Selecting A 3PL

The company that is selected should be able to fulfil all the logistics requirements and that can only be assured if every requirement is communicated to potential companies. The RFI should include a detailed description of the areas to be outsourced. This will usually include:

•The scope of the contract, including locations, facilities, departments.

•Information on volumes involved; number of deliveries, warehouse sizes, number of items, etc.

•The logistics tasks are to be performed, e.g. warehousing, transportation, etc.

•The level of performance required.

After the bids have been received by a company from the prospective 3PL’s, an evaluation would take place where a multi-discipline team will review each bid based on a pre-defined set of criteria. These will include some of the following.

•Does the 3PL provide the services required?

•Does the 3PL have the technology required to perform the tasks required?

•Does the company have the required warehouse space, dock capacity, warehouse personnel, etc.?

•Is the 3PL financially sound?

•Are the 3PL’s geographical locations suitable to cover the network?

•Does the 3PL have the flexibility to respond to changes?

•Are the 3PL’s environmental policies compatible?

•Are the costs of the services detailed enough for comparison to other bids?

•Are the customer references acceptable?

•Is the 3PL a good cultural fit?

The selection team will usually review each of the bids based on the criteria and give each bidder a score. Depending on the importance of each criteria, a weighting can be given which gives more importance for one or more criteria in the selection process. Once the selection team has evaluated the bids, management will often select the top two or three companies for site visits, face to face interviews and more detailed reviews of financial records. Once a company has been identified contract negotiations would follow before a final agreement could be reached.

Source : Martin Murray by  About.com guide

5 Steps to improving your 3PL relationships

Many of the problems companies experience stem from jumping into the contract prematurely without a solid understanding of the ramifications. With this in mind, our first tip is to slow down and take the steps to get outsourcing right before you start any work.

To do this properly, we recommend the five-step implementation approach that is profiled in the book Vested Outsourcing: Five Rules That Will Transform Outsourcing. The book goes into detail on each of the five crucial steps companies and service providers can take to create a successful 3PL relationship:

1. Lay the foundation

2. Understand the business

3. Align interests

4. Establish the agreement or contract

5. Manage performance

When taken individually, these steps can offer shippers and service provider’s valuable insight into current operations. However, they tend to work best when implemented as a process for outsourcing by allowing companies to implement a true collaborative 3PL relationship where the company outsourcing and the service provider have a vested interest in the other’s success.

All too often, companies dust off an existing Statement of Work, rush to competitive bid, and give the service provider three months or less to transition the work—we’ve seen many that only allow for a four-week transition.

The great thing about the five-step framework is that it can be used during a request for proposal (RFP) or with an existing supplier to improve a relationship. Skipping steps usually results in a poorly conceived business outsourcing agreement or worse—a total disconnect in what the service provider is doing versus what the customer actually needs

By Kate Vitasek, Pete Moore, and Bonnie Keith,

University of Tennessee Faculty Members

February 24, 2011