So how much are you spending on logistics in your business?
Most companies spend between 8% and 15% of their turnover on logistics. That means for every R1 billion you turn over in your business, you’re spending between R80 million and R150 million on logistics.
For many businesses, that makes logistics the third or fourth biggest line item on the income statement – yet it’s a number that often doesn’t get the attention it deserves from the CEO and CFO.
The opportunity is significant: with a deliberate logistics strategy that supports your business strategy, you could save 10% of your logistics costs. And the real question is this: how much more do you need to sell to put R10 million directly onto the bottom line?
Strategy comes before procurement
When asked about logistics strategy, the most common answer we hear from companies is, “We’re going on an RFP.”
The reality is that a Request for Proposal (RFP) forms part of your logistics strategy – but it’s not where you start. Only once you’re clear on your strategy should you go to market for pricing, because there’s a lot of work that needs to happen before you issue an RFP.
Typically, the pre-work for a Transport RFP includes strategic decisions like:
- What is the equipment type required?
- Do you own the equipment, or outsource the trucks?
- Do you create ESD opportunities as part of your operating model?
- How do you optimise inbound and outbound fleets?
The important part is to invest in a well thought-through, deliberate logistics strategy that enables your business strategy. Once you’re clear on that, you then go to market and procure in line with the strategy.
RFQ vs RFP: why most businesses get this wrong
One of the most common questions asked is, “Should we go for an RFP or an RFQ?”
An RFP does give suppliers room to be creative and propose different options which you may not have considered. But that creativity can also sometimes become a problem – because you often end up with 10 different proposals, and it becomes incredibly difficult to evaluate them and make the right award decision.
A better approach is to be clear – and that means using a Request for Quotation (RFQ).
Being clear means asking suppliers to quote on something very specific, including:
- Lane Rates
- Equipment type
- Hours of operation
- Goods-in-transit insurance
- Liability requirements
- ESD requirements
The clearer you are in your RFQ, the easier it is to evaluate responses – making it far simpler to select the right service provider for your business.
A strategy is useless if you don’t execute
Once you’ve developed the strategy and procured accordingly, there’s one final step that determines whether you get results or not: you need to make sure that every single day, every single load is planned in line with the strategy.
That means consistently ensuring:
- Carrier availability
- Loads are allocated to the lowest cost option where possible
- Deliveries are completed according to the plan
- Documentation is captured and processed for invoicing
- Service levels are achieved
If you’re planning only 5–10 loads per day, Microsoft Excel may be enough. But once you reach 20+ loads per day, you’ll likely want to reduce dependency on a single individual, de-risk the business, and consider transport management technology with automation to ensure ongoing sustainable savings.
Ready to review your logistics strategy?
Dive into the full video series on Strategy, Procurement, and Execution to understand the transformation, and value, that Transnova can deliver. Or contact our Solution team for a discovery session.