Jumping into a Long-Term Relationship: How to Select a 3PL for Distribution

April 10, 2018 BY Gabrielle Tiven

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Selecting a 3PL (third-party logistics company) for your distribution operation is a big decision. You’re giving someone else control of part of your business and committing to a long-term relationship that isn’t easy to get in to or out of. You want to find a 3PL you trust, with smart management and good resources. And it goes both ways – they also have to want you as a client.

So how do you find the right partner? It’s important to go through a clear selection process. You should know who you are and what you’re looking for first, and then assess whether potential partners are a good match or not.

At LIDD, we often help clients select a 3PL. Here are the steps we lead our clients through:

1. Define the current state of operations
> Be able to explain your operation in quantitative terms such as order volume, order profiles, SKU variety and inventory levels. Describe clearly in writing how you operate, both physically and digitally.

2 .Write Request for Proposals
> Your Request for Proposals (RFP) should explain who you are, what services you want to hire, and ask bidders a comprehensive set of questions around their capabilities, capacity, experience, industry knowledge, pricing and more.

3. Develop a list of bidders
> Contact a preliminary list of possible 3PLs and see if they are interested in bidding. Ask a few key questions to rule bidders in or out. For those that seem like real prospects, have them sign a non-disclosure agreement.

4. Send RFP & answer questions
> Send out the RFP to those bidders who’ve returned an NDA. Answer questions as they arise.

5. Analyze responses and create a short list
> Analyze the answers you get back from bidders. This is both a quantitative and a qualitative exercise. Narrow down the bidders to the best 1-3 responses.

6. Conduct site visits
> Visit the short list of bidders. Observe their operations, get a demonstration of their technical systems and meet with leadership to see how you get along.

7. Have bidders revise bids if necessary
> If there are outstanding questions about the bids – on pricing or other elements – ask the bidders to fine tune their responses.

8. Select winning bid
> Pick the partner you want to work with. Notify bidders of the results of your decision and begin to negotiate the contract that will govern your relationship.

Though picking a 3PL is a complex decision, if you follow a clear process you should be able to find a partner you can work with successfully for the long-term.