The Case for Tendering Parcel Logistics: Optimising Efficiency and Costs

In today’s volatile supply pricing landscape, it is vital to remain on top of your third-party costs.

Logistics play a pivotal role in customer satisfaction. For companies that rely on parcel delivery, whether for e-commerce shipments, B2B supply chains, or internal distributions, tendering logistics requirements is not just a best practice; it’s a strategic imperative. Here’s why tendering your company’s parcel logistics is essential and how it can deliver long-term benefits.

Prokura’s logistics experts have extensive logistics procurement experience, regularly generating commercial and operational improvements for our clients. For example, for a leading global manufacturer of recreational sports equipment, Prokura optimised spend by tendering logistic services and improving efficiencies across the value chain, leading to a 20% cost reduction on parcel logistics alone. Competitive tendering, supplier consolidation, lane-specific award scenarios, and improved utilisation led to a significant cost improvement.

We also pinpointed opportunities to improve lead-time reliability and boost customer satisfaction by consolidating shipments to minimise split deliveries. Prokura also provided guidance for establishing robust negotiation strategies with incumbent logistics service providers once contract terms conclude.

Five Factors that are Fuelling the Need for Tendering Parcel Logistics

1. Evolving Market Dynamics The logistics market is continually evolving, with new technologies, regulatory changes, and service models emerging.
2. Cost Optimisation Regularly tendering logistics requirements creates healthy competition among providers, driving down costs and ensuring that pricing structures remain competitive.
3. Service Quality and Reliability A tender process enables businesses to assess providers’ track records, technology platforms, and customer service capabilities. This ensures that parcels arrive on time and the customer has means of reporting and charging against non-compliances.
4. Customisation and Scalability Tendering provides an opportunity to specify requirements and identify providers that can offer tailored solutions. Furthermore, companies can evaluate the scalability of services, ensuring the provider can grow alongside their business.
5. Risk Mitigation Supply chain disruptions are costly. Tendering helps businesses assess the resilience of potential providers, including contingency planning, compliance with regulations, and data security measures.

Steps to Tender Parcel Logistics

Define Your Needs Start by clearly outlining your parcel logistics requirements, including the following:

Volumes: Analyse historical shipping data and align with growth plans to forecast volumes shipped.

Geographic reach: Identify domestic and international coverage and outline high-priority regions.

Lead times: Understand customer shipping behaviours to determine lead time requirements, including the need for standard and express delivery options

Special handling requirements: Account for items that are fragile, oversized, temperature-controlled, hazardous, perishable, electronic, etc.

Develop a Comprehensive RFP

Create a detailed request for proposal (RFP) that sets clear expectations from suppliers:

• Service-level specifications: Detail necessary delivery requirements based on your needs.
• Evaluation criteria: Whilst cost reduction is a big factor in final supplier selection, other non-cost-related criteria will also influence selection.
• Timelines and milestones: Outline key deadlines for submission, interviews, and final selection.

Engage Multiple Providers

Reach out to a diverse range of providers to ensure you have a wide pool of options. While chosen suppliers must meet your company's basic service-level requirements, including as many suppliers as possible will foster a competitive environment, creating additional savings.

Evaluate Proposals

Thorough evaluation ensures proper selection of the provider that best fits your needs. Assess proposals based on the following factors:

• Cost: Whilst freight and fuel charges drive base rates, additional surcharges can significantly increase overall costs. Prokura conducted a total cost of ownership (TCO) breakdown, revealing that substantial savings could be realised through additional surcharge cost reductions.
• Service quality: Evaluate suppliers based on their past performance data, and conduct customer interviews to gauge market perception and satisfaction.
• Technology integration: Tracking KPIs is essential for businesses to remain competitive and often determines which suppliers are selected.
• Alignment with your business objectives: Prokura recognises the growing change towards e-commerce shipments and supported the client in shifting to a new supplier that would facilitate the company’s B2C growth ambitions.

Negotiate Contracts

Once a provider is selected, negotiating final contract terms is a crucial part of setting up a successful long-term partnership. Prokura led focussed negotiations with suppliers, securing substantial improvements in contract conditions that delivered a wealth of value to the client:

• Performance benchmarks: Set clear KPIs, such as on-time delivery rates.
• Penalty clauses for service failures: Include performance credits to provide businesses with compensation for failing to adhere to outlined standards.
• Flexibility for future adjustments: Ensure that terms allow for volume adjustments or scope changes without substantial penalties.
• Rebates and volume discounts: Provide earned discounts for exceeding annual volume thresholds. Prokura achieved significant savings through rebate volume threshold negotiations with incumbent suppliers ?

Monitor Performance Even after finalising a contract, continuously monitor the provider’s performance to ensure compliance with agreed-upon standards. Use regular audits, customer feedback, and industry benchmarking to keep the business’ parcel logistics amongst the most competitive.

?Conclusion

Executing a successful parcel logistics tender requires a strategic approach that balances cost efficiency, service quality, and scalability. By conducting a comprehensive assessment of the parcel logistics landscape, evaluating proposals that are best aligned with operational requirements, and undertaking targeted negotiations, organisations can lower costs whilst maintaining high service standards and fostering successful partnerships.

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