Reducing Transportation Expenses with a Tender Process

January 6, 2025

by Gaoly Ly

In today’s global economy, supply chain management has become increasingly complex and challenging. One of the main challenges for businesses is to keep transportation expenses under control. Indeed, transportation can account for a significant portion of expenses, ranging from 3% to 10% of manufactured products.

Transport plays an essential role in a company’s overall logistics. An efficient flow of goods maximizes the availability of materials or products in the right place at the right time. This helps maintain operational continuity and satisfy customer demands. As a result, these expenses are often rarely questioned.

There are numerous strategies and best practices that companies can implement to reduce their transportation expenses within the supply chain. In this article, we explore the establishment of a tender process and the gains it can bring. This approach can be implemented quickly without requiring significant investments and can lead to substantial short to medium term cost reduction.

Leveraging Carrier Management: Negotiating Rates and Building Relationships

An effective carrier management system is crucial for manufacturing companies seeking to optimize freight costs and improve operational efficiency. Companies can negotiate advantageous rates by leveraging their shipping volume and establishing long-term partnerships with carriers. Regular evaluation ensures that the service you are using still meet your specific needs and align with current market offerings.

Key Steps in a Tender Process:

Analyze Transportation Data:

The company must be able to translate functional needs into transportation requirements. This requires a detailed understanding of the various transportation flows and their qualifications: volume and weight, type, frequency, distance, origin and destination, expected service, and any other specifics related to the nature of the goods (such as time required for goods availability, reception and delivery schedule…). Evaluating current partners is also an essential part of this stage.

Define Transportation Strategies and Compile a List of Potential Partners:

Researching potential partners helps target the right potential suppliers. Considering various transportation strategies based on operational requirements allows you to evaluate different scenarios and their potential savings: intermodal transport, single partner, regional partners, or third-party logistics (3PL) providers.

Establishing Specifications Document:

This is one of the most important steps, as it will determine the success of the tender and the quality of the proposals received. The previous stages of analysis should enable you to draw a clear and precise specifications document outlining deliverables and required needs.

Although the form of a specifications document may vary, some common key points should include:

A presentation of the company and the context
Specific transportation needs that have been qualified and quantified
Pre-defined selection criteria established during the requirements definition phase
Deadlines
The expected format of responses
Contact information

Receive and Analyze Proposals, Evaluate and Select Transport Strategy and Partners:

Rigorously evaluating and comparing the received rate proposals will enable you to choose the partner(s) that best meet your needs at the best market rates for the desired service. This stage is carried out with the help of evaluation and rating tools.

In Summary:

Our experience at Avalon CSC shows that effective management of transportation expenses can lead to significant cost optimization and reduction. To achieve this, transportation procurement must be viewed not merely as a commodity but as a service tailored to your business’s specific needs at the best possible cost.

Case Study:

Challenge: A manufacturing company in the pulp and paper industry wanted to reduce its transportation costs and acquire better technological tools to measure performance.

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