You Get What You Negotiate: Logistics Lessons from Safaricom

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May 17, 2014

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Photo credit: Hash/Flickr

Photo credit: Hash/Flickr

Acquiring government tenders in Kenya has become akin to finding the Holy Grail for many entrepreneurs and corporate bodies. The process of getting to this financial Promised Land has become viciously competitive, with firms willing to do almost anything to land lucrative deals that endow not just profits but also stability and excellent networking opportunities, among other benefits.

A recent success story that left many Kenyans with mouths agape is communications giant Safaricom’s KES.8 billion security deal announced just this month. That’s right, billion with a capital ‘B’. Contracted by the government to set up a communications system featuring 1,800 surveillance cameras in Nairobi, and Mombasa, linked to control room at police headquarters equipped with facial recognition software and other data to aid in identifying and tracking criminals. Needless to say, this five year project set to earn Safaricom KES 2 billion annually for four years is any business manager’s dream.

What does this have to do with logistics? We’re glad you asked. Allow us to ask you something right back – just how did Safaricom capture the top spot? The simple answer: negotiation. Firms operating in the logistics industry have much to learn from Safaricom’s strategy, the first lesson being ‘differentiation’. While many companies would have been willing to take on the project, a key part of why the government was swayed in Safaricom’s favor is the structure of the deal. Choosing to eschew the usual process of demanding up to 90% of the KES 12 billion project cost up front, Safaricom opted to bear the cost themselves, with the government reimbursing the funds in phases later on, effectively setting them apart from the usual tender prospects.  What supply chain management firms can take away from this is to learn to stand out from the crowd. By being informed on what competitors have to offer, we can tailor our services to create a pitch that instantly sets us apart from the industry noise, substantially increasing our chances of earning new business.

The_Thumbs-up_positionTied into this point is the value of creativity as business owners or managers. It would be of no benefit to the company to study competitor strategies without the ability to think outside the box and find a solution that differs from the norm, but is still viable and valuable as a service.

Another key lesson we can take away from the Safaricom deal as supply chain management industry players is the benefits of ‘sweetening the deal’. Extra perks and free services your company can provide a competitive edge in a situation where many options are available. For logistics, this can be in the form of free delivery to clients’ homes after shipping, or finding other ways to give customers bonus offers that help build customer satisfaction. On a contract this large, Safaricom elected to provide one year of managing the system gratis, meaning the government would only be beholden to pay for system management four years instead of five.  This meant reduced costs for the government, which is always a key concern when undertaking such a large, expensive project.

Such an offer that seemingly reduces your profits is an excellent gesture to help gain the trust of your potential customers, as it shows you’re willing to take a risk as well. Safaricom not only waived one year of payment, they also made a point to invest KES 12billion to show their commitment to the project, and willingness to become partners in the contract, rather than just service providers.

Wise men say we learn from everyone and in this case, that couldn’t be truer; supply chain managers should take the opportunity to learn from businesses practicing excellent corporate strategies, even outside our industry. Feel free to let us know what else you learned from the Safaricom deal in the comments, below. Wishing you all a profitable week.


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