How many suppliers should you involve in your logistics outsourcing tender?
This is one of the most common questions I get asked. It’s a crucial part of the process.
Check out the full video for insights and advice on getting it right!
The Importance of a Structured Approach
Logistics outsourcing requires a structured process to ensure success. One common question is how many suppliers to involve in the tender process. Whether it’s called a Request for Tender (RFT), Request for Proposal (RFP), or Request for Quotation (RFQ), the goal is the same: to gather qualified bids for services like warehousing and distribution.
Open vs. Closed Tendering Methods
Open tenders allow any supplier to bid. While this method is common in government and large corporates, it often results in an overwhelming number of responses, many of which are unsuitable. In contrast, closed tenders involve inviting a select group of suppliers. Over my 25–30 years of experience, I’ve found closed tenders to be far more effective, as they allow for better focus and results.
Think Like an Informed Buyer
An informed buyer narrows their options to avoid wasting time on irrelevant bids. Imagine you’re hiring a contractor for a bathroom renovation. Would you advertise broadly and sift through hundreds of quotes? Or would you choose a few local contractors with relevant experience and within your budget? Logistics outsourcing works the same way. By narrowing the list, you attract suppliers who are a better fit for your needs.
Building the Right Shortlist
To get three strong contenders at the end of the process, start by inviting around five suppliers. This allows for potential dropouts, which are common in today’s tight logistics market, where warehousing space and resources are often limited. Your shortlist should include your current provider, as they can reassess their performance and potentially offer improvements. Additionally, consider adding a newcomer or an outsider—perhaps a supplier recommended by colleagues or one entering the market. Five is usually the ideal number. Inviting too many suppliers can make you appear uninformed and reduce supplier enthusiasm. A focused, well-curated list leads to better results and stronger supplier engagement.
Related articles on this topic have appeared throughout our website, check them out:
- Supply Chain Cost Reduction: The Dangers of Supplier Squeezing
- Supplier Selection: Evaluate the Risks to Reap the Rewards
- How to Address Chronic Poor Supplier Performance
Editor’s Note: The content of this post was originally published on Logistics Bureau’s website dated March 22, 2023, under the title “Logistics Outsourcing Tender – How Many Suppliers to Invite?“.
