Why Successful Tender Processes Are Important.
How to ensure best value when switching packaging suppliers
Depending on your company setup, management structure, industry sector or specific requirements, it may not be a simple task to switch suppliers.
Even though the need – and benefits of doing so – may be clear, it is likely various stakeholders and departments will need to be consulted and agree upon the course of action.
This can, unfortunately, lead to disagreements and debate if vested interests are allowed to dictate the decisions made.
It can be a difficult process.
However, by following a tender process, you not only alleviate this problem but, ensure the supplier you appoint is the best fit and will provide the most beneficial service – rather than simply being the cheapest.
Points to consider
When deciding to proceed with a packaging tender, there are various points to consider.
This could include points relating specifically to your company and future plans. Are you forecasting accelerated growth over the next couple of years? Do you have plans to relocate? Will you be losing important staff members due to retirement or promotion elsewhere in the business? Will your product offering be changing or expanding significantly?
All of these points can impact your approach to the tender.
However, you must also consider any current difficulties you are facing now, or expect to in the future.
Are you suffering from a lack of storage space? Are your levels of returns and transit damage excessively high? Is staff productivity too low? Is your competition growing market share at your expense?
You should also decide how you want any new packaging suppliers to fit in with your own company culture. The levels of customer service required. Whether you prefer frequent face to face meetings or are happy with more remote management. Even whether you are looking to consolidate multiple suppliers.
The list is incredibly large.
However, most importantly, you should define the goal of your packaging tender (both short and long term); so that you can get the products and service you need to advance your business, at the most economically viable level.
Packaging tender process
As the driver of the process, you can shape the way in which the tender proceeds to suit your specific requirements. Ultimately, you are using the process to achieve the business goals you have identified – be it overall cost savings or improvements to service levels.
However, many companies will follow a fairly prescribed approach to tenders (across all of their suppliers).
This, typically, is seen as follows:
- 1: Rationale for tender
- 2: Documentation Preparation
- 3: Research
- 4: Advertising / Submission
- 5: Bidding Process
- 6: Tender Evaluation Process
- 7: Contract Award
Please continue reading for further information on the key tasks and considerations at each stage in the process.
Rationale for tender
The first stage is to ascertain why you are putting your packaging supply to tender.
This is important in that if you do not define what you want to achieve, the final outcome may be different.
It is important at this stage to discuss your current packaging processes and supply with the relevant stakeholders and departments across your business. This includes everyone from those packing the goods, the warehouse and logistics teams, those responsible for replenishment and even your customers.
This feedback is crucial and allows you to create a tailored and exact specification that will resolve any issues you are currently facing (and the reasons you are looking to tender).
This also allows any companies tendering for the supply to know your precise requirements, and tailor their response accordingly.
The documentation that you supply can make or break the overall success of the tender process.
There are usually 3 main parts, but depending on your business types or more requirements you may feel you need more or less.
The specification describes the type of product and or service that you require. It is important here to cover everything that is particularly important.
For example, as well as listing the main product types (when referring to corrugated packaging), it is also important to add any requirement for sundry products (tapes, labels etc.) if you want these to be part of the proposals.
The next document is any terms and conditions of trading that you may have. Whilst these do not have to be provided in full detail, anything that may affect the tender should be noted.
Finally, the pricing document will allow your chosen potential suppliers to feedback cost information.
If you have a particularly large range of products, it is often better to select a representative sample of lines (e.g. small, mid and large sizes, or high and low volume usage). This will allow the packaging tender to be completed more quickly and accurately, and will also not discourage potential suppliers from offering prices (don’t ask for too much initially).
The next stage should comprise of your own initial research.
Use search engines, directory listings, trade shows and even industry press to try and identify the types of company you feel would not only be able to supply the product you need, but also be a good “fit” for your company.
LinkedIn is another rich source of information, possibly allowing you to get an insight into the people and skills at a particular company.
Advertising / Submission
Once you have identified a handful of companies you feel are suitable to approach, the next step is to simply send them the packaging tender documents prepared in step 2.
It may be wise to also send your tender to your existing packaging supplier (unless they are the main reason you are tendering) in order to get a benchmark and see what they may be able to do if they feel they may lose your business.
However, if you only find a couple or even just one supplier you feel is a good fit, do not be afraid to conduct the packaging tender process with just them and your existing supplier.
The process, as well as allowing you to choose between suppliers, also lays the groundwork and trust for a successful relationship moving forward.
You may – depending on your industry or products – ask for each company tendering to sign an NDA (non-disclosure agreement) before sending them the more detailed documentation.
Don’t forget to set a deadline of when you would like any response by, or, even better, set out a proposed timetable covering any response, presentations, meetings etc.
Working to your timetable, a number of things should happen.
Any suitable supplier should want to meet and discuss your requirements. This is sensible so that not only can you begin to ascertain whether the company is indeed a good fit to be your supplier, but allows the supplier to get a feel of the challenges you are facing as a business.
Following this, you may wish for the selected companies to undertake a presentation to not only you, but the relevant stakeholders and board members as well.
As well as providing a lot of pertinent information, this will also allow you to ask questions and ensure everything you wish to know is covered.
Note that you do not need to discuss pricing at this point, rather confirm whether the supplier would be suitable.
Tender Evaluation Process
At this stage, all pricing and supporting information should have been submitted.
Once a potential supplier submits a bid, you should evaluate it against a number of important factors, including a financial and capability appraisal, system and procedures appraisal and so on. This will allow you to determine the most economically advantageous bid.
The evaluation criteria used to determine the successful bid should also be weighted in accordance with the type of contract.
So for example, if your initial rationale was that your company growth was inhibited by lack of warehouse spacing, consideration of a managed inventory and JIT supply should be weighted more highly than other less important factors (which may or may not include the overall pricing).
Remember to remain impartial and treat all information submitted with the strictest of confidence.
Once a decision on who to award the contract to has been decided, the successful and unsuccessful bidders should be notified.
If you decide to continue with your existing supplier (if they were part of the packaging tender process) then very little else needs to be done at that stage.
However, if you do switch suppliers, a plan must be put in place for the transition of supply (including mitigation plans), account and invoicing setup, delivery schedules etc. It is particularly important to manage the switch well, in order to minimise disruption and avoid potential interruption of supply.
Then, you can begin implementing the changes that prompted the tender process in the first place.
Conducting a successful packaging tender
A packaging tender can be a tricky process to get right, but the rewards and impact it can have on your business can be extremely high.
Just don’t forget, tenders to not have to be solely cost driven, do not need to be sent to a large number of companies, and can focus instead on achieving a change in service level that will improve the overall cost efficiency of your business.