source: Nordenia

Cost vs. Benefits

André Wüstemann, logistics manager at NORDENIA DEUTSCHLAND Halle GmbH, faced a major project in early 2009: Strategic freight purchasing — a part of the lead buyer organisation within the NORDENIA group — was to be centrally coordinated for all German companies of NORDENIA INTERNATIONAL AG by a single responsible person. A real challenge — with one request for tenders from each plant, moving general cargo, partial and full loads from five German sites into 21 European countries, more than 300 individual delivery channels, and around 15,000 individual shipments, with a total tonnage of 180,000 tonnes. "It was clear that we wanted to use an electronic platform, in order to standardise processes on the one hand, and optimise our transport costs on the other hand", according to Wüstemann.

Requirements for freight purchasing

NORDENIA decided to bring a partner on board, specifically for the freight purchasing project. "We wanted to use an electronic platform, and to work with contact persons who had experience in logistics." In March 2009, the decision was made to work with TICONTRACT. The web-based tool for strategic freight purchasing fulfilled 95 % of the desired and necessary requirements from the beginning.

Lead time of up to six weeks

As the project coordinator for all five plants, Wüstemann had a considerable amount of coordination work to complete in the run-up to the tender requests. Those responsible for logistics at the individual sites had to be included, and their requirements and needs had to be analysed. According to Wüstemann, the key to a successful tender request is the clear definition of goals in the run-up to the request: which data must be captured, which data structures must be created? Which results must be achieved? Which factors must be taken into account? "The best tool is useless, if we don't know what we want", says Wüstemann. "Since this was the first time that we issued tender requests in a centralised and standardised way, the amount of effort and the preparation time were relatively high. We had a lead time of approximately four to six weeks before the tender requests were actually issued." The effort was justified, however: The processing of the tenders was straightforward, in addition to the standardisation of processes, and their audit compliance. "In particular, the extensive assessment possibilities were extremely helpful for us. Using TICONTRACT, it is possible to simulate different service provider commission scenarios, and to see the best possible contract award combinations. The results of the assessments are particularly meaningful, and they can be practically implemented." In addition, Wüstemann sees the benefit of this in future tender requests. "Now that we have structured our data, and laid out the appropriate matrices, we will realise huge time savings when using the tool for upcoming tender requests." Tender requests which have been set up can be used as templates, duplicated, and easily modified.

Success factor: communication is the Alpha and Omega

New and innovative techniques are often met with refusal, and a greater amount of communication is usually required in order to implement them. For this reason, NORDENIA personally informed all existing service providers about the new processes ahead of time. Wüstemann describes the approach as follows: "Most of our service providers were already registered in the system. Those who were not registered did so when we informed them. For us, service providers are important long-term partners — their fair treatment is one of our key concerns. Involving them in our processes is part of this." An electronic platform is not a substitute for personal communication with the service providers. Martin Beyrer, TICONTRACT's business development manager, confirms this: "Our tool only provides the technical basis for an efficient processing of tenders. It cannot, and should not replace personal contact with the service providers. It is designed to enable the pre-selection of suitable partners, with whom one can then negotiate the final contracts in person."

Well accepted by service providers

Between 15 and 20 service providers were invited, depending on the tender. "We take care that shipping agents only invite service providers who can actually fulfil their requirements. This is accomplished using a detailed search for service providers in the system, or, more precisely, using an electronic request for information (RFI). It is pointless to invite hundreds of service providers, if, for example, none of them can manage the relevant delivery channels", according to Beyrer. Service providers may use the platform free of charge, even for procurement. Nellen & Quack – The Green Line from Gronau has been moving freight for NORDENIA for several years. "Our customer NORDENIA invited us to tender using TICONTRACT, so we registered, and took part. We were positively surprised that the system was so easy to use, and readily comprehensible. To begin with, we were somewhat sceptical, but we discovered that submitting tenders using the tool is in no way reminiscent of an auction", according to Peter Meckmann, head of purchasing at Quack GmbH & Co. KG – The Green Line.

Success all down the line

Overall, NORDENIA offers a positive summary: "On the one hand, our goal was to realise the cost saving potential. On the other hand, soft skills such as durations, departure modes, and disposition times played a key part for us. Not least, we place great emphasis on a good relationship with our service providers. We have been able to achieve all this with the electronic tender request process", says Wüstemann.

September 2009