For many companies, the current pandemic is driving an unprecedented urgency to get new logistics providers in place or to add services to the ones already working with your company. For sure, such urgency puts pressure on the provider selection process to be fast. But more importantly, it must be successful; that is, deliver the services as committed and on schedule. Lives may depend on it. An open-book RFP can help.
In an open-book approach to logistics provider selection and contracting, both parties—shipper and logistics service provider—openly share their financial and operating data as a means to move more quickly and with a higher success rate, particularly for complex logistics solutions. In this Brief, we highlight seven actions you can take to make the best of such an approach in today’s world.[1]
- Assess provider capabilities first
Prequalifying a shortlist of capable providers is essential to an expedited process. More traditional logistics provider selection processes may involve a request for information stage (RFI) to prequalify potential providers for inclusion in the subsequent RFP. In calmer times this can be effective to bring in previously unknown, but highly capable, providers into your logistics network.
Today’s urgency does not allow such a luxury. Whether you are taking an open-book approach or otherwise, now’s the time to reach out to your trusted partners—providers you are currently using, you have used before, or those known or used by those within your business network. Sole-sourcing the opportunity to a single RFP participant may be the obvious approach, or alternatively shortlisting two or three providers will hedge the possibility of discovering unknown capability gaps or capacity constraints later in the process. While pricing is still a consideration, it likely is of a lower priority in terms of keeping the RFP “competitive.”
- Share detailed operational data
A current provider may already have visibility to the new requirements and therefore can likely reliably fast-track a solution design, implementation roadmap, and proposal. Potential new providers, on the other hand, will need to be supplied with sufficient operational data as a part of the RFP. This may involve significant amounts of granular data, but many logistics providers today are quite adept at analyzing large datasets quickly. So do not hesitate in sharing all that data—without it the new provider will be making too many guesses, putting the success of the project, your customers, your company and the provider themselves at risk.
We also recommend that open-book RFP participants have the opportunity to observe the current or related operations in action. Likewise, RFP participants should encourage shipper visits to their own facilities where the services will be performed. This adds context and on-the-ground reality to the data and solution proposals. Ideally, this would involve a physical visit to manufacturing or distribution sites. Today, however, this can be substituted with virtual videocam tours and similar technologies.
- Share the operational and cost details
In the open-book RFP process, shippers request that RFP participants share in detail the proposed solution designs, resourcing (e.g., IT, staff, facilities, equipment and sub-contractors), implementation plans, contingency/continuity plans, and operating costs. Hence, all aspects of the design are open and available for inspection, analysis, Q&A, collaborative testing/piloting (see next sections), and improvement. Like the shipper’s operational data discussed in the previous section, a logistics provider’s confidential information, trade secrets and such can be protected using nondisclosure confidentiality agreements.
This then leads into the critical discussion and agreement on pricing. At a time when many logistics service providers’ costs are rising (e.g., hazard pay and efficiency losses due to additional health and safety protocols incurred by distribution center operators), the open-book RFP facilitates a fact-based discussion regarding pricing, including heading off possible concerns that might be raised about opportunistic price gouging. For medical device and supplies manufacturers striving to meet a surge in demand as I write, the logistics service provider (and contract manufacturer too) may be asked to quickly start-up a temporary site and hire staff. Reaching the required throughput volumes rapidly might drive to a solution design including a capital investment in automation. But if the demand spike is expected to be temporary, how will the provider justify the equipment purchase if it will sit idle or need to be sold at a discount after the surge passes? And what about the one-time start-up and then post-surge shutdown expenses? Here, the open-book RFP cost and pricing discussions will lead to the right decisions, faster.
- Test drive the solution
We don’t recommend attempting an end-to-end pilot of the proposed solution in a virtual environment. However, it can be beneficial for selected “unproven” aspects of the solution to be pre-tested and verified in the RFP process. For example, proposed product packaging or robotic product handling can be readily checked out in a simulated or test bed environment. Inter-company business processes and system interfaces can often be effectively verified using a handful of test scripts in a virtual conference room pilot. All these approaches will help ensure that all parties are confident that the solution design will work as proposed or, better yet, the testing process and collaboration will yield insights that will lead to even more effective solutions. While this may add extra days to the process, it can drive faster results in the end.
- Stress test the implementation plan
It’s hard to overstate the importance of the implementation plan and project team to a successful launch of a complex new logistics solution. Hence, we recommend that the shipper and provider each assign experienced project managers early on in the RFP process. Then as the RFP progresses, it is the role of these individuals and their support teams to dive into the details of the implementation plan. Here, inter-company, cross-functional team reviews and “what-if” scenario working sessions (one or more) led by the project managers can be effective in stress testing and improving the implementation plan.
- Ensure resourcing
While it is likely technology will play a big role in the proposed solution, for most companies, logistics is still a people-based business. This may be the team that keeps the technology running or the supervisors and associates on the floor or in the trucks. In today’s environment, the resourcing challenge extends to the health and safety of the workforce as it relates to COVID-19 and to ensuring backup personnel, systems, and facilities. Hence, the full disclosure and a deep-dive into the proposed provider resourcing plan warrants particularly close examination. At the same time, the logistics provider should indicate what resources they expect the shipper to provide to support their solution.
- Build in contingency plans
By now you have a greater appreciation for the effectiveness of your company’s business continuity plans and those of your current logistics service providers[2]. Take these learnings and ensure your existing or new providers build these plans into their proposals.
Now is the time for fast-tracked open-book RFPs. This requires a high degree of trust and information sharing—all enabling solution validation, inter-company collaboration and confidence to move forward faster and with more successful outcomes. Something we all need now.
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Contact us to explore how we can support your strategic, operational, and investment needs: [email protected].
David Frentzel is a Partner at New Harbor Consultants. Dave brings 30 years of management consulting and hands-on executive leadership experience to improve business outcomes. Prior to joining New Harbor, he held various senior positions at 3PL and supply chain technology companies. Dave has extensive global management expertise having spent more than ten years living and working internationally helping companies with their global go-to-market, organizational, sourcing, manufacturing and supply chain strategies and operations.
[1] For related logistics RFP (request for proposal) recommendations, please see Logistics RFPs: Mistakes to Avoid and Embedding Data Analytics in Your Negotiations Playbook).
[2] For a related supply chain contingency planning discussion, please see Revisiting Supply Chain Contingency Planning.