Tender management remains one of the most business-critical jobs for logistics companies. A significant share of revenue is generated from bids, with the aggregated value of tenders amounting up to billions of euros p.a. for large organizations.
As a result, tender management is the arena in which the main battle for future revenue is fought. Yet, it is wrong to consider it purely a function to manage the top line. It is a strategic game that, if played well, ensures critical mass is generated, flows are optimized and procurement power is strengthened. Thus, it lays the foundation to handle future business more efficiently – at higher profits.
In a bidding environment that is characterized by high transparency, fierce competition and strict rules, service offerings among providers are commoditized. The whole negotiation process is reduced to one variable - the price - which is not very attractive to most logistics companies. Hence, tender management is seen as a necessary evil, rather than an opportunity for future excellence . This is also reflected in the way it is set up and executed in many logistics companies: non-harmonized processes, high manual efforts, endless escalations and limited technology application are still the status quo.
Accepting the fact that large bids are indeed a commodity-purchasing exercise for clients does not mean company profits have to suffer in the long run. However, neglecting the strategic importance of tender management and not utilizing it properly does.
Symptoms: what is “bad” tender management?
From previous project experience, Arthur D. Little has identified the following tender management pain points , frequently highlighted by senior executives in the industry:
- Processes are error-prone, with “too many things going wrong”, which leads to lost sales or diminishing profits.
- Average hit rates are as low as 10 percent, with“not enough value being captured from the efforts invested”.
- There is low transparency on what is going on and where attention is needed, leading to business losses.
- Processes are considered too bureaucratic in some cases, in which “more focus is put on correct administration rather than on actually winning business”.
- In other cases, processes are not well structured at all, resulting in unclear responsibilities and lots of back-and-forth between internal stakeholders.
- There is often no continuous improvement: “The same hassles come up again and again”.