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So you’ve been tasked with putting together a complex request for proposal (RFP) for third party logistics (3PL) services and ultimate selecting a suitable partner? Not only is this a mouth full, but it’s also a very time consuming process in order to do correctly and include all information necessary to make the best choice. But worry no more – we’ve put together a checklist of some of the most important components to include in your RFP, as well as a detailed 3PL selection process to follow based upon the experience of one of the top supply chain experts in the US and owner of The Lean Supply Chain, Charles Intrieri.
A fulfillment “Request for Proposal” (or RFP) is a major part of the process in looking for a fulfillment center. When you send an RFP, you’re basically using it as part of your vetting process in assuring a warehouse you want to work with is top quality.
As much as you might think every fulfillment center is the same, they’re really not. Many of them across the nation vary greatly in functional quality, technologies, and designs for specific business structures. It’s hard to know this, however, without asking vital questions to help you discern what works best for you.
An RFP is basically a set of inquiries that look more deeply at what the fulfillment center offers. They may give you the basics in their marketing, yet it’s hardly ever enough to know everything.
So what’s contained in a fulfillment RFP? Let’s take a look at the questions you should ask, and anything else you need to include to achieve thorough vetting.
Always remember that when working with a fulfillment center, you’re going to need to work closely with them like any other business partnership. One of the first statements you should make in your RFP is telling the warehouse exactly what you’re looking for in a fulfillment center.
By telling them directly what you expect, they can better know whether you’re both going to have a successful partnership. It’s best to know early and not realize you’re not a match halfway into a busy customer buying season.
Giving the fulfillment center a list of your most serious shipping problems, the fulfillment center can better understand where you’re coming from. They’ll also know whether they’ll truly solve your problems with their technology.
Logistics require a lot more challenges now, so if you find out from this that they aren’t completely up to speed on shipping technology, it’s best to move on to someone else.
Some warehouses might have superior technology, yet just don’t have experience shipping products like yours, or equipped for your business structure. Transparency in your RFP scopes this out fast.
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The more your considered fulfillment center knows about your company, the better it can serve you. It’s unfortunate many business-warehouse relationships go on generalities rather than truly knowing every detail about one another.
Tell them about when you opened, your owners, and your sales figures over the last several years. Listing your strategic goals also matters so the fulfillment center knows whether their own growth can handle your future logistics expectations.
If they tell you they probably won’t have any technological growth over the next few years, it’s a possible red flag.
Asking what the warehouse provides in the way of services helps you pin down what you really need and what might become a waste of time and money. Tell them about what your average order totals are and the type of shipments you need for every customer.
You also need to inquire about how many international orders they can handle if you’ve opened up to overseas markets. Plus, don’t forget to give details about what your product (or products) are so the warehouse understands how to appropriately handle shipments.
Your products may need unique special handling as well, and not all warehouses can accommodate this. In addition, ask about inbound volumes, communication methods, and your expectations in how packaging should occur at receiving and shipping.
Contact us at insightQuote so you can use our WarehousingAndFulfillment.com site to vet a fulfillment center that works for you. We’ll help you through the RFP process.
Before we begin with outlining the perfect 3PL RFP, it is extremely important to understand why having one is important in the first place. The time investment to create a 3PL is significant – so why should you make such a commitment? Below are three key reasons to take the time to outline a formal RFP.
Putting together a 3PL bid is a process that needs careful consideration since you’ll likely be sending multiple bids out to your top warehouse choices. Otherwise known as a Request for Proposal, sending a bid to a 3PL happens after you’ve thoroughly vetted a number of companies. As you send out bids, you’ll want to provide various types of information, including questions to ask the 3PL.
Overall, you want to include things in your bid request that helps you establish a good working relationship with the fulfillment center. You already know they have the right technology available for your business structure. Plus, you may know they have a dedicated team and have financial security.
You still want to know what kind of relationship you’ll have with your 3PL company. This includes requests for more information so you have a complete picture of which company is the best choice.
Vetting is never easy, yet it sometimes requires being slightly forceful to get more info. Most of all, providing information about your own goals can help the 3PL better prove they’re right for you.
Take a look at what to include in your request for proposal, including a list of your data points so a 3PL can give you a better idea of their logistics process.
Experts on 3PL bidding always emphasize that you need to define your business goals before you even write a proposal. Once you understand what your goals are, you can have a better idea of how to craft your proposal. A 3PL can also get back to you with more thorough information about what they provide so you make a better educated decision.
1): What Do You Hope to Accomplish?
Answering this question can help you determine what your true aim is in distributing your products. Do you have a specific geographic area in mind? Do you want to provide unique shipping offers as part of your brand? You may also want a better line of communication with your 3PL so you’re aware of upcoming technology changes or improvements.
2) What Are Your Estimated Cost Saving Goals?
What your 3PL charges you for their services matters in your savings goals. Sending out multiple proposals helps you weigh the costs to determine which fulfillment center provides what you need for your budget guidelines.
3) What Kind of Operational Efficiency Do You Need?
You’re perhaps in a unique niche industry that requires certain types of shipping equipment and procedures. Some of the 3PL companies you vetted may not have enough commitment toward service improvements to help you expand in the near future. This can help you whittle down your bid choices fairly fast.
Based on the answers of your goals above, you can incorporate that and more into your bid on what your business requirements are. Don’t be timid on including more data, because the more the 3PL knows, the more they can help nurture better teamwork with you.
Some other things to add include the minimum requirements you need for your business to keep up with demands, plus any perks that could benefit you along the way.
By providing data on what you currently pay for freight and what your expenses are, the 3PL can give you a more accurate quote after looking at your bid. In a sense, you’re providing your own audit so the 3PL can see what you truly need in order to work well with them.
When the 3PL sees you’re considering several warehouse choices, one may counter with a savings offer to prevent you from going to one of their competitors.
Contact us here at WarehousingAndFulfillment.com so we can help you find the 3PL company right for you and provide tips on the bidding system.
The “meat and potatoes” of the RFP is a thorough description of the business issues and services required for your 3PL project. This will include all of the things that you’re looking for in an outsourced third party logistics partner. When creating this aspect of your RFP, don’t forget to include any assumptions that you use so that each potential service provider is aware of the confines of your needs.
One of the most difficult tasks involved with 3PL selection is comparing the various pricing structures of competing 3PL companies. Therefore, create some “rules of the game” so that you can easily compare apples to apples. Providing the expected structure of the pricing component puts you in the driver’s seat and will save you much needed time. Furthermore, many companies allow warehousing firms to also provide any specific pricing they would propose using in addition to the standard requested format. This allows providers to “pitch” other ways of streamlining pricing.
Be sure to include the potential term of any fulfillment agreement. This sets the expectation for how long the relationship will last. Keep in mind that the longer the term, the better the rates that the providers will potentially propose, as longer term contracts hedges some of their risks. However, on the other hand, a shorter contract hedges your risk of performance should you want to switch providers in the future.
It’s important to set a timeline for the 3PL RFP to be completed by the various providers. Furthermore, you may wish to provide a timeline that spells out exactly how long they have to ask you questions, for you to respond to their questions, as well as any other timeframes needed during the process.
If you have a preference as to where the 3PL is located, be sure to spell this out clearly early on in the request for proposal. This way, providers will know right away if they are eligible or ineligible to compete based upon the location of their facility.
Most people enjoy knowing the ways in which they’re going to be “graded”, as it sets the expectations appropriately. Similarly, 3PL companies need to know what factors you’re going to use when “grading” them against other providers. While you don’t have to put everything out on the table, highlighting the most important factors will help them showcase the appropriate information to make a sound decision.
The best RFP’s are forward thinking – meaning that they not only help you provide a basis to make a decision, but also serve as a foundation for assessing their performance. By including key performance indicators that you’ll be using if they’re chosen, you not only get to assess their success or failure with these criteria, but you’ll also be gain insights into whether or not they have the capacity to measure the desired results within the confines of their current systems.
One of the most important aspects of an RFP is the section related to your questions for the various providers. This is your opportunity to ask them specific questions to get at the heart of how well they’ll be able to address your needs. Be sure to put some extra time into thinking through the most valid questions possible. By making the competing companies respond to questions, you’ll be the insights you need to make the best choice of a partner.
Lastly, you’ll want to provide an avenue to respond to your request. Let the 3PL firms know how you want them to respond and provide a specific point of contact. By funneling all of the information flow through one representative, communications will be streamlined.
Below is a comprehensive step-by-step guide exclusively developed by Chuck Intrieri of The Lean Supply Chain to help you keep track of all the nitty-gritty details as you screen and choose the right 3PL for your business. (There’s quite a bit to manage, so using a 3PL consultant might be wise.)
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