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SELECTING A 3PL PROVIDER
There is a growing trend toward outsourcing logistics functions, regardless of size, many companies are retaining "the experts" to focus on the storage and distribution of their products while they concentrate on their core competencies. These experts are third party logistics providers, or 3PLs.
Once a decision is made to use a 3PL, the key to a successful outsourcing relationship is highly dependent upon an organized process in selecting and communicating with the potential 3PL vendors. While this process can be complex, a systematic approach will clarify your needs and alternatives and impact the satisfaction of your final decision.
The following plan outlines a strategy for choosing a 3PL for your company:
FORM A CROSS-FUNCTIONAL TEAM
Before you begin, form a team representing all departments within your company; manufacturing, sales, marketing, finance, quality control, logistics, and potentially even your customers. The input received from the various departments will create a team effort and give all parties a vested interest in the success of the out sourcing arrangement.
SET OBJECTIVES
Once the team is in place, you should develop the company's objectives for choosing a third-party provider. A clear understanding of company objectives will guide the selection process and assist in evaluating the success of the process. The team needs to evaluate the required resources for the project and identify constraints that may affect the decision. This is where you will need to determine the type of provider relationship that will be needed.
DETERMINE CUSTOMER SERVICE REQUIREMENTS
With the objectives set, ascertaining the customer service requirements becomes paramount in the decision-making process. These requirements will identify the distribution and product transformation services that will be needed from a third-party provider. Internal and external customers need to be surveyed to determine current warehousing and distribution strengths and weaknesses. This audit will also help forecast future needs for logistics services.
DEVELOP A LIST OF CANDIDATES
Once the criteria have been set, the team should compile a list of appropriate candidates. Logistics providers can be found through industry directories, the IWLA trade association, or through Internet searches.
EXPLORE INTEREST AMONG 3PL CANDIDATES
The team should contact prospective 3PL candidates, exploring the interest level and capability the 3PL has in providing services. The letter, or request for information, should have information about your company and the specifics of your logistics needs. In addition, the letter needs to request a company profile and list of capabilities. Today, a great deal of this information is available at company web sites.
SOLICIT REQUESTS FOR PROPOSALS
Once a qualified pool of providers has expressed an interest, they should be sent a request for proposal (RFP). The request should outline in detail project requirements for distribution, warehousing, transportation and value-added services. The Company should take great care in providing accurate and meaningful information, as that will have a significant impact on the quality of the responses. Furthermore, it should request specific information about the company's capabilities and customers. Finally, the request should indicate a format for price quotation and a timeframe for responses
VISIT THE PROSPECTIVE PROVIDER'S FACILITIES
Visiting a potential 3PL providers operation is an important next step. Once the field of candidates has been narrowed to four or five, the team should examine and survey the candidate facilities. Experiencing the companies' facilities gives the team a chance to rate them first hand on the initial criteria. The team should get to know the management, facilities, procedures and employees.
REVIEW QUALIFICATIONS At this time, the team should compare notes. The site visits give the team some hard data to compare. In addition to the data compiled by the team members, references and the RFP's should be reviewed. All aspects of the company need to be considered: financial information, strategic fit, management philosophy and customer satisfaction.
IMPLEMENT THE SELECTION PROCESS AND CHOOSE YOUR BEST CANDIDATE To insure that your 3PL relationship is successful, a continuous discussion about the effectiveness of the process needs to become standard practice. This will ensure that as your company grows and its needs change, your third party logistics providers, in turn can respond to those changes.
As your company explores various ways of cost cutting, it may determine that a thoughtful plan for selecting a 3PL as a supply-chain partner can provide the savings your company has been seeking.
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