The 3PL contract cycle can be managed just like any other outsourced services procurement, and has four distinct segments that we will call the four S: Source, Solicit, Select, and Secure. Proper execution of each segment is essential to developing and maintaining successful 3PL relationships.

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OUTSOURCING
4S
THE 4S: HOW DO YOU BRING PURCHASING
SKILLS TO THE PROCESS OF 3PL SELECTION.
THOMAS L. TANEL, RONALD D. GROSSMAN
AND GEORGE YARUSAVAGE
T
The ITT/RFP should establish what is consid-
he 3PL contract cycle can be managed
Upon receipt of the completed PQQ/RFI and
just like any other outsourced services
procurement, and has four distinct
your review of submitted financials, insurance
certificates, regulatory authority licenses, operat-
segments that we will call the four S: Source,
ing and other documents, and references, you
Solicit, Select, and Secure. Proper execution
of each segment is essential to developing and
are ready to solicit.
maintaining successful 3PL relationships.
2. Solicit
ered to be a responsive tender/proposal and the
deadline date.
3. Select
Now you’re ready to take all the responding
tender/proposal submissions and conduct due
diligence such as:
Using the PQQ or RFI results to identify your
1. Source
most qualified providers, send each of those
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First you need to identify, clarify, confirm, and
review all transportation requirements, as well
selectees an identical ITT or RFP. This must
include your specified pricing and contract
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compromise or negotiation.
as your internal organisation’s transportation-
formats, and should clearly state that alternate
related metrics and key performance indicators (KPI). And you need to separate the true
documents, electronic or hard copy, will not be
accepted. You should also clearly state the basis
requirements from the ‘nice to haves’ to know
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viders. Then, seek out and analyse any gaps in
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what you really need from logistics service pro฀
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negotiation strategy.
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Use analytical tools to select. Do benchmarking
industry comparisons for the type of customers,
facilities, coverage, management and cultural
ITT/RFP timetable, with due dates, milestones,
and targeted conclusion date(s) should also be
attitudes, cost models and fee structures, etc.
At this point, it’s also wise to review any noted
Next, gather six to twelve months’ worth of
included. The ITT/RFP should also define the
exceptions or modifications by providers to the
relevant data and put it into a useful summary
format for use by your potential providers.
requirements for a responsive tender/proposal.
If really needed, you should hold a pre-
proposed terms and conditions of the contract,
especially considering how these might require
tender/proposal conference electronically or in
further adjustment, compromise, or negotiation.
person, and invite qualified providers to:
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As you analyse each tender or proposal, you
may note areas that require more investigation
performance so you can build corrections into
your tender or proposal process.
If you need to include new 3PL, the next step
would be to identify potential providers. This
can be done through personal references within
the professional network community, or looking
at the providers used by your industry, or even
considering those used by your competitors.
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or clarification, such as:
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their tender/proposal.
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is offered?
Once you have compiled a list of incumbent and
potential providers, you can narrow the field by
As you formulate your tender/proposal package
for the qualified provider sources, you should
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to accommodate increased demand?
creating and issuing a pre-qualification ques-
also include an information gathering template,
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tionnaire (PQQ) or request for information (RFI),
which asks all potential providers to fill out your
where each 3PL can insert detailed data that
allow you to make ‘apples-to-apples’ com-
capability and technology roadmap and yours?
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profile questionnaire and provide the financial
and operating information you will use to qualify
parisons. In addition to providing clear instructions concerning the information you want the
providers for your invitation to tender (ITT) or
provider to include, we recommend attaching a
request for proposal (RFP) process.
A PQQ or RFI should be sent to all those
copy of your standard contract terms and conditions (T&C) up front, to avoid surprises later in
who have expressed an interest in supplying an
the process.
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tices, process improvement, and value
added opportunities?
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quality, and so on?
outsourcer with a particular requirement as well.
The PQQ or RFI is used to select a shortlist of
THE FOUR S:
Your assessment and final selection of a
contract provider should include these five
providers out of those who have expressed an
Source.
critical consideration criteria:
interest. In addition, you may want to provide
candidates with preliminary, overall informa-
Solicit.
Select.
1. Financial strength
tion about your upcoming solicitation and your
company in this document.
Secure.
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MHD SUPPLY CHAIN SOLUTIONS —
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49

2. 50
F E AT U R E
Assessment questions to ask
& gauge a first-class thirdparty provider
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department function. Are the process
flow and procedures realistic? What modifications would you make? Why?
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under way for this business process or
department function? What role can you
play to help us succeed? What competitive
advantage can we gain?
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system standards affecting this business
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2. Business experience
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of work force.
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rates will minimise personnel turnover.
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services.
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operation that you, perhaps, could help us
clean up? How would your recommendations affect our total cost of ownership and
your internal cost profile?
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4. Secure
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It’s important to consider that both outsourcer
process, a strong emphasis should be placed
on establishing a mutually beneficial long-term
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feedback. You should schedule and conduct
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Thomas L. Tanel is president and CEO of
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business exigencies.
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ship. So, just as in any supplier relationship,
there has to be mutual benefit.
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CATTAN Services Group, Inc. a logistics and
supply chain management advisory, counsel-
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regular in-person reviews with all outsourcing service providers, even those satisfying
all of your KPI, at least every six months, no
ling and training firm. Ronald D. Grossman is a
matter what the term of the contract may be.
Additionally, a performance report card that
practice leader with CATTAN Services Group, Inc.
and president and CEO of Argee Logistics LLC.
tracks each provider and compares all providers
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and provider share in the risks and rewards.
Both invest time and resources in the relation-
relationship, where both parties seek continuous improvement through KPI and user
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differences between what was promised versus
what is being delivered on an on-going basis.
To get the most out of your contracting
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5. Business arrangements
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case… be prepared to address and reconcile the
performance. It is imperative that both parties
define their expectations in writing.
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and service levels.
long-range, strategic point of view?
service levels that you will use to monitor their
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process or function effectively from a
and incorporating into those agreements the
measures of agreed performance or structured
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ance strategy?
George Yarusavage is an executive consultant
to each other should be issued on a monthly or
quarterly basis, as resources allow.
with CATTAN Services Group and a principal in
Fortress Consulting. For more information call +1
Hopefully, everything will be copasetic and
what was promised will be delivered. But just in
979 212 8200, email cattan@cattan.com or visit
www.cattan.com.
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operating contract.
Finally, you’ll want to consider conducting site
visits at finalist locations you may not already
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This final step focuses on finalising and executing the contracts with your selected providers
4. Support services
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tracts.
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by your firm? Would you be willing to talk
about them in more detail?
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purposes? Are there operations being
done in-house that could better be done
their ‘strategic fit’ for a long-term relationship.
ous improvement program.
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philosophy, strengths and weaknesses, and
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have some better ideas? Do you have better
ideas for handling operational transactions?
upper management if possible, and review each
provider’s qualifications, finances, management
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process or functional department? Do you
formal checklist, talk with local management,
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be eliminated and/or improved? What are
the operational alternatives to our business
limited to 2 to 5 individuals, and should be
the same individuals for all site visits. Using a
3. Business development
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standards be functional?
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ments and performance metrics? What can
be familiar with. Your site visit team should be
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your industry?
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“A 3PL can perform
logistical services that
an organisation is either
unwilling or unable
to perform itself, but
are they as good as
advertised?”
process or department function? Is there
a dominant movement? When will these
MHD SUPPLY CHAIN SOLUTIONS —
SEPTEMBER / OCTOBER 2012