Shippers are busy restructuring challenged supply chains today, including their third-party logistics (3PL) provider relationships. Importers face a seemingly never-ending list of concerns – geopolitical, inflation, interest rates, freight rates, network resilience, and recession, to cite a few. The objective involves more than just swapping out one 3PL with another at a lower cost. Rather, it is more expansive: seeking new services, locations, capabilities, and management aligned with the company’s supply chain strategy.
In this Brief, I will highlight seven 3PL partner selection best practices. These stem from my years on both sides of the table, as a 3PL service provider and as a management consultant assisting shippers to find the best partner. I’ll start by briefly touching on what we typically look for when preparing the short-list of qualified 3PLs to invite into the sourcing process.
What to look for in a 3PL partner
Whether an RFP is focused on freight forwarding, domestic transport, warehousing, technology, or a combination of services, when creating a short-list of candidates, start with these key factors:
- Experience in your industry
- Relevant case studies and referenceable customers
- Demonstratable network capacity, ops management, IT, process design and CI capabilities
- Project management skills, particularly for start-ups and service expansions
- Focus on customer service, productivity and cost performance metrics
- Long-term view – willing to invest, to learn and evolve with a customer
This kind of information is initially gathered from a combination of the supply chain team’s experience, desk research, consulting assistance, or a request for information (RFI). RFIs are typically sent out to a longer list of potential 3PLs, from basic qualification screening and without the need for an NDA.
RFP best practices
These seven best practices have consistently proven helpful to shippers in choosing the right partners for their supply chains. Even 3PLs can benefit by proactively aligning themselves in support of these practices.
- Form a cross-functional team
The best results stem from an RFP process led by supply chain and supported by a cross-functional team: sales, customer service, finance, IT, operations, and legal. Including key stakeholders helps ensure that all perspectives are considered. An executive steering committee can also help align the project with a company’s strategic objectives and project resourcing.
- Clearly define the RFP objectives and scope
One of the first tasks of the RFP team is to prepare a clear objective and scope for the RFP and elicit feedback from the organization. This drives alignment to strategic business goals and fosters communication with all stakeholders.
- Prepare a comprehensive, data-rich RFP document
In our experience, it is virtually impossible for a 3PL to prepare a compelling RFP response based on high-level or incomplete data. And at least as difficult for a shipper to assess the merits of the responses. Be sure that the RFP includes detailed SLA requirements and operating data, typically at a very granular level, e.g., daily customer order history, reflecting daily, if not hourly, patterns. This may involve large quantities of data – your 3PLs should be prepared to accept and make good use of the data in their solution design and RFP response.
- Select a short-list of RFP participants
Good prework or an RFI should yield a short-list of five or fewer highly-qualified candidates. This enables a thorough examination of bidders and their proposed solutions, particularly if the RFP scope calls for a complex and highly-tailored solution. At this stage, invite bidders to enter into a confidentiality agreement prior to issuing the RFP.
- Allow enough time for 3PLs to respond
How much time depends on a lot of factors. Both parties benefit by allowing sufficient time for data analysis, solution design and Q&A. Expect multiple rounds of responses and discussions to refine the solutions, as well as pre-negotiation pricing submissions. And build into your overall RFP project plan time for customer reference calls or site visits and even for 3PL visits to your operations, if warranted.
- Engage with the bidders
Align your RFP team with the 3PL’s functional experts, particularly on the solution design, IT plan, and implementation roadmap. In person or virtual solution review workshops are effective ways to foster such engagement. Be sure there are opportunities for the senior leaders of both parties to engage over the course of the RFP process. If using consulting assistance to manage the process, let the 3PL get to know your company leaders and decision-makers early in the process.
- Share contracting, pricing, KPI and QBR templates early
By sharing these up front, any concerns or counter-proposals can be addressed proactively. You want to avoid last-minute surprises that could potentially undermine the trust-building process.
These best practices are not a detailed playbook for a successful 3PL search. They are very helpful, in our experience, in getting an RFP started on the right foot and increasing the likelihood of finding a 3PL partner who’s best for your company.
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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 helping companies with their global go-to-market, organizational, sourcing, manufacturing and supply chain strategies and operations.