The art of handling a freight tender

Did I write art and freight tender in the same sentence..?? Oh yeah, maybe I did and yes handling a freight tender is considered by many to be an art..

Freight Tenders are an integral part of shipping and freight for the carrier, shippers and OTI (freight forwarder or NVOCC)..

I headlined this article as “the art of handling a freight tender” because majority of the tenders are quite complicated and capable of pushing people over the edge due to its complexity with its tight deadlines and the nearly impossible task of compacting the costs..

the art of handling a tenderPeople in our industry who have handled some complicated global freight tenders will understand what I am talking about..

So how does the whole thing work and how does a tender influence or impact on a carrier and/or freight forwarder and their business.. Is it really an art..??

Imagine a MNC (Multi-National Company) who have multiple brands to be exported from their 20 odd group companies to around 200 countries globally where they are present..

Imagine the shipping division of the above MNC in each of these countries trying to secure the best rate for shipping their products from A to B which may translate into thousands of containers over a short period of time..

Or imagine you are one of the lucky service providers invited to bid or tender for this business.. Visualise the dynamics involved in coordinating the movement of these containers across the 20 operating companies into 200 countries for these thousands of containers..

Its mind-boggling whichever side of the fence you are on – whether you are from the MNC or from the service provider..

It is also important to consider that winning a tender has its pros and cons for both the carrier and the forwarder..

Pros Cons
Tender business offers guaranteed volume and revenue flow for the service provider in the short term – whether you are the carrier or the forwarder The yield on the tender business may not be that attractive for the carrier as they maybe forced to compromise on rate in favour of guaranteed volume
If you are a forwarder and you are in charge of the tender volumes, you can use those volumes as a spring-board to negotiate FAK rates with the carrier for other businesses If you are a forwarder, the work involved in ensuring that the tender cargoes are shipped as per the plan and ensuring the operational flow may become quite overwhelming
If you are a carrier and you secure a few tenders, you have your base cargo covered and do not have to chase for that volume of cargo on a regular basis If you are a carrier who has undertaken to carry the cargo, you maybe obliged to accommodate the tender volumes in favour of other high yield cargoes

While handling tenders can get complicated, with proper planning, co-ordination and execution, one should be able to handle tenders effectively..

So here are my 7 tips on the art of handling a tender :

1) Know your market – Identify companies that float shipping and freight tenders on a regular basis and get onto their list as a registered supplier.. That way when there is a tender, you will get an invitation to tender.. Several companies miss out on this vital aspect and therefore miss out on the opportunity to tender when it does arise..

But don’t just depend on the companies to invite you for the tender, you should also follow-up..

the art of handling a tender2) Follow up – Generally a RFI (Request For Information) document is sent by the company which is the first step towards the tender..

This document is used by companies to collect information about the service providers and the information thus gathered allows them to shortlist potential service providers who have the capability to carry out the scope of work required..

3) Understand – So if you are the bidder, it is in your best interest to understand the full requirements and scope of work and ensure that you are able to provide the same before you bid for the tender..

Once you have submitted your RFI, watch out for an RFP (Request For Proposal) or an RFQ (Request For Quotation) or a combination of both that will follow.. But this will be sent only to the short-listed candidates so be aware of it and follow-up..

RFQ is generally used when the required service is standardised – say shipping 200×20′ and 100×40′ containers from Genoa to Haiphong.. RFP may be used when things maybe slightly more complicated such as when it involves various methods of movement or where other creative solutions maybe required..



4) Meet and Learn – Once you have been short-listed there will be an RFQ orientation meeting wherein there will be an open discussion on the deadlines, how to participate, what system to use, how to use the system etc will be discussed.. This is a very crucial meeting that must be attended in order to be able to handle the tender effectively..

5) Pay attention to detail – Some companies may use complicated excel spread sheets with hundreds of port pairs and container types and volumes.. Pay due attention to what you fill up in which column (for example filling up 20′ rates in 40′ column and vice versa or updating 40′ BAF in 20′ Freight)..

Some companies have switched to using cloud based procurement solutions which also needs to be checked and updated correctly..

This is one of the key elements that needs to be considered carefully and verified before submission..

6) Clarify – Many of the tenders have multiple port pair requirements, multiple routing, multiple rate patterns.. It is essential that you understand firstly what is required by the client and then decide whether you can satisfy those requirements or not..

If you do not understand something, you always have the option to request for clarification and every customer would rather you ask them for the clarification than fill up incorrect information which wastes both yours and their time..

7) You have the Choice – Remember in a tender process, you have the option of being chosen either as a first, second or third (in some cases also fourth) service provider..

Price is not necessarily everything in a tender (although it is a VERY CRUCIAL element).. There are many cases where the first choice service provider who had the cheapest price were unable to back it up with the service required..

If you are not confident, rather only bid for the areas that you are confident in so that you don’t make a mistake that may jeopardise your chances in the future with the same or other customers..

So for example if this year you have been chosen as the third carrier and you have the chance to prove yourself, then do that to the satisfaction of the customer so the next year you may get a chance as a second carrier..

Normally there would be a second round in which the service providers are given some feedback about their participation and how much percentage of business they secured and where they fell short etc.. So you may yet have a chance..

As you can see it is an intensive process that needs to be followed strictly in order to be successful.. Many employees at the carriers or freight forwarders offices have many sleepless nights in order to try and finalise the tender, especially for companies that have extremely high volumes, multiple port pairs and routing..

the art of handling a tenderSome of the commodity tenders (Tobacco, Cotton, Tea) may be seasonal as well..

Another type of commodity that moves also quite a bit on tender or on contract basis is Reefer cargo which again is seasonal..

So, if you are a carrier or an OTI, it would be prudent to follow these tender tips, watch out for the bidding season and ensure that the process is followed diligently and timeously..

Like wine, the art of handling a freight tender only gets better with age and experience.. 🙂

What other tips do you have on the art of handling a tender..??


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5 comments on “The art of handling a freight tender”

  1. By Faisal Reply

    Pros and Cons mentioned in this article couldn’t be put better. Simple, clear and oh so true. In my experience- the tendering process is only there for MNC and FMCG giants to base payment plan against. Spot rates may be cheaper in some instances but the space securing and relatively fixed price structure are worth it.

  2. By latisha Reply

    Hi.

    I would like to know for rate /estimates negotiations for RFQ tender submissions does the task fall under sales team who has the knowledge of specific areas to quote , experience ,better relationship with carriers and securing good rates or does it need to be completed by docs/operations.

    Thanks

    • By Hariesh Manaadiar

      Generally its a combination of both as the docs/ops people may have some knowledge of the existing market conditions which can contribute to the success of completion of the RFQ in time..

  3. By Ashutosh Raul Reply

    Having handled tenders in past one of the common mistakes done by the big liners is failing to understand the negotiation process of the customer & then base your pricing strategies accordingly .For example some companies will invite only top 3 or 4 carriers for subsequent rounds whereas some might invite all & also disclose the benchmark rates or lowest rates quoted by other liners for the next rounds as a negotiating technique & ignite a freight war. In such cases it will not be ideal to quote your best rates in round 1 which liners are tempted to do it many times.

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