Logistics RFPs: Mistakes to Avoid
Complete this phrase: We’re going to need a bigger _____.
If you answered “boat,” you’re clearly a movie buff.
However if you answered “and better third-party logistics RFP,” you might be one of the wisest people at your company.
Although an RFP is a routine part of most 3PL searches, preparing an effective one is anything but simple. In fact judging from the hundreds I’ve had a chance to prepare, view, or respond to over the past 20-plus years, few things are more difficult to get exactly right.
With that in mind, here are five common RFP shortcomings your company should consider steering clear of in the year ahead. Some are related to how these documents are prepared. Others pertain to how you interact with recipients. But all could be preventing your company from finding the best 3PL match for its needs.
Thinking big data = TMI. Many of the industry’s leading 3PLs are highly adept at manipulating huge sets of data and applying sophisticated modeling tools to a wide variety of complex challenges. But despite the arrival of the big data era, most companies’ RFPs still aren’t providing the kinds of detailed, candid input that 3PLs need to put it into play.
As a rule, RFPs that are too brief, generic, or nebulous will usually result in a collection of responses that are equally incomplete. So if you want your RFP to lead to truly innovative and relevant solutions, be willing to provide respondents with the full story of your operation down to the granular level. Just as important, be flexible if some ask for additional detail; it’s a sure sign they really are interested in getting things right.
Being reticent about 3PL candidates visiting your operations. Most businesses would never consider choosing a 3PL before visiting some of its operations. Yet many are reluctant to offer their prospective providers the same kind of access to their own operations, citing concerns that candidates might be overly influenced by the status quo instead of devising the fresh solutions that are desired.
This is a huge oversight. No matter how data-driven 3PLs are, it’s often helpful for their engineers to see an operation in action before completing a proposed design, especially if they want to perform time studies.
To ensure more robust and real-world responses, roll out the red carpet and allow 3PL candidates to tour your facility if they want to. And if for some reason that’s not possible, consider providing them with a virtual tour instead.
Forgetting to include key selection criteria. Although issuing an RFP provides an ideal opportunity to clearly define needs, goals and objectives right out of the gate, some companies still don’t see the value in using their RFPs to spell out how they’ll be making their final decision or how they’ll be working with their provider of choice once a contract is signed.
Do your candidates and yourself a favor by removing as much guesswork and mystery as possible. Let your potential providers know up front how various criteria will be scored or weighted. Include a contract template in your RFP to ensure everyone’s expectations are fully aligned. And come clean about any special terms and conditions that might apply.
It will help head off a host of unfortunate misunderstandings and unwelcome surprises – and pave the way for a considerably better and more productive relationship between you and your provider of choice.
Contributing to the “curse of the incumbent.” Many circumstances can lead companies to put an existing 3PL-run operation out to bid, and not all of them have to do with being dissatisfied. In fact, it’s not unusual for incumbent 3PLs to be among the candidates who are vying for the “new” business.
Unfortunately it’s also not unusual for these incumbents to frame their responses based on real-life assumptions about an operation rather than those set forth in the RFP, causing them to come in with a seemingly less competitive bid – and compelling those who are reviewing it to eliminate them simply because they appear to be higher-priced.
Your company may not be able to avoid all bias when deciding between an incumbent and the rest of the pack. However you can give your incumbent a fairer shot by expressly advising it to respond only to what’s asked for in the RFP (and being data-rich) rather than trying to go above-and-beyond.
Comparing apples to oranges. Whoever said that variety is the spice of life clearly wasn’t referring to RFPs, because the more eclectic and “all over the place” candidates’ responses are, the more difficult it becomes to make an objective, side-by-side assessment of their proposed solutions and capabilities.
While there’s a lot to be said for giving 3PLs the latitude to color outside the lines and put their own personal stamp on their solutions and proposals, it’s still best to pave the way for more standardized apples-to-apples comparisons.
One good way to do this is by providing structured RFP response templates and spreadsheets that 3PLs can use to download prices, timelines, and other projects (with links to open book-style responses as appropriate to help explain the rationale behind them).
Practices and tools like that will enable you to do a better job of making a fair and equitable head-to-head comparison so that you can find the provider that’s truly the right business partner for you instead of the one that’s merely right for you on paper.
Dave Frentzel is a partner with New Harbor Consultants. A 25-year supply chain professional, he currently focuses on helping companies to improve business outcomes with more effective supply chain strategies and operations.
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