49

OUTSOURCING

4S
THE 4S: HOW DO YOU BRING PURCHASING
SKILLS TO THE PROCESS OF 3PL SELECTION.
THOMAS L. TANEL, RONALD D....
50

F E AT U R E

Assessment questions to ask
& gauge a first-class thirdparty provider
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The 4 s how do you bring purchasing skills to the process of 3pl selection--mhd supply chain solutions sep-oct 2012

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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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The 4 s how do you bring purchasing skills to the process of 3pl selection--mhd supply chain solutions sep-oct 2012

  1. 1. 49 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 ฀ 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 ฀฀ ฀ ฀ ฀ ฀ 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 ฀ ฀ viders. Then, seek out and analyse any gaps in ฀ ฀ ฀ ฀ ฀ what you really need from logistics service pro฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀฀ ฀ ฀ negotiation strategy. ฀ ฀ 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: ฀ ฀ 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. ฀ ฀฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ or clarification, such as: ฀฀ ฀ ฀ ฀ ฀ ฀ their tender/proposal. ฀ ฀ 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 ฀฀ ฀ ฀ ฀ ฀ ฀ to accommodate increased demand? creating and issuing a pre-qualification ques- also include an information gathering template, ฀฀ ฀ 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? ฀฀ ฀ ฀ ฀ ฀ ฀ ฀ - 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. ฀ ฀ ฀ ฀ ฀ ฀ tices, process improvement, and value added opportunities? ฀฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ 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. ฀ ฀฀ MHD SUPPLY CHAIN SOLUTIONS — ฀ ฀ ฀ ฀ ฀ ฀ SEPTEMBER / OCTOBER 2012 ฀ 49
  2. 2. 50 F E AT U R E Assessment questions to ask & gauge a first-class thirdparty provider ฀฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ department function. Are the process flow and procedures realistic? What modifications would you make? Why? ฀฀ ฀ ฀ ฀ ฀ ฀ ฀ under way for this business process or department function? What role can you play to help us succeed? What competitive advantage can we gain? ฀฀ ฀ ฀ ฀ ฀ ฀ ฀ system standards affecting this business ฀฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ 2. Business experience ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀฀ ฀ ฀ of work force. ฀ ฀฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ rates will minimise personnel turnover. ฀฀ ฀ ฀ ฀ ฀ ฀ ฀฀ ฀ services. ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ operation that you, perhaps, could help us clean up? How would your recommendations affect our total cost of ownership and your internal cost profile? ฀฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ 4. Secure ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ It’s important to consider that both outsourcer process, a strong emphasis should be placed on establishing a mutually beneficial long-term ฀ ฀ ฀ ฀ feedback. You should schedule and conduct ฀ Thomas L. Tanel is president and CEO of ฀ ฀ business exigencies. ฀฀ ฀ ฀ ฀ ฀ ship. So, just as in any supplier relationship, there has to be mutual benefit. ฀ ฀ ฀ ฀ ฀ ฀ CATTAN Services Group, Inc. a logistics and supply chain management advisory, counsel- ฀ ฀ 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 ฀฀ ฀ 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 ฀ ฀ differences between what was promised versus what is being delivered on an on-going basis. To get the most out of your contracting ฀ ฀ 5. Business arrangements ฀ ฀ ฀ ฀ ฀ case… be prepared to address and reconcile the performance. It is imperative that both parties define their expectations in writing. - ฀ ฀ ฀฀ ฀ and service levels. long-range, strategic point of view? service levels that you will use to monitor their ฀ ฀ process or function effectively from a and incorporating into those agreements the measures of agreed performance or structured ฀ ฀ ฀฀ ฀ ฀ ฀ 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. - ฀ operating contract. Finally, you’ll want to consider conducting site visits at finalist locations you may not already 50 ฀ This final step focuses on finalising and executing the contracts with your selected providers 4. Support services ฀฀ ฀ ฀ tracts. ฀฀ ฀ by your firm? Would you be willing to talk about them in more detail? - ฀ ฀ ฀ purposes? Are there operations being done in-house that could better be done their ‘strategic fit’ for a long-term relationship. ous improvement program. ฀ ฀฀ philosophy, strengths and weaknesses, and ฀ ฀ ฀ ฀฀ 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 ฀ ฀ ฀ ฀ process or functional department? Do you formal checklist, talk with local management, ฀ ฀ ฀ ฀ 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 ฀ ฀฀ standards be functional? ฀฀ ฀ ฀ ฀ ฀ ฀ ฀ ments and performance metrics? What can be familiar with. Your site visit team should be ฀ ฀ your industry? ฀ “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

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