Tendering is where you tell a group of companies what it is you want to buy, and they tell you about the products and services they offer, their price and their terms. This post explains the steps in how to tender to get the right goods at the right price.
The competition of bidding for something can improve the prices you’re offered. Tendering can also be used to consolidate a group of items, such as PPE or stationery, into one defined price list.
Here are the steps for conducting a tender to save money.
Define the need
It’s crucial to have a clear idea of what is needed and communicate this well to the suppliers.
A specification can include anything that will be useful for the supplier, so you can write it up, or add drawings, or have plans of your buildings, or photos of where products will go.
Allowing the supplier to come back with alternative ideas can open you up to new innovations or services, too.
Deciding Who’s Best
When you receive the responses back from suppliers, you need a way to choose who is the best fit. This is called the ‘scoring criteria.’
Things you could score are:
- Previous performance
- Lead time
- Sustainability measures
- Made in Britain
- Availability of technical support
The company must be a good fit for you to work with. It’s no good to be buying the best product if the company is really frustrating communicate with and they always deliver late.
Similarly, they should have similar values to you. If you’re telling your customer that you care about sustainability, then your suppliers are a great opportunity to further that agenda.
It’s still important to know what the company needs and values before you go out to tender. This is because you want to limit the amount of times you go back to the supplier for extra information. Plus, you want to receive the goods or services that you really want, first time round.
Sending the Tender
When sending the tender to your potential suppliers, you can send:
- Your Terms and Conditions
- The specification
- Any drawings, plans or detailed information that’s required
- Contact details of who they should respond to
- A deadline for response!
The first step is to check that they include what you’ve asked for. Only you can judge it but ask yourself whether it fulfils the specification you put together. Is it the right quality product? Will the lead time match your requirements? Do they have the insurance levels, ISO standards or other certifications you need? Are there elements of their response that you’re not sure about?
Next, compare the prices. Are some way out? I often give suppliers the chance to review their response and double check that they included everything if they’re super cheap or haven’t overdone it if they’re really expensive. Other buyers will automatically exclude the most expensive and cheapest suppliers.
There are basically three criteria to check:
- The quality and technical aspect
- Whether you could work together. For example, with their lead times, order process and communication methods
- The price
You can weigh up a supplier that is giving better quality against the cost – are you willing to pay that much extra for that quality? Only you can decide.
Agreeing The Contract
At this point you could just decide on a supplier, ring them up and tell them they’ve got the work. In the UK, verbal contracts are still binding. But they leave a lot of scope for misunderstanding and if something goes wrong you’ve got nothing to rely on in your argument.
Both sides need to understand what to expect and what their responsibilities are. Formalising the contract in writing means the supplier knows EXACTLY what they need to deliver, and you know when you’ll receive it and how much you need to pay.
There’s no set format for how a contract needs to be laid out. It could be as little as a one-page document stating that both parties agree to proceed as per the price list, until a fixed date.
Think of the contract as a pack of documents that someone could pick up in future and know exactly what’s involved, without needing to hear the history. It should have reference to the original specification you sent, the quote you received back and any clarifications that were made during the negotiation stage.
The purchase of something doesn’t end when you’ve signed the contract. You want to know that they deliver on time and that the goods or services are the right quality.
For ongoing needs, try and maintain a positive, useful relationship with the supplier. One of the ways to do this is to have a regular review meeting with them. In this, both sides get to discuss performance, safety, communication. It’s also a great opportunity to discuss future cost saving measures!
Another way to manage the contract is to monitor the performance with metrics, if you have them. If you have a computer system that can analyse your POs and tell you when you get late deliveries, that can help a lot.
Other routine checks can include random price checks against the list of prices you agreed.
It’s always good to check with your own team members who are using the products or services, too. Your Warehouse team is best placed to tell you if all the products come in packaged well. And the first people who use the office in the morning can tell you what the cleaning standards are like.
It’s easier to pick up on the small problems as they occur than let them fester. It costs you a lot of time and energy to manage a poor-performing supplier than one that does everything right first time.
Right Back Where We Started
You might have realised that the diagram for the tender process was a circle. That’s because when you’re managing a contract, there comes a point when you need to check that you’re still buying the right products and services.
Your business goals might have changed, so you need to look at alternative ways to fulfil orders to your customers.
Be in control of defining what your business needs and how you fulfil those needs with your suppliers. Otherwise, your suppliers will end up defining it.
Take the initiative and continually improve.
Want to learn more? My eGuide is full of real life examples and gives practical steps and resources for how you can implement this in your own organisation: https://payhip.com/b/C0tl