Today, third-party logistics providers fill broader and deeper roles in many supply chains than ever before, as companies continue to outsource larger portions of their distribution activities to better focus on core competencies.
It has thus become more urgent than ever for companies to do a thorough and accurate job when evaluating potential logistics providers, to make sure they identify the best partner for their specific needs.
Whether a corporation employs a highly structured, formal RFP process, or another less formal method of canvassing for and interviewing potential partners, the "courtship" has to focus on something beyond simple, cut-and-dried numbers, say executives of several highly successful 3PLs.
"You do find some companies who send out a very detailed RFP and when you try to find out more about the customer and its needs, try to set up a meeting or get them to tour your facility, they keep it strictly black and white-just fill out the form, send it in by next Thursday, we'll evaluate and get back to you," observes Carl Melville, vice president, marketing, for Total Logistic Control, Zeeland, MI. "But that's putting a commodity mentality on something you can't purchase as a commodity, because not all 3PLs are the same."
While cost is always part of the equation, in this era of integrated partnering with players outside one's four walls, companies need to dig deeper into the qualities behind the quoted numbers when deciding with whom to hitch their wagon.
What Do You Need?
Before assembling potential candidates for review, a company seeking to outsource needs to first look inward and perform a thorough and realistic assessment of its needs and goals.
"You have to ask yourself what needs do we have, what problems are we trying to solve and then, what firms have the capability to make the process better than it is today?" suggests Kerry Byrne, executive vice president of Total Quality Logistics, Cincinnati.
This may sound simple, but in the real world even seemingly basic considerations are somehow overlooked at times.
"I'm amazed sometimes at companies who come to us and say, we're going to be putting out an RFP, we need a 300,000-square foot DC, or a place to put inventory in a forward DC. And the first question I'll ask is where do you need the facility located? And sometimes the reply is, we don't know, where do you have facilities?" relates Stephen Cook, vice president, sales, for Saddle Creek Corp., Lakeland, FL. "As much as I'd like to steer them toward one of our existing locations, that's not the best way to enter into business."
Ideally, says Cook, the customer should have already completed their own network optimization study, taking into account not just the costs ssociated with a prospective DC, but also the transportation costs involved.
Cook suggests companies start their search process by creating "a matrix of their requirements.
"To begin they need to talk internally with all the people in their organization that will be affected, for example the purchasing people, supply chain management, production planners, salespeople, inventory managers and find out, from each of their perspectives as specifically as possible what they want to accomplish and what they need from the 3PL." All these factors should then go into the matrix of requirements that form the basis for the evaluation process, Cook says.
The Qualifying Round
Once a company knows what it's looking for, it can start searching out candidates who fit the bill.
In most cases, before an actual RFP goes out, customers should do some fairly extensive pre-qualification of potential targets.
"There's no reason to send out more than 10 requests for information at most, before putting out the RFP and I'm not sure in most cases most companies even need to put out that many," observes Cook. "Certainly no more than five to 10 and probably less than that if they've done enough homework up front."