Running a 3PL RFP: 8 Mistakes To Avoid
by Staci Americas on Dec 14, 2023 10:00:00 AM
Reliable order fulfillment is a linchpin of customer satisfaction for online sellers. Orders that are late, wrong or damaged can lose you a customer for life. That’s why selecting a reliable 3PL (Third-Party Logistics) provider can be such a pivotal decision. And the search process for the right partner often starts with a 3PL RFP, or Request for Proposal.
3PL RFPs for order fulfillment services require careful planning. Unfortunately, in the chaos that often defines brands in hypergrowth mode, the 3PL selection process often gets short shrift and mistakes are made.
That’s what this article will explore.
What is a 3PL RFP?
A 3PL RFP is the compass guiding shippers and e-commerce retailers toward the ideal 3PL fulfillment partner. It's a strategic initiative aimed at aligning a brand’s business goals and requirements with the capabilities of potential 3PL providers.
Beyond fulfilling current logistics needs, a well-structured RFP process foresees future challenges and opportunities. The goal: a symbiotic partnership where both parties benefit and the service provider becomes an extension of the brand’s operational team.
As we delve into the nuances of running an effective 3PL RFP, we’ll focus on the common mistakes we’ve seen over three decades of experience working with brands of all sizes across many different industries.
Common Mistakes to Avoid in 3PL RFPs
As we said, the decision to outsource fulfillment services is a major step in a brand’s evolution. A well-constructed 3PL RFP process can ensure 3PL selection goes well – but only if that process is done right. Here are common mistakes we often see.
MISTAKE 1: NOT ALLOWING SUFFICIENT TIME TO WRITE THE RFP
Brands reach a tipping point where they realize the volume and complexity of orders are beyond their capabilities or the capabilities of their current 3PL fulfillment partner. That realization is often triggered by problems – orders backing up or a sharp increase in errors – that lead brands to hastily develop RFP documents to address the mounting issues. Big mistake. You may need stopgap measures to address operational problems until a new 3PL is in place. But don’t rush the 3PL selection process because you see it as a quick fix to an existing challenge. Think longer term.
MISTAKE 2: INVITING EVERYONE TO THE PARTY
There are lots of 3PLs out there. But there’s probably only a handful that align really well with your particular operational requirements. Take the time to find out who these are – before you issue the RFP. Perhaps it’s a 3PL that handles similar order volumes, or has handled your particular type of product, or comes highly recommended from a consultant who knows your business. Rather than spend your time doing cursory evaluations of many 3PL partners, narrow down the list of providers you approach and then do a deep dive with each.
MISTAKE 3: NOT PROVIDING CONTEXT
Many RFPs for fulfillment services that we’ve seen get right down to business, with detail on the products, order volumes, packing requirements, SLAs, etc. All good stuff that’s needed. But the right 3PL partner will also want to understand the big picture stuff. Your history as a business…where the brand is going…future growth projections….what you’re looking for in a strategic 3PL partnership. Take the time to provide this context in the RFP.
MISTAKE 4: NOT PROVIDING ADEQUATE OPERATIONAL DATA
Gathering detailed data on historical fulfillment operations takes time, and that might be time you don’t have. But this data is essential to getting an accurate price estimate – a primary aim of any 3PL RFP for fulfillment services. In fact, beware of 3PLs that don’t push back if this detailed data is not provided. Order fulfillment pricing quotes based only on high-level data will likely require re-pricing once the provider starts operating and recognizes that many of the assumptions made for the initial price quote are inaccurate. And guess what? Most re-pricing exercises don’t result in a price decrease.
MISTAKE 5: OVEREMPHASIS ON COST
One of the most prevalent missteps in the 3PL RFP process is a focus on cost as the overriding criterion for 3PL selection. While budget considerations are crucial, fixating solely on the rate can come at the expense of service quality and overall value. Brands should do a balanced assessment that considers service costs, but also considers the financial upside of higher levels of customer satisfaction and loyalty over time.
MISTAKE 6: SHORT-TERM THINKING
Neglecting to factor in long-term scalability and adaptability in a 3PL partnership can lead to future challenges. If your brand grows 4x over the next two years, can the chosen 3PL handle that growth with the same level of quality? If not, you may be firing up the RFP machine again. And, frankly, changing 3PLs is hard. Brands must assess a provider’s ability to scale its operations to keep pace with evolving business needs, ensuring a future-proof fulfillment solution.
MISTAKE 7: POOR VETTING OF A 3PL’S VISIBILITY AND ANALYSIS TOOLS
When you outsource to a 3PL for order fulfillment, you need more than bodies to pick and pack orders. You need data on how the operation is performing and insights that help you make decisions. Make sure this requirement is captured in your RFP. Don't assume providers will have the operational dashboards you need for proper visibility and control.
MISTAKE 8: OVERLOOKING AUTOMATION CAPABILITIES
It's hard to economically scale a manual, paper-based fulfillment operation. Should order volumes increase sharply, that provider would have no choice but to address the challenge with more bodies – bodies that you would pay for. Make sure your 3PL RFP assesses the provider’s investment in warehouse robots and other automation technology to drive efficiency and accuracy on the warehouse floor.
Ready to Elevate Your Order Fulfillment Operations
In this exploration of 3PL RFPs, we've reviewed the pitfalls to avoid based on the good, the bad, and the ugly in RFP construction that we’ve seen during our 30+ years doing order fulfillment for growing brands. We specialize in helping brands scale fulfillment operations to support any level of growth. If you plan to issue your own RFP for fulfillment services, contact us to start a discussion.
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