Transport Tendering Troubles
Posted by Louis D'hondt on 25/01/2018
For many shipping-agents, applying for a tender is almost a natural reflex. Sure, you’ll never want to let a big deal slip through your fingers, but please be careful. Without the right information, the added value of a long-term commitment is difficult to predict. If there is any added value at all…
It’s a situation most transporters are familiar with: a huge potential customer is issuing invitations to tender, you join the race, in the hope of getting that deal. If you succeed, you’re very delighted for obtaining that precious contract.
However, after a couple of months, the commitment you made doesn’t seem to be as lucrative as originally predicted. You certainly wouldn’t be the first one ending up working at a loss because of a low price in a big deal.
Submitting an offer will not cause any troubles, but without the right information, estimating the extra cost that will come with the new contract is very risky. History has revealed that many transporters set their prices too low.
Gut Feeling and Guesstimates
As a transporter you certainly have a clear view on the locations you already cover and in which areas you might have some spare capacity. Yet, that information generally isn’t enough. Contrarily, the extra costs these new stops will incur are not that straightforward. Many managing directors do not conduct a thorough analysis, but they would rather rely on ‘gut feeling’ and ‘guesstimates’, two methods that have proven to be all but accurate.
You do gain insights into that crucial information when having advanced transport- and route planning software at your disposal. You will be able to assess:
- the actual cost of your orders at present. Simulating this correctly is critical because this will be a reference point for future scenario simulations.
- the extra cost when providing a service that meets all specifications.
- the future cost components such as road taxes or tolls.
Furthermore, you’ll be able to quickly determine the extra cost because of narrow time windows. What’s the impact on your margin should these time windows be restricted to deliveries between 8.00 and 10.00? What’s the impact of expanding them to 4 hours, say 8.00 to 12.00? Or 11.00 to 13.00?
On the other hand, the situation can be turned around and transporters can suggest a discount when open time windows are being used, fi. from 8.00 to 20.00.
These insights can be translated into graduated prices, based on the profit margin you are aiming for. Taking it one step further: you're creating room for negotiation.
The added value such software generates is literally worth a lot.
In addition, these packages produce two other benefits that are not to be neglected.
- You’re saying you’ll provide great services, you’re thinking along with your potential customer and you’re looking for ways to optimize his services. You’re putting yourself in the customer’s position: how can you help them to improve their sales.
- Last but not least: convince your potential customers that your company is ‘tech savvy’, using state-of-the-art technologies and has great expertise. This is a powerful differentiator creating a competitive advantage.
Prospects are looking for more than just a low price. They're looking to build a valuable partnership. Don't think about your customers, think about your customers' customers.