Xzisu Case
Study:
creating a distribution network through a RFP
The project brief
With the support of US-based
consultants, studies on the European logistics market in relation to the
products and distribution requirements had already been conducted. But even
with this preparation on hand and the in-house knowledge of experienced people,
the possibilities and limitations of the European logistics playing field
remained unclear in many areas.
Being in a relative hurry to
enter the European market, the client defined a project ledger containing one
main item to investigate: pre-selection of a parcel distribution partner
through a Request for Proposal (RFP) process.
With no operational presence on
the European continent, the E-tailer was initially advised by its US based consultants
to open a third-party operated warehouse in The Netherlands and supply its
European customers from there. Since the company was only operational for a
short period and operated solely through selling via the Internet without any
trading history, detailed sales forecasts were difficult to generate. This
resulted in an uneasy feeling within the client about the advice to build up
stock in Europe. Before taking the step over the ocean, the client decided to
have a feasibility study executed by a European based transport experts. This project
would be used as a benchmark on the initial advice and would form the basis for
a go or no-go decision of the firm.
Challenges of the EU
logistics market
The European logistics market
consists of a very large numbers of service suppliers ranging from very small
(family) companies to huge players. But even within the large pan-European
companies the cultural differences between the separate country organisations
are more than apparent in the daily operations and commercial approach. So far,
no company has yet succeeded in presenting itself convincingly to the customers
as a true European company, which crosses the borders of language and culture
seamlessly. Although more and more logistics providers operate on a
pan-European scale, in reality they maintain their country structures and are
generally no more than a cluster of local operations under one central flag.
This diversity of cultures offers a big challenge for companies from outside
the EU, which aim to set up logistics networks in Europe.
Logistics
requirements
The client’s
main requirements were that the chosen European logistics service provider
should have the capability to build a complete transportation partnership with
them, focusing on the outbound distribution to European customers (B2C). Furthermore
multi-user warehousing facilities should be available, preferable in The
Netherlands for customs and tax reasons. The logistics partner should be able
to operate as a fiscal representative for the client.
A wide range of potential
candidates were invited for the RFP, amongst which parcel carriers and
3PL’s.
The fiscal
representation in all of Europe presented the major challenge. Representation
in the “base” country (The Netherlands in this case, because of the potential
location for the European warehouse / cross-dock) was not really a problem, but
in other countries it was. This meant that representation would have to be
outsourced to a specialist parties or taken up by the client, through opening
up local subsidiaries.
All
invited candidates were requested to submit the following items in their RFP
response:
- Prices for outbound parcel distribution
- Prices for return pick up
- Prices for inbound and outbound airfreight
- Costs for warehousing/x-dock activities
- Costs for fiscal representation
- A completed service capabilities survey
- Free format solution presentations.
The result
With RFP
concluded it was time for the client to come to decisions. Two day sessions
with the short-listed logistics service suppliers were arranged. During these
sessions the client presented its plans and discussed requirements and capabilities
in detail.
In
the ever changing economic environment and all relevant information at hand,
the client decided it to be wise not to start distribution to all European
countries at once. A step-by-step approach would be beneficial for the company
and its customers. It would allow for both the client and its new logistics
supplier to get used to the delivery schedules and market circumstances.
Furthermore it would allow them to delay setting up an overly expensive
logistics infrastructure in a still untested market.
By deciding
to start with supplying their main markets in Europe first, being Germany and
the United Kingdom, the client allowed itself to benefit from a learning curve.
Getting used to their new logistics partner in Europe and building up trading
history allowed them to gradually merge into the European business arena. By
working closely together with expert business partners, which are familiar and
experienced in their fields of business and regions, the client successfully entered
the European market and was able to face the challenges of this complex market.
