Is e-procurement providing value for money?

by Graham Dodd on 01/08/2012

Back in January, I wrote a blog focusing on my New Year’s Resolution to try and educate all door drop clients that buying “solus” distribution on price could be a dangerous principle.

My view on that has not changed and in the seven months that have elapsed since, its an issue that has repeatedly come to the fore when participating in local or regional authority tendering processes, and that’s a concern to me.

Tenders are regularly published where price has a “greater value” to the issuing authority than method and reliability; commonly 60% of the award process, sometimes even 70%.

Yet the procurement process demands tenderers submit thousands of words detailing how they will arrange and control the door drop process, handle complaints, liaise with the Communications team and provide a first rate service – quite possibly at a second rate charge!

It commonplace that authorities’ procurement processes are triggered when the incumbent seeks a price increase (which has happened several times in the last year or so through Royal Mail door to door), but, is there also increasingly a trend when authorities do not take up their contract extension options?

And if so, why is that?

Quality of distribution?

Particularly for authorities seeking to move out of Royal Mail door to door, solus – authority material delivered on its own – has become a popular option.

But at a realistic rate?

Mathematics is not one of my stronger skill sets, but take a look at the numbers below and tell me if I’m wrong.

General industry advice is that an individual distributor, subject to the demographic nature of the area they are covering, should be able to distribute between 700 -1,000 single sheet leaflets in a 7-hour working day.

I personally think the number may be nearer to 700-800 if we are talking a tabloid newspaper or A4 magazine. Logistically, a distributor can carry fewer items because of the size and weight of the item and they will require replenishment more regularly.

But for sake of the mathematics, let’s agree 800 items in 7 hours (if we don’t allow an hour for unpaid lunch!).

From October 2012, Minimum Wage for adults was increased to £6.19 per hour. Calculate a “daily” wage therefore as 7 hours x £6.19 = £43.33 per 1,000 – i.e. just the direct cost of labour.

If the distributor only delivers 800 leaflets in 7 hours, the cost per 1,000 rises to £54.16 per 1,000.

And a paid lunch break will increase that cost!

In addition, the successful tenderer has to fund transport costs for the driving and running of the vehicles servicing the drop, provide the all important control and checking procedures and presumably make a profit!

Assuming a minimum 10% profit margin and without the additional direct cost centres, a charge is already edging towards £60.00 per 1,000.

So how does any company charging you anywhere around £40-45.00 per 1,000 (or less) exist financially and provide a quality service, fulfilling its tender obligations?

And perhaps importantly for authorities, are their suppliers paying the distribution staff Minimum Wage?

When considering all of the quality assurances and policies that tenderers are required to provide, should there not be a question in the tender about confirming distributors are paid Minimum Wage?

If there was a dispute that implicated an authority and it emerged that their door drop activity was being completed by a company who did not pay Minimum Wage, how would that reflect upon the authority?

And whilst we are on the subject of solus distribution, what is the fascination with this option?

Many clients I have asked that question over the years claim the impact of an item being delivered on its own?

But just how true is that?

Consider that up to 50% of UK households are empty during the day i.e. I presume you are reading this at work?

When residents return home, is the authority item not most likely to be found sitting on the doormat alongside items delivered by the Royal Mail – unaddressed promotional material, direct mail and/or your post, at least one free newspaper is still delivered to nearly c. 50% of UK urban households, and then there are all the other solus items which fall through your letterbox throughout every week?

Is there not the possibility that 50% of your solus spend is compromised because residents will not see the item as solus?

And if you are paying “significantly” less than £60.00 per 1,000 for your door drop activity, are you even sure your material is being delivered solus in the first place and not shared alongside other items the distribution company may carry – perhaps to compensate for your low charge?

There has to be a degree of understanding the medium you are buying and precious budget should not be frittered away.

Another of my recent blogs – understanding the medium – focuses on that subject, because I genuinely believe many door drop users do not fully understand the medium to the degree they perhaps should when issuing tenders and entering into contracts.

E-procurement by the public sector is out of step with the processes that the vast majority of private sector clients complete prior to undertaking their door drop activity.

A typical briefing process for us will involve an initial client facing meeting to discuss the general aims and objectives of the project. At this point, our role as specialists in the door drop industry help the client to consider factors such as costs and the various door drop options’ strengths and weaknesses when writing their brief.

In addition, looking at critical date paths, moving production dates by just 24 hours can sometimes open up new opportunities

In my opinion, this is what the move to e-tendering for local authorities has lost; we now have clients writing their own briefs, without an industry specialist’s input. This brief is then handled in such a way that we, as the supplier, must adapt our response to suit the tender document, rather than go back with an honest appraisal of the general objective, a constructive criticism of the brief and recommendations of how to improve the brief to achieve long term successful door drops.

Authorities cannot be expected to know the implications of an insistence on solus distribution accompanied by a 60% price related scoring system, for example, and it does seem that they are under pressure to create a tendering process as described above; but wouldn’t it be healthier if the brief were open, allowing genuine industry experts to help the council come to a conclusion based on experience, quality and a bespoke brief?

What do you local and regional authorities think?

This article was written by...

– who has written 82 posts on Letterbox Consultancy for Door Drop Marketing.

Graham Dodd is the founder of The Letterbox Consultancy - he has over 40 years of experience in the door drop industry and remains at the forefront of innovation in the business.

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