Pricing Drawbacks To Avoid When Selecting A Logistics IT Solution

Implementing IT solutions end up costing more than expected. Why?

Buyers generally make the assumption that the quoted prices include the commensurate levels of effort and value from all providers. Pricing between service providers differ widely, the features or functionality included in one provider’s quote will not necessarily be included in another provider’s quote. Therefore, it is important to ensure that your expectations are aligned with what the providers offer and will deliver.

 

The differences between offerings that can result in discrepancies in cost:

A service provider with the lowest offering price is not always the best option for you. The provider offering the lower implementation fee and monthly subscription fee will maintain the price quote lower -with the assumption that the client will complete tasks such as: initial data loading, entering existing carrier rates and other data into the TMS,  IT support, as well as user training. On the other hand, the service provider charging a higher price quote may perform all the mentioned functions as part of their service at the quoted price.

The lower cost solution provider typically charges extra to help the client complete these tasks when the client is faced with unavoidable challenges and the client is not able to execute autonomously. When reviewing annual costs, it is common for a logistics IT solution with a lower price to end up costing more than the solution which includes these services as part of its (higher) price quote.

 

 Arriving at an equitable comparison when comparing solutions and costs:

Discuss service levels with suppliers as soon as possible. The same way you would require a detailed SLAs – a contract between a service provider that is either internal or external and the end user that defines the level of service expected from the service provider- for technical aspects-  also request prospective providers to provide a line-item breakdown. A line-item break-down is an appropriation that is itemized on a separate line in a budget of what is included in their quote and what is not included.

You should receive the following three things from each provider:

  1. A detailed listing of functionality and features.
  2. A List of services that will be included during and after implementation (example, data).
  3. A detailed Statement of Work (SOW) which is a document routinely employed in the field of project management.  An SOW defines project-specific activities, deliverable and timelines for a vendor providing services to the client. A SOW including definitions of standard roles expected to be provided by the provider and the client. A SOW can be compiled using the RACI matrix (illustrated in the image below).

 

 

If your potential provider cannot deliver all three these items discussed above, you should view their pricing as a risk.  You should always be aware of the expectations of what is included in the price, and whether you will incur further charges before it is too late to choose a different provider.

 

Sources:

www.inboundlogistics.com

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