The 3PL Evaluation and Selection process was an important topic of discussion at our recent Supply Chain Secrets Free Seminars.
The subject of course was Logistics Outsourcing. (3PL – 3rd Party Logistics)
Having been involved in 100+ Logistics Outsourcing projects, I was sharing this experience and stressing the important aspects of the 3PL evaluation and selection phase.
I’ll summarise the key points for review here:
We must assume of course, that prior to this stage you’ve ensured that you have a shortlist of suitable 3PLs. You will have carefully selected them based on your specific needs and the 3PL’s experience and capability. (These elements are covered elsewhere in this blog in articles and videos)
So here are some key points about the 3PL evaluation phase:
- Make sure you have prepared an ‘objective‘ scoring or ‘evaluation‘ process. This may often be a spreadsheet with your key evaluation criteria listed and weighted according to your needs.
- Then, try to ensure that your RFT (Request for Tender) response format, matches this evaluation format. This makes the evaluation process a lot easier. For example, if key criteria #9 is asking for details about similar contract implementations, that make that ‘section’ 9 of the RFT response template.
- Try to have a cross functional team involved in the 3PL RFT evaluation process. I always try to include managers from all key functions impacted. These might include Logistics, Production, Sales, HR, IT, Finance, Quality and others. You might even consider asking ‘external’ people to join your evaluation team? Perhaps you have a friend who has been through the same process in another organisation? All subject to the appropriate confidentiality arrangements of course.
- And now the most critical element of the 3PL evaluation phase. Remain OBJECTIVE for as long as you can! This is why I stress the essential nature of scoring or evaluation templates. It makes each member of the evaluation team think about their scores, and justify scores that are significantly different to other members of the team. This is OK of course, because they make have seen something others missed. But at least the difference in score is identified and investigated.
Here’s an example of the type of 3PL evaluation template that I often use. It’s just a small part of it. As you can see, there were 83 different 3PL evaluation criteria. But this was quite a complex contract.
When is comes down to the final selection process here are my key tips. Maybe you have some you could add in the comment section below?
- Aim for three 3PLs to be in the final selection process. Why three? Here’s my simple logic. You don’t want to be left with one. that leaves you no choice. And if you are left with two, and one falls out…. So aim for three well qualified and capable 3PLs to make it to the final evaluation stage. This may mean you start the RFT process with five or six. (this allows you to assess the capabilities of new participants of those who have recently added to their service offer) If you are an ‘informed’ buyer, you certainly don’t need to approach more than five or six.
- Ensure that all finalists meet the minimum standards of your selection criteria. As an informed buyer of 3PL services, this is vital.
- Involve the whole evaluation and selection team in ranking the final three 3PLs.
- Make sure you include meetings with the 3PL finalists and visits to the 3PL sites, as part of the selection process. Meetings at this stage will typically review resourcing, pricing, IT, contract structure, KPIs and implementation plans (and team).
- Then finally, go with your GUT. Does that sound strange? Not really. Once you have gone through the objective evaluation and selection process, you should be left with three 3PLs who ‘on paper’ at least can do everything you require, have the right capabilities and experience and are in the right ‘ball park’ regarding costs. So you now have to decide who feel confident will do the best job. Who you want to work with? Who you feel a high level of trust with? That’s why the very final stage needs to ‘tap into’ your gut feel. Because it can’t be measured. It’s ultimately about people.
I hope your own 3PL evaluation and selection process works well for you. Perhaps you gained some additional ides from this post? I hope so.
Please feel free to comment below based on your own experiences, or if you have a question. I read and answer all of them personally.
Hi Rob, good afternoon!
First of all, thank you very much for you post at the Logistics Bureau! It was fantastic your comment about 3PL Evolution and Selection.
My name is Bruno and I am working on a project to develop best practices for evaluating the 3PL procedure and creation in warehouse management.
I would like to know if you have any material that might be good to control this activity: evaluate 3PL and Warehouse management.
That’s a long answer, sorry. Maybe for now have a search on our Blog or check out one of my books.