Using RFPs to Optimize Partnerships
Requests for proposal are rewarding but time-intensive processes that ideally result in both parties entering into a years-long logistics partnership. The significant amount of time invested in the RFP process helps ensure the provider and client are a good fit. Developing a strong partnership with a best-fit 3PL also can help your company optimize long-standing supply chain processes. However, throughout the process, both parties can experience confusing scenarios that could be avoided given proper communication. Following are six guidelines for your 3PL-seeking company to be cognizant of during the RFP process:
- Consider sending an RFI first. Sometimes, a company will send an RFP to 40 or 50 providers, which each have to expend resources responding. "Requests for Information" generally are less time-intensive and more informal. The question-and-answer process in RFIs allows your company to narrow its list of providers quickly and easily, without the provider or your organization expending significant time. Similarly, responding in stages also allows the 3PL to get to know the needs of your company and decide at each stage whether they wish to remain in the process.
- Have a clear idea of your company's objective. Many times, companies will seek logistics providers through the RFP process to lower overall supply chain costs, increase responsiveness to their customers' needs, shorten delivery times or all of the above. Know what your company needs. If your company provides a large amount of data and asks for solutions without clearly defining what it wants, it can slow down the selection process. If given the proper information, the potential 3PL provider can accurately anticipate the company's needs and save time for both your company and its own operation.
- Involve top decision-makers during the 3PL selection process. In a recent WSI blog post, we encourage the revolution of procurement departments and emphasize how 3PLs can help companies with procurement. By working strategically with other members of your organization, procurement and purchasing leaders can design a robust selection process, taking into account key areas of criteria, "such as customer service, responsiveness, financial stability, and international scope, if applicable." As a recent University of Tennessee study found, companies still struggle to include top leaders in their 3PL selection process. Engaging in an analytical and strategic RFP process with 3PL service providers can help discover previously unseen points of stagnancy within your company and help to eliminate those inefficiencies.
- Analyze factors other than bottom-line costs. As stated above, a multi-disciplinary approach involving key leaders in your company is essential to developing a long-term relationship with a 3PL provider. Additionally, some companies use RFPs as a way to price check with no intention of switching vendors. The faux-bidding often induces the intended effect of encouraging a company's current 3PL provider to reduce its prices. Open communication about price expectations could reduce the need for a manufactured bidding competition, with numerous 3PLs spending resources on a contract a company has no intention of giving them.
- Make sure outside advisors know your business and industry. If your company uses a logistics consultant, the consultant may know the logistics industry well but may not understand your specific organization's needs. For example, your company hires a consultant, who doesn't fully understand the retail industry, to seek a logistics provider for your company's retail division. The consultant therefore does not consider the costs of compliance, chargebacks and expenses incurred for shipment variations. A logistics provider in the company's RFP bid also "forgets" about these expenses—or does not think to consider them in the first place—and wins the business over another more-informed 3PL with retail experience, based on price alone. Typically, given the importance of the overlooked factors to your company's logistics business, your organization ends up parting ways with the ill-fitting 3PL provider after a short time. The provider's expectations for the work and your company's expectations for the costs ultimately do not match.
- Accurate data is essential to the RFP process. If your company knows typical order sizes, inventory levels, SKUs, an approximate amount of rush orders and standard transactional data, it will find a logistics provider that is a good match for those factors. If your company does not know or have this data, the discrepancy between expectations will become rapidly apparent during the onboarding and start-up process. The better the RFP data, the better the implementation of start-up. Anything clients can do to ease the start-up process on the front end will benefit them.
In short, transparency and communication are key in the RFP process, to develop a true and lasting partnership with a 3PL provider. Is your business seeking a true partnership? Contact WSI today.