Commoditization in the Relocation Industry

by Administrator 19. February 2013 08:24

Last month I shared my top three predictions for the relocation industry. While I didn’t call out commoditization specifically, I did cite it as a fueling agent around the continued consolidation of service providers. And, while I do believe that to be true, I also believe that the tipping point between pricing commoditization and service is around the corner for many. As a service provider, we are often requested to participate in RFPs for our customers; third-party relocation companies and van lines. RFP content typically focuses on our organizational structure, key performance indicators, technology capabilities, and, of course, price. This type of proposal request is fairly standard and it provides us with a presentation platform to demonstrate our value proposition in its entirety.

What has been more interesting to me over the past several years is to watch the evolution of corporate RFPs in the relocation industry. While not directly engaged, we’re often asked by our customers to participate directly in this process, which has certainly been an eye-opener. For many corporations, the increasing need to use a parallel RFP process for all purchased services is driven by procurement. Leading a team that includes HR, finance, and others, procurement has moved to the ‘pole position’ for relocation services. There is no doubt that the processes set forth by procurement ensure competitive pricing, but what is concerning is that some companies procure relocation services the same way that they would office supplies. As an industry veteran, I only question the ability to adequately evaluate the full array of value that a relocation service provider delivers with an online bid process for pricing that requires bundled pricing for each relocation level. Anyone with any relevant experience knows that this is just not possible for domestic relocations, so what’s a service provider to do? Do you simply go in with a ridiculous cost or even a zero cost and hope that the corporation questions their process once they receive the submissions?

While not often directly impacted by these corporate processes, I sit and scratch my head just sitting on the sidelines. How commoditized can the industry become before service is affected and the value to the employee is significantly impacted? How much degradation can service providers experience within their margins before they are forced to either compromise service quality or exit the industry all together? For large corporations, will domestic relocation become simply a loss leader for the international business? Only time will tell in terms of what will happen, but hopefully procurement departments will continue to take the time to learn the specifics around relocation and how the respective services are delivered and priced, so that, at a minimum, the RFP process is a meaningful one for both the service providers bidding and the corporation as a whole. 

 

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About the author

As the President of ReloTrans, Frank Peditto is responsible for the vision and growth strategy of the company as well as overall leadership. A veteran of the transportation and logistics fields, Frank possesses more than eighteen years of leadership and thirty years of customer service experience.