What is a tender?
Since its establishment 20 years ago, INCON-LOGISTIC Ltd. has regularly participated in the tenders of its future and existing partners. By sharing the experiences accumulated over the 20 years, we assist those interested in their tender applications.
It is a common practice in the business world for large companies to select service providers in the transportation market through tenders every year. Each year, we must compete with our market rivals to maintain and expand our business. Our experience shows that achieving the desired results is often not easy.
Both the tender announcement and participation are complex processes, and various questions and problems arise from deficiencies in the announcements and inaccuracies in the data, which pose additional challenges for participants due to the already tight deadlines.
What’s the Difference Between a Tender and a Request for a Price Quote?
A tender is a formal bidding process where companies invite bids for services. Bidders need to submit their proposals based on specific criteria outlined in the tender documents. The goal is to foster competition and select the best offer for the business year or another designated timeframe.
On the other hand, a request for a price quote typically arises when there’s a specific shipping requirement. This request comes directly from the customer and aims to address one-off shipping needs.
In summary, a tender is a competitive bidding process, while a request for a price quote is an individual request for an offer.
What are the challenges in setting tenders?
In the market, there are significant methodological differences in how competitors set their prices. These differences require careful attention from those issuing tenders and can complicate transparency between bids. As a result, decision-making can often become a time-consuming process.
It’s often observed that tender issuers provide information that does not adequately address the needs of bidders. This can lead to the necessity of clarifying questions during the tender completion process, many of which may go unanswered. Therefore, it’s crucial that decision-making criteria are clearly defined when tenders are announced. If not, issuers should be prepared for bidders to use their own pricing strategies and explain their calculation bases in their submissions. This can increase the risk of errors during evaluation and may undermine the objectivity of the decision-making criteria.
The more open and unknown factors there are at the time of the tender announcement, the greater the uncertainty, which can result in misunderstandings regarding the prices offered and their interpretation. Consequently, all parties involved may risk losing trust in one another. Accurate and competitive bids can only be submitted if the data, calculation bases, frequency, and pricing models associated with the transportation structure accurately reflect reality as closely as possible. By doing so, the tendering process can become more efficient and beneficial for all stakeholders.
5 Key Considerations When Issuing Tenders
- Starting from the Pareto principle, it’s evident that a significant portion of transportation costs—around 80%—typically comes from just 20% of the shipments. Therefore, it’s advisable to identify and focus on these key areas at the corporate level instead of drafting tenders that span 600-800 lines simply because a certain route was used once in the past. Unfortunately, such lengthy tenders are not uncommon. Completing them requires a substantial amount of time, and many transportation providers choose not to participate because they feel it’s not worth the effort. (The essence of the Pareto principle is that 20% of our actions will lead to 80% of the consequences.)
- It’s important to determine whether we want to split a particular route among several competitors or, based on the Pareto principle, allow significant quantities to drive the decision-making process. In the latter case, it will suffice to request concentrated pricing for these main areas and make decisions accordingly.
- For example, there’s no need to request pricing from 1 to 33 pallets for a given route if we know that customer orders have not exceeded five pallets in a single order over the past five years, and significant order growth for the tender year is not expected based on forecasts. This way, we can save both time and effort for the transportation provider, and faster, more efficient decisions can be made during the evaluation process.
- Defining the calculation basis is one of the most important and perhaps the most challenging tasks for the issuer. Various formats can be encountered during tenders, including pricing requests based on pallets, cubic meter measurements, weights per kilogram, or for full, partial, or consolidated shipments. What should be considered in such cases? If we have a price for pallets, it’s advisable to request pricing per pallet. For stackable items, we can inquire about prices per pallet space. If dealing with bulk goods, it makes sense to request pricing based on cubic meters (cbm) or cubic meter equivalents.
- When requesting pricing per cubic meter for palletized goods, it’s essential to specify the average weight per cubic meter. Otherwise, the transportation provider will determine the calculation basis, which can significantly complicate the comparison of bids.
What Are the Steps in the Tendering Process?
Needs Assessment: The first step is to define the project’s needs and requirements.
Tender Announcement: The issuer (client) prepares the tender documentation, which includes the necessary information and bidding conditions.
Selection of Bidders: Identifying potential bidders and inviting them to participate in the tender.
Submission of Proposals: Bidders prepare and submit their proposals within the specified deadline.
Evaluation of Proposals: Analyzing and assessing the received proposals based on predetermined criteria (e.g., price, quality, references).
Decision Making: After evaluation, the most favorable proposal is selected.
Contract Signing: Initiating the contract negotiation process with the successful bidder.
Implementation: Executing the selected proposal and carrying out the project.
Monitoring and Closure: Conducting a post-project evaluation, assessing the performance, and documenting the process.
If you’re interested in tenders and this type of shipping, feel free to reach out! Send an email to info@incon-logistic.hu!
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