Check your Freight Auditor’s shipment data – Part 1

Collecting and cleaning historical shipment data is one of the most time consuming tasks in a freight RFP process. It is also one of the most important tasks in the RFP process. Historical shipment data forms the basis for shipment profiles, analysis baselines and modelling. The data is often divided over multiple locations, available in various formats and has a wide range of quality standards. Companies that use a Freight Audit & Payment (FAP) vendor often have an easier job in collecting the data. A FAP vendor can be a single source for actual shipment data and shipment cost. This sounds like an ideal situation, but be careful, there are still many things to look out for.

In this 2 part article we will give you a checklist that you can use to check your auditor’s data (and that of other sources) before you use it for freight RFP’s. Here is part 1 of the checklist.
 

Check 1 – Does the data cover the whole scope of your RFP?

This seems an open door, but FAP vendors do not necessarily cover the whole range of carriers or shipment lanes for which you might need data for your RFP project. FAP is still not a fully global service, so it might be that your vendor does not cover certain regions or trade lanes that are included in your RFP. Also a lot of the spot buy freight activities and inbound freight activities are often not part of the service contract with a FAP vendor. Be clear about which carriers, services and shipment lanes are covered by your FAP vendor before you start your tender project. Any gaps that you find need to be covered via other data sources, which often proves to be a time consuming process.

Check 2 – Is your data categorized correctly?

Freight Audit companies receive shipment- and cost data from your carriers. It is the FAP vendor’s task to categorize the data correctly. But it is your task to set the requirements for this categorization. Data needs to be categorized in such a way that it can be easily grouped and sorted. Each shipment should be categorized on correct mode, direction (e.g. inbound, outbound), type (e.g. return, inter company, etc.), region, etc. Now, this seems logical, but it is not a given that this not always the case. A shipper and the FAP vendor need to ensure that during the implementation process of the FAP services clear categorization rules are established. Wrong or no categorization can lead to data that is meaningless. You can imagine that Parcel data that is categorized as Air data needs a lot of rework before you can use it for a RFP project (if you can find it at all if you run a query to extract all your Parcel data, when it is wrongly categorized as Air). A FAP vendor has its main focus on receiving data that can be used to audit invoices, the quality and categorization for later reporting is often a secondary priority. However, getting the data right is a top priority if you intent to use it for more than auditing.

Check 3 – What data items are included in the data set?

 

FAP data is not necessarily the same as RFP data. In a FAP data set you will also find rejected duplicates, credit notes and other audit related items. These types of financial data items can pollute your data set. Data pollution in a historical shipment data set is very risky. Duplicate shipment data in your data set can mean you overstate your actual shipment quantities. Keep in mind that a FAP vendor’s primary focus is to report on financial audit results. This means their data set includes all audit findings such as duplicates, overbillings, wrong billings, unauthorized billings, etc. If you do not comb through a downloaded data set from your FAP vendor and manually clean the data you run the risk of creating a wrong shipment profile for your company. A misrepresentation of your company in a RFP can be very risky and potentially costly. 

 

Check 4 – Quality of the carrier’s data set

When you use a FAP vendor you need to work with your carriers to ensure that you get the maximum number of data elements that the carrier can provide. Invoice data is not necessarily useful as shipment data for a RFP. In a RFP you need a lot of details about each shipment. If a carrier only provides the FAP vendor consolidated shipment data in its invoices, your data set stored with the FAP vendor is often less valuable or even useless for a RFP. When you appoint a FAP vendor you need to be very clear about what you expect to be able to do with the data. If you do not specify this in detail and do not work with both the FAP vendor and your carriers, you risk ending up with a lot of data that you cannot really use.

At the time of implementing a carrier into a FAP process ensure that the carrier can provide line item shipment data in the invoice feed instead of consolidated shipment data. Also ensure that your FAP vendor captures the data on line item level and not on consolidated level (which is often done as a compromise to lower processing cost).

 

 

In the second part of this article we will look at the remaining checklist items, being:

 

§  Data quality check

§  Missing data check
§  Oddball data check
§  Cost data split
§  Calculation check

 

Ocean Container Facts and Figures

Term used to indicate the maximum size and capacity able to pass through the Panama canal. Currently the maximum length is 290m. This will be increased in 2014 to 366m as work on the Panama canal is completed.

 

 

10000 - Estimated number of containers lost at sea each year. This is less then 0,01% of total containers shipped

 

The annual income generated by Ocean shipping is estimated to be USD 500 billion.
 
The average cost of shipping a 20ft container from Asia to Europe is about the same as an economy fare for one passenger on the same lane.

 

Information sources: Port of Rotterdam, Alphaliner, Marisec.org, Worldshipping.org, Maersk, US Army Corps of Engineers,desk research. www.xzisu.com

 

 

Successful transport RFP response teams – Part 2

Why are certain bid response teams more successful then others? What do these teams do to get a higher success rate than others? We identified 10 things that successful response teams do to win more business. In this series of two articles we share some of our observations about the characteristics that successful transport RFP response teams have.  In this second article we review the remaining 5.

Getting invited to respond to a transport RFP can bring pressure to a sales team. Pressure to deliver a competitive proposal in a short period. Many RFP response teams have been burning the midnight oil to get their responses out on time. All this hard work does not bring a guarantee to win the business though. And is that not what it is all about, winning the (new) business and have a high success rate?

 

So, why are some RFP response teams more successful than others? What traits do they have that give them a higher success rate? Having a successful RFP response team means your business can grow and become more profitable. Based on our experience we will share some of our observations on how the success rate of tender responses can be increased.  Here are the remaining 5 of their top 10 traits:

6) Don’t overpromise or under deliver

No one wants to start off a new business relationship on the wrong foot, by failing to deliver on promises made during the RFP process. The biggest question a Tender Manager may have after he awarded the business is: “did I make the right choice”? A Tender Manager may also see a new vendor as a potential risk and not necessarily only as a nice new relationship to explore further.

RFP response teams that understand the number one concern of a Tender Manager, ensure that people from the operations team are involved before a response goes out to the bid initiator. The response team reviews the proposal upfront with operations to understand if their proposal can be implemented successfully. When this is done, this should be made clear in the submission as well. It shows the Tender Manager that you have taken into account his concern about risk and that you can mitigate this.

 

7) Talk in benefits

Successful RFP response teams understand that the bidding party is mostly interested in understanding what is in it for them. So, what you’re going to do for them, how you are going to deliver those results and what will be the benefit for them. You need to make clear you have a full understanding of their requirements and talk about benefits, instead of talking about your features.

 

8) Demonstrate success

Success stories make great stories. Everybody wants to join a winning team, so tell your prospective client what is so great about joining your winning team. Professional RFP response teams list any great ‘claims to fame’, if you have any. Doing this proves that your company has ‘been in the trenches’ and suggests to them that they can also get results from you.

Pro-actively list your results, giving a brief description of the project, industry and the results which you have achieved. Also present real live KPI’s as proof and offer references.

 

9) Make response documents look extremely professional

You never get a second chance to make a first impression. How you present your proposal directly affects how your company is perceived. A professional presentation makes you look professional. A poor presentation makes you look inadequate.

Many people are ‘visual’ and they need to see things in a graphical format, so that they can understand how it works. Winning RFP response teams make extensive use of graphs, a graph says more than words. Also include some flow charts so your prospective client knows how your business and processes work.

Include action plans as well. Your prospective clients will know what to expect and when to expect it. Offer plans for multiple scenarios so that it is clear you are ready for every eventuality.

Ensure your document always contains at least an executive summary, contact details and a table of contents. Furthermore deliver your presentation in PDF format rather than DOC format. PDF format ensures the layout stays fixed despite the settings of individual PC’s.

To sum it up, make a document that your team can be proud of and does their efforts justice.

 

10) Evaluation cycle

For a professional RFP response team a bid process does not end at the submission of the proposal. The process needs to come full cycle through an evaluation process. Every tender response needs to be reviewed in detail. You need to get as much feedback from the client as you can on what they liked and did not like about your proposal.

The response evaluation step is part of the continuous improvement process of your RFP response team. It brings out best practices and creates success formulas for next responses. A team learns something from every tender. The evaluation process teaches a team where they are strong and where they need to improve. The lessons learnt need to be shared with the rest of the organization. This will bring the service offering as a whole to a higher level and improves the success rate on winning RFP’s.

We hope that many people who read these two articles think “we already do this”. If this is the case, great, you are probably on the right track. A good RFP response can give you the edge to win a tender - a poor RFP response will make sure you will not win the business.

 

 

Successful transport RFP response teams – Part 1

Why are certain bid response teams more successful then others? What do these teams do to get a higher success rate than others? We identified 10 things that successful response teams do to win more business. In this series of two articles we share some of our observations about the characteristics that successful transport RFP response teams have. In this first article we review the first 5 and in the next article we will review the remaining 5.

Getting invited to respond to a transport RFP can bring pressure to a sales team. Pressure to deliver a competitive proposal in a short period. Many RFP response teams have been burning the midnight oil to get their responses out on time. All this hard work does not bring a guarantee to win the business though. And is that not what it is all about, winning the (new) business and have a high success rate?

So, why are some RFP response teams more successful than others? What traits do they have that give them a higher success rate? Having a successful RFP response team means your business can grow and become more profitable. Based on our experience we will share some of our observations on how the successrate of tender responses can be increased. Here are the first 5 of their top 10 characteristics:

1) Preparation and planning

A well prepared team understands that the clock starts ticking the moment a RFP lands on their desk. Their preparations don’t start at that moment though. These have started well in advance. A tender RFP team should not be formed when a RFP invitation is received, it should already be in place. The roles and responsibilities of the team members are clear. The team consists of subject matter experts which should at least include one “writer” that has experience in creating professional RFP responses.

A number of RFP response components are always the same (e.g. your company profile, your service description, your competitive advantages); these can be prepared in advance and applied  to any RFP response. Of course you need to customise part to the individual RFP (e.g. focusing on the service that are requested in the RFP) but having the basic framework prepared will save a lot of time.

Winning teams are equipped with the right tools. They have access to company data, modelling tools, the latest MS-Office software (it will scare you to learn how often people are not able to open a document because they work on old software versions) and Desktop Publishing software to create professional response documents. Of course, fast internet access is a must for online tenders and research. 

A team that is prepared in advance will hit the ground running and does not loose valuable response time. Great responses are not created in a last minute do or die effort. They are based on preparation thus allowing more time to be spent on the RFP specific part of the response (e.g. pricing and services)

2) Understand what you are bidding for

Most professional RFP response teams don’t shoot at everything that is thrown their way. They run a received RFP methodically through a standard checklist to verify if it meets their minimum criteria for putting in the effort of creating a response. Once it is established that the RFP is interesting for them, they perform a detailed study on the received documentation.

Successful RFP response documents demonstrate clearly that the bidder understands what they are bidding for. They demonstrate where the offered business will fit in their current business model and how they can deliver maximum value to the client. RFP response teams that truly understand the business opportunity they are bidding for also reflect this in their quotation. Their pricing is not necessarily low, but it excludes the “safety buffers” that others build into their quotes when they are unsure of what to expect. If the issued RFP does not contain sufficient detail to determine what the business opportunity is, it is the responsibility of a professional RFP response team to ask the right questions to get the answers on the table. Don’t bid for something you don’t fully understand, it will only provide nasty surprises for both parties in the end.
 

3) Understand why you are invited and who the competition is

Successful RFP response teams understand why their company was invited to participate in a RFP. If you don’t really know why you were invited for a RFP, don’t bother spending time on creating a response. It is clear that you don’t have a fit with the client and the requirements. It must make  sense to you why you have been invited and how you can bring value to your potential client.

Insecure or under-prepared RFP response teams often go back to the RFP issuer to ask who the competition is. Prepared teams know this without having to ask. Based on the scope of the tender and their knowledge of the marketplace, they understand who their main competitors are and don’t have to ask or guess. Knowing who your competitors in the RFP process are is important because you need to show differentiation from them (also see point 5).
 

4) Follow the guidelines and complete all requested information

Most (not all!) RFP documents give a clear set of guidelines on what is expected by the RFP issuing party. These guidelines (rules) should be treated as absolutely non-negotiable by the RFP response team. A deadline is a deadline. Missing a deadline or asking the RFP issuing party to extend the deadline especially for you puts your company in a bad spot from the start. It shows you haven’t done your planning right. If you cannot get the planning for a RFP response right, how do you perform in day to day practice with your deliveries? Make sure if don’t negatively influence your changes by something like this. Keep in mind that the RFP issuing party also has a time plan which is based on receiving responses at a certain moment. If not everything is in on time, they cannot start their analysis which will mess up their time table.

Having said that, the given timeline for a response has to be realistic and achievable for the parties responding. For example, asking providers to quote for a global airfreight tender within one week is unprofessional and will not lead to competitive responses. However, deciding whether your are able to provide a credible RFP response within the given deadline needs to be part of the initial scoping (point 2). If, based on that scoping, you have decided to accept the invitation you have also committed to the deadlines.

Nothing can lower your chances of winning a RFP as much as submitting an incomplete response. The RFP issuing party needs to make an apples-for-apples comparison. This can only be done by having all the requested information in the RFP responses. Many RFP analysis teams will not take the time to contact you about missing details, but will ignore your submission altogether. If you were requested to submit information (e.g. quotes) in a prescribed format, don’t change it. The prescribed format has a purpose. If you change it, you will most likely make it impossible to upload your submission to an analysis tool and ruin your chances of winning any business. If the required format does not completely fit your mould you have to adapt to this. The RFP format that was requested often only serves the purpose of allowing the RFP issuer to equally compare data, a final format will be agreed upon in the negotiations.

A winning RFP response team always submits a complete and timely proposal to the issuing party.
 

5) Differentiate from the competition and mitigate risk of change

Winning RFP response teams don’t just hand in a list of their services, they make clear what their unique selling points are. They clearly demonstrate what their edge is over the competition. Being able to do this means you need to have a clear understanding of the marketplace you operate in and who your competitors in the RFP process will be (also see point 3).

Especially if you are not the incumbent you need to make it clear how you intend to limit the risk of change. Risk of change is a factor in the RFP process that can make or break your proposal. It is difficult to quantify as it often is linked to maintaining un-interupted service, switching IT systems, changing service levels and changing client interaction. Your quotes and services may be superb, but if you are not able to convincingly mitigate the risks of change you risk not being selected because the client feels uncomfortably with the risk.  

 

In the next article we will review the remaining 5 traits of successful RFP response teams.

Outsourcing Freight Audit - things to look out for

An established industry in North America, a fast growing industry in Europe and an emerging industry in Asia. Freight Audit and Payment is a fast growing outsourced service. But which vendor to select and trust with the audit and payment of your logistics service providers? Do you just go for the cheapest or are there other things to consider?

While freight audit as such may not be a mission critical activity – not paying your carriers on time as a result of badly managed freight can affect your logistics. So when considering outsourcing your freight audit and payment activities it pays to consider the following aspects.

1. Regional or Global Requirements

Not all providers have global capabilities.  A number of them will project a global footprint but it is not just about having an office in the region you are looking at. Make sure to truly evaluate if your provider can handle various currencies, various languages, local legal, tax and finance requirements.

 

2. Just Audit?

Are you just looking for an audit? Or do you also require complex GL coding? Matching? Rate claim handling? Payment? Data Mining? Freight audit providers continue to expand their service offerings to include e.g. shipment order entry and tracking – but they may not be specialists at those additional services. So you need to decide which part you outsource with them and which part you keep in house or outsource somewhere else. Make sure to know what you need (now and in the future) and that your provider can truly cover your needs.

3. Payment

Payment can bring complexities (and costs) with various currencies as well as regional and local financial and tax requirements. Sometimes it may be wiser to outsource the audit but keep the payment in house. Some freight audit and payment providers have an interest in also taking over the payment part of the process. That can allow them to subsidize their service through the interest accumulated between the moment you pay the provider and the moment the provider funds the carrier. That interest is known as ‘float’. There is nothing wrong with float as long as it is transparent to all parties. Off course with the current level of interest rates being less then 1% the incentive for a float based model has largely disappeared.  That also has the added benefit of keeping control over your funds.

4. Information and Reporting

As the emphasis in the freight audit industry has shifted from pure audit to information gathering and reporting, it is essential to truly test and evaluate your provider’s coding and reporting capabilities. Is the reporting on line? Does it allow to slice and dice data, can you feed data into your own systems. Freight audit can potentially create a wealth of detailed logistics and financial information. But can your vendor untap it for you in all its details? And against what cost?

5. Additional Costs

Beware that your price per audit transaction may not cover everything. Allocations? Payments? Rate updates? Reports? Implementation? Will these add to your overall costs? And you need to make a distinction between the transactional fees and the one time fees such as implementation and set up. Freight audit pricing can be notoriously complex. Make sure to account for all the costs and calculate them back to a price per transaction. Better yet, let your prospective providers quote in fixed pricing format so you truly compare apples with apples.

6. Implementation

Selecting a provider is the first step, not the last! How will they implement? What resources will they commit? Can they convert carriers to EDI? What are the timelines? Depending on the provider and what system and process they offer the impact of implementation can vary. In some cases implementing the solution may mean truly integrating your financial and operational systems. In other cases it can be as simple as diverting the carrier invoices to your provider and receiving a data feed after audit. On whichever side of the implementation spectrum you may end up – make sure your provider has enough resources to ensure a timely implementation – but also ensure your own organization and carriers are ready to spend time and effort to get off to a good start.

7. Beware of just price!

Just going for the lowest price per transaction may not always be the best way. The freight audit market is a competitive market where the emphasis is on price to win business. This can be at the expense of quality. Cheap may be expensive on the longer term through missed deadlines, re-implementations, or incorrect audit.

Outsourcing freight audit to a specialist can bring benefits - savings between 1% and 5% over freight spend are regularly achieved - it pays to take the time to go through a comprehensive selection process to make sure the vendor you select really delivers the benefits you expect.

Xzisu is a global transport & logistics tender/RFP management specialist. With a proven track record of service excellence Xzisu uses its industry knowledge, combined with technology to manage complex tender processes .

www.globalroutingguide.com

www.xzisu.com

 

Why carriers deserve (better) RFP feedback

 

The number one complaint from carriers, who participated in a transport RFP, is that they do not get much feedback or any feedback at all from the party who issued the RFP. Carriers that are invited to participate in RFP project often spend a lot of time and effort on understanding the requirements and creating a professional response. It is disappointing to most when all they get is a one-line email in which they are thanked for their efforts and simply told they did not make the cut. Carriers deserve better. It is in the best interest of both all parties in an RFP (shipper and carriers) to have a good feedback loop, we’ll explain why.

 

It is good business practice

A RFP project is usually an intensive activity which has taken many weeks to prepare by the shipper. The invited carriers in general get two to three weeks to create responses. They bring in a tender team that puts in a lot of effort to create a competitive proposal. It is just good business practice to provide the professional partner you are looking for with professional feedback. Every RFP project should include as a standard an effort from the shipper in which each individual participating carrier receives detailed feedback on why he did or did not win the business.

Good feedback brings improvements

Carriers that are invited to a RFP project are invited for a reason; they might be potential partners for the future. When responses are received from carriers they should get details on where they were strong and weak. The more details they get the better they can study their offering and improve on segments where they are weak. This could mean that the next time such a carrier is invited he has improved his services or pricing and is an interesting and competitive party.

You might need the carrier a next time

RFP’s are a reoccurring exercise for which most of the time you invite the same “usual suspects”. Invited participants that have had a good experience with a company’s RFP, will be glad to give it another shot the next time they are invited. If you are professional, they will go the extra mile for you. When carriers have a feeling that they do not stand a chance in a RFP or feel that they are not taken seriously, they will either refuse to participate, or hand in an uncompetitive  response.

 

What should good feedback include?

For each bid step in the RFP project you are performing an analysis anyway, you might as well use this analysis as a basis to give feedback to the carriers you invited.

Both the "winners and losers" of each bid step should receive detailed feedback on their responses. Feedback should consist of an anonymized and indexed comparison against the other invited participants. The service driven components (such as the RFI) give the participants a good understanding of their strengths and weaknesses. If possible you should also give them a comparison against your requirements list. This shows them not only how they stack up against the competition, but also why they are or are not a good partner for you.

On the pricing side giving feedback is a more sensitive issue of course. But also here an anonymized and indexed comparison should be possible. Use graphs to illustrate where a carrier was strong or weak. This does not have to mean exact percentages up or down should be shown.

Giving professional feedback on a transport RFP is often highly appreciated by participants, even if they do not win any business. The insights they get from it help them understand and improve weaknesses in their offering. Furthermore it will strengthen the potential partner base for any future RFP.

 

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