The purchasing process can often be almost a charade. Here the Fleet Industry Advisory Group explains how to get the most out of it.
Fleet is typically a company’s second biggest expense after staff salaries, so it pays to ensure that the process for purchasing vehicles, fleet services and related products runs along best practice lines.
Too often the purchasing process conducted via a tendering exercise can be totally inappropriate, ineffective and almost a charade. However, when undertaken carefully and involving all key stakeholders, it becomes the cornerstone of the contract that will define the long-term efficiency and effectiveness of the fleet operation.
Preparation is key
The key to a successful fleet purchasing process is to define what is required, commercially and functionally, from potential suppliers while ensuring the very best value for money is obtained.
Typically tender documents when issued to potential suppliers fall into four categories:
- Those that are concise, to the point and generally first class
- Those that are vague having probably been written by people with little or no fleet knowledge
- Those that are written by external consultants engaged for the specific exercise, which are often unnecessarily complicated
- Those that are simplistic generic documents used for general purchasing that are inadequate for the job in hand.
It is vital that fleet decision-makers clearly identify their requirements and establish the criteria.
To ensure compliance and value is achieved, other key internal stakeholders should be involved. Depending on the size of the organisation this could include procurement, finance, HR, legal, health and safety and environment.
Such an approach ensures the procurement process is both well-run and has a clearly defined and auditable tendering objective.
Too often, particularly if the fleet decision-maker is inexperienced or fleet is not their full-time job role, the decision-making process is unduly influenced by colleagues from other departments. This can result in a lack of clarity in terms of what is required from suppliers because those making the purchasing decisions do not necessarily understand the complexities of fleet.
However, it is vital that a company’s procurement department provides technical support and ensures that the purchasing process from start to finish is managed against corporate compliance procedures.
The most successful tender processes are those where the fleet professional has outlined the requirements and then works in tandem with the procurement department to identify suppliers that can deliver the objective and at the same time keep internal stakeholder departments onside.
Structuring the tender process
To ensure that ultimately the ‘right’ purchasing decision is made and the ‘right’ supplier appointed it is important that:
- The organisation issuing the tender has a high level of marketplace knowledge so the ‘right’ suppliers are asked to tender.
- Potential suppliers tendering for fleet business have knowledge of the organisation, an understanding of the fleet set-up and clarity about the objectives of the exercise.
- There is a cultural fit between the parties. This aspect is often overlooked, but it is important that the right ‘feel’ exists from the start of a relationship.
That is why a prequalification stage embracing a ‘request for information’ from potential suppliers is essential.
Those making the purchasing decisions should familiarise themselves with the latest fleet thinking and marketplace developments by reading the fleet press, talking to their peers and generally researching the marketplace.
Surveying the market and taking on board the views of other fleet professionals will result in a targeted tender exercise being carried out involving potential suppliers that are most likely able to deliver the product or service required.
Suppliers should be asked to provide specific information and evidence of capability and price in answer to a series of fleet-related questions. They should also be asked to demonstrate that they can offer:
- Quality and reliability
- Speed and flexibility
- Value for money
- Strong service and clear communication
- Financial security
- Stability and continuity
The incumbent provider(s) should also not be ignored. It is essential that organisations involve them in the process and discuss with them the reasons for the tender, any procedures that could be improved and new services required.
Responses from potential suppliers to the request for information should then be weighted and scored to enable a shortlist of potential suppliers to be compiled who will then respond to the formal tender document.
The tender shortlist should ideally consist of a handful of possible suppliers – perhaps a maximum of four or five.
It then comes down to a discussion about value for money but, critically, also company culture, personal relationships and how certain fleet operating scenarios will be managed.
Asking a potential supplier to respond to precise operational scenarios enables them to fully detail the actions they would take and gives the fleet decision-maker the opportunity to compare and contrast in the real world.
As a result, the tender document reflects what is happening on the fleet and should tackle specifics. The objective and the areas of concern should be clear with a list of questions to which suppliers can respond defining what is both essential and desirable.
It is also a good idea to visit short-listed suppliers. This will provide an opportunity for the fleet/procurement team to test key areas and, in particular, talk to personnel who will be delivering the service.
Fleet decision-makers should also visit existing customers of potential suppliers. Gathering information on levels of satisfaction and service delivery is critical so a step into the unknown is not made with disastrous consequences.
Detailed planning and making the necessary time to visit potential suppliers will enable tendering to become a fast-track process that should take no longer than six months.
Awarding the contract
Having received full and final offers from each short-listed supplier, a scorecard approach should be taken.
Key criteria should be weighted and measured including: capability, risk, financial stability and corporate social responsibility issues as well as a would-be suppliers’ ability to deliver what is requested of them alongside value for money and price. If this is done properly, then the organisation with the highest score will win the contract.
All internal stakeholders engaged in the procurement process should ideally score potential suppliers to ensure fairness that the company ultimately chosen is most definitely the best to meet the requirements of the business.
During the final decision-making process it is OK to seek clarification on specific points from potential suppliers, but that should not alter the competitive nature of the tender process or the preset selection criteria.
If a supplier can significantly undercut its competitors there is usually a very good reason for it, which is why it is vital to analyse value for money and not simply analyse the headline price. This analysis should take into account the quality of service delivery and the ability to innovate.
Saving money by selecting the ‘right’ supplier is important, but to be the most effective any savings must be sustainable. It is far better to select a supplier that can reduce costs year on year rather than one that is cheapest at the point of tender but that’s where cost savings end.
Critically, it is vital to understand how a new service or fleet tool will be implemented. It is important that realistic timescales are allocated to the process.
Trust and transparency are the two key words when selecting supplier partners. Fleet decision-makers must then build on the partnership relationship and will find that with qualities apparent from both sides, first-class service levels and value for money will result.