Logistics Outsourcing Tips – a video
Not all business is good business. Rob O’Byrne explains that on both sides of the relationship, you need to take care.
“You know one of the lessons I learned very early in is that not all business is good business.
Hi, this is Rob O’Byrne from Logistics Bureau. If you’re wondering where I am, I’m actually in tropical Queensland at the moment, in Kents. I’m here for work, not sitting on the beach and we’ve got a cyclone coming in very soon so I’ll try and make this quick. Hopefully, you can hear me okay above the wind.
What I wanted to talk about was Logistics Outsourcing and I had a very interesting conversation with somebody recently, a guy who owns his own transport business. He rang me up with a little bit of concern and he said, ‘Look, we’ve been approached to actually bid on a very large transport contract and I’m not quite sure exactly how to go about this and could I just run through this with you?’ He actually sent over to me the request for tender documents so that I could get a hand along what the requirement was and it made me think, you know, that when you’re trying to outsource an element of logistics, be it warehousing or transport, it really does require both parties to have very detailed and open communication for it to work.
So let’s call this Transport Company Owner John. What John sent me was about a 6-page Request for Tender which hardly had any detail in it at all, it basically just said we need these products moved from A to B, please give us a quote on your services. What I said to John was that ‘that made me a bit nervous’ because firstly, it told me that the company putting out that request for tender probably didn’t have a lot of experience in tendering because they hadn’t really provide enough information. So what I suggested to him was to firstly, try and get a meeting with the company and try to visit their premises to learn more about their specific requirements.
The other key thing, because there is really very little information provided, was to be very careful about how he costed the project. Here’s a lesson for customers of transport companies: because so little detail had been provided, what John had to do was make a lot of assumptions about how the service was going to be provided and the sort of resources he needed to provide. So put yourself in John’s position for a moment, he had to work out how many trucks were going to be used, what utilisation of those trucks were going to be and so on and what the management cost was going to be, the maintenance cost and all manners of costs associated with actually running what was going to be quite a large contract. What I said to John was, ‘Don’t try and buy this contract.’ That a term you very often hear in transport where transport companies will bid quite low for what thet think is a very lucrative contract, but it actually turns around and bites them in the end because they underestimated the resources and the costs involved in servicing the contract. They end up losing money on the contract and the customer’s unhappy and the relationships break down.
So from the transport company’s perspective, there was a couple of lessons there. From the potential customers’ perspective, I think it’s all about be open as much as you can, obviously with a commercial confidentiality, but try and get people as much information as you can about the task at hand, some detailed data if you can, the sort of relationship you’re looking for, and maybe the type of commercial contract you’re looking for to give potential suppliers a bit more information on exactly what you’re looking for.
So the key message there, and I do need to give John a call and see if he won the contract, was for both parties to take a little bit of care and time and make sure that you go through and really understand the requirements of the contract well, communicate often and in detail about what the need is going to be and then hopefully, things will work out well, the contract will be correctly resourced and costed and it will be a long term fruitful relationship.
Just remember that not all business is good business.”
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Logistics Outsourcing is one of the services at Logistics Bureau.