The quest to find the perfect third-party logistics (3PL) match to meet the needs of your company can be a daunting task. The first step on the journey is to understand your day-to-day business inside out, as well as what your anticipated future requirements will be. The creation of a thorough and thoughtful request for proposal (RFP) is paramount, but the process involved can be overwhelming if you are not certain about what you should include in the RFP so the process delivers the most effective solution to keep your operation running as efficiently as possible.
A well-developed RFP will offer potential 3PL candidates a clear picture of your operations; if your RFP lacks pertinent data, you could wind up with an ill-fitting solution. “One of the stumbling blocks I have noticed over the years is that many manufacturers don’t really know their business operations well enough so they can articulate their requirements to a potential 3PL in order for that provider to create the proper solution for them,” notes Joe Marelli, vice president of logistics for New World Pasta and Riviana Foods, Harrisburg, PA.
So how should a company proceed in the journey to find the perfect match in a 3PL? Our experts offer an excellent roadmap to discovery.
1. Design The RFP
Before you even begin this journey, ask yourself if your company has the in-house expertise and manpower to prepare an RFP, send it out, manage the responses, and then manage the evaluation process, advises Joe Sullivan, principal at Tompkins Associates in Raleigh, NC.
Putting together an effective RFP is critically important, but some companies just might not have the people or time to develop an effective one. “A good independent consultant can help you draft the RFP,” says Tom Patterson, senior vice president of warehousing operations for Saddle Creek Corp. in Lakeland, FL.
Patterson suggests having in the mix a group of about six or seven candidates with the industry experience you require. Once you have determined who will be developing the RFP, here are some suggestions to assure its effectiveness.
Develop clear objectives: “You need to be clear about your day-to-day operations and particularly those operations you plan to outsource,” advises Sullivan. For instance, let prospective providers know if you will be outsourcing your warehousing operations, transportation management, or both.
Include critical data: Include complete and accurate historical data showing what your business looks like today, continues Sullivan. “Then develop the best possible projections for the future of your business. If your business will double over the next few years, you should advise the respondents of this possibility.”
Identify your metrics: Advise your candidates what your KPIs are, Patterson says. “Include the metrics that define the goals of your operation once it’s up and running so your bidders are not just guessing. Your RFP has to take into account the extremes of your business such as an inventory that can fluctuate from a half million cases to 1.2 million cases.”
You should have a clear understanding of how you want to handle paying for warehouse space, especially when your inventories are low, when you might want to share the space and cost with another company.
If a company has recently grown through acquisition, it might be trying to handle disparate systems of its own as well as those of the acquired company. “In a situation like this, it is very difficult to get your mind around how much inventory your 3PL will be responsible for managing,” notes Marelli at New World Pasta.
“I have seen a manufacturer that scoped the space he would need at a solution of 100,000 square feet of warehousing space. But when inventory started transferring into the new startup, he discovered he really required 150,000 square feet of space because he didn’t understand what stacking requirements were applied to each of the SKUs,” says Marelli. “So the assessment has to be this tactical in order to provide good, clear metrics that define the nature of your business so the solution is exactly the right one.”