Logistics tends to be seen as the irritation of any project, by both the supplier and the site. The goods have to be expedited and checked constantly then given to a freight forwarder before goods magically appear on site – sometimes after a lot of pressure, pleading and commotion. It has always surprised me that people who all want the same thing (to get the same cargo safely and quickly from the supplier to site) can be so suspicious of each other’s skills. I am even more amazed that sometimes this distrust is justified. However, I have seen that one simple step can not only prevent this but can help a relationship to grow.
Step 1. Evaluate the costs
Potentially the simplest step in evaluating the tender is to evaluate the third party costs and ensure that all tenderers are within the same band. As mentioned last week, this is called a service contract, not a freight pricing exercise. Therefore, it is not essential to know who has the cheapest freight rates as these are probably going to change anyway. In fact, I have known some people to intentionally take the rates that they have received from third parties and reduce them, just to get the tender. With the third party prices, all you are trying to do is establish outliers or major disparities. If any of them are particularly low or high, you may want to check the reasons for this or otherwise eliminate them immediately. Yes, even the attractively low one.
Step 2. Evaluate service contracts
After that, you would now evaluate the service contracts themselves. This means looking at your potential suppliers’ skills, strengths and weaknesses. For this, you will probably have your own weighted scorecard. I won’t comment how you weight each item. However, I will gladly debate this with anyone. What is important is to you draw up your scorecard at the same time you draw up the tender and evaluate accordingly. It is equally important that you include the following:
Step 3. Manage currency risks
One item to contemplate is the currency. A good logistics supplier can make or save up to 20%, just in the timing of currency fluctuations. How you set and change your currency adjustments should be carefully considered – this includes forward cover.
After you have thought about the aforementioned, you should have a good idea of who is the optimal choice for your project as a service provider. Now comes the key part, setting things up on time to allow shipments to punctually begin without delays.
Potentially the simplest step in evaluating the tender is to evaluate the third party costs and ensure that all tenderers are within the same band. As mentioned last week, this is called a service contract, not a freight pricing exercise. Therefore, it is not essential to know who has the cheapest freight rates as these are probably going to change anyway. In fact, I have known some people to intentionally take the rates that they have received from third parties and reduce them, just to get the tender. With the third party prices, all you are trying to do is establish outliers or major disparities. If any of them are particularly low or high, you may want to check the reasons for this or otherwise eliminate them immediately. Yes, even the attractively low one.
Step 2. Evaluate service contracts
After that, you would now evaluate the service contracts themselves. This means looking at your potential suppliers’ skills, strengths and weaknesses. For this, you will probably have your own weighted scorecard. I won’t comment how you weight each item. However, I will gladly debate this with anyone. What is important is to you draw up your scorecard at the same time you draw up the tender and evaluate accordingly. It is equally important that you include the following:
- Are all compliance documents provided and/or proven?
- What staff are allocated and dedicated? Put value on the strength of the team and ensure it includes all major locations.
- Work experience – what similar projects have they recently undertaken?
- Location experience – what experience/staff experience do they have in major locations?
- Service pricing and pricing visibility – all prices should be cost plus with copy of third party invoices included in invoice packs.
- Review of terms and conditions – this is possibly an article in its own right. While one should always query and negotiate the logistics service providers T&C’s, too often I have seen engineering and construction companies proposing a construction based contract which is useless for the logistics world.
- Applicable law and jurisdiction – always include one but cautiously consider where you would want to go to court. England is logical but very expensive and Brexit may change this.
Step 3. Manage currency risks
One item to contemplate is the currency. A good logistics supplier can make or save up to 20%, just in the timing of currency fluctuations. How you set and change your currency adjustments should be carefully considered – this includes forward cover.
After you have thought about the aforementioned, you should have a good idea of who is the optimal choice for your project as a service provider. Now comes the key part, setting things up on time to allow shipments to punctually begin without delays.
