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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

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 youre 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 organisations 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, its 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.

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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.

your industry?
3. Business development

services.

4. Support services

5. Business arrangements

and service levels.

formal checklist, talk with local management,

upper management if possible, and review each

providers qualifications, finances, management

operation that you, perhaps, could help us

clean up? How would your recommenda-

philosophy, strengths and weaknesses, and

tions affect our total cost of ownership and

your internal cost profile?

4. Secure

process or function effectively from a

This final step focuses on finalising and executing the contracts with your selected providers

long-range, strategic point of view?

service levels that you will use to monitor their

case be prepared to address and reconcile the

performance. It is imperative that both parties

define their expectations in writing.

differences between what was promised versus

what is being delivered on an on-going basis.
Its important to consider that both outsourcer

process, a strong emphasis should be placed

on establishing a mutually beneficial long-term

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

ship. So, just as in any supplier relationship,

there has to be mutual benefit.
Thomas L. Tanel is president and CEO of

regular in-person reviews with all outsourcing service providers, even those satisfying

CATTAN Services Group, Inc. a logistics and

supply chain management advisory, counsel-

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

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, youll want to consider conducting site
visits at finalist locations you may not already
50

by your firm? Would you be willing to talk

about them in more detail?

feedback. You should schedule and conduct

business exigencies.

tracts.

have some better ideas? Do you have better

ideas for handling operational transactions?

limited to 2 to 5 individuals, and should be

the same individuals for all site visits. Using a

To get the most out of your contracting

process or functional department? Do you

and incorporating into those agreements the

measures of agreed performance or structured

ance strategy?

be eliminated and/or improved? What are

the operational alternatives to our business

be familiar with. Your site visit team should be

standards be functional?

ments and performance metrics? What can

purposes? Are there operations being

done in-house that could better be done

their strategic fit for a long-term relationship.

ous improvement program.

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

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