Are you an efficient shopper? Do to go to the supermarket with a list and get everything you need, including some sale items? Or, do you stroll down each aisle picking up items you think you need and wind up with a hefty bill, but not all the ingredients you need to make dinner?
This stark difference in approaches has more similarities with outsourced order fulfillment operations than you might think.
Outsourced Order Fulfillment: Pre-Planning is Key
The best shoppers do their thinking before they head to the store, not while they’re in the store. When outsourcing order fulfillment, start the Request for Proposal (RFP) process only AFTER you have the following:
Adequate historical data
3PLs need historical data on order volumes, inbound receipts and inventory levels. Averages don’t work. They need granular data on peak and non-peak volumes to design the most efficient solution. They need SKU-level data to identify your fast movers. If your systems prevent you from providing this granular detail in a proposal process, think about waiting until you can. When 3PLs need to make assumptions to determine pricing, they will almost always err on the conservative side, and you’ll pay more.
Clear and detailed scope of work
The detail you need to provide your 3PL goes beyond historical order and shipping patterns. What do you actually need a future partner to do beyond standard picking, packing and shipping? Are there international orders? Will they be handling returns and, if so, how many and what’s the requirement? Are there special packing needs? You may take some of these processes for granted because they are part of your everyday routine, but 3PLs will want to understand the nature of the work to factor it into pricing and determine if there’s a better way. The more detail you can share, the better.
Clear performance objectives
You’re not outsourcing fulfillment to maintain the status quo. You’re looking to raise executional performance. But to what levels? Think about this before you hit the street with an RFP. Keep these objectives aggressive, but reasonable. 3PLs expect to be challenged, but will want performance objectives to be realistic.
With outsourced fulfillment, as with grocery shopping, a little pre-planning goes a long way. Want more tips? Read our Ultimate Guide to Outsource Fulfillment.
Mistakes to Avoid When Constructing an Outsourced Order Fulfillment RFP
In our 20+ years of experience as an order fulfillment specialist, we’ve become pretty astute judges of RFP quality. Here are a few of the biggest mistakes we see.
Seeking to solve current, not future, challenges
Decisions to outsource are often triggered by an immediate problem, such as the need to replace a current fulfillment provider that is underperforming. That urgency can lead to a short-term focus in the RFP – one the seeks to fix the current issue fast, but fails to look 3 and 5 years down the road. The obvious downside of this approach is that you could be back on the street with another RFP 2 years later because the chosen provider couldn’t scale with your business. Hockey star Wayne Gretzky famously said the key to his success was “skating to where the puck was going to be.” You need to apply that same thinking to outsourced RFP fulfillment.
Inviting too many providers to respond to the RFP
When it comes to RFPs, no one benefits from a “cattle call.” Fulfillment companies that know they’re part of a large crowd of contenders rather than a carefully selected group may elect not to participate – even if they are the best candidate for the job. Or, if they do choose to respond, they may decide not to put as much sweat equity into preparing a proposal as they normally would. For that reason, do careful planning before the RFP process to identify a handful of truly “best fit” partners, and let them know they are part of a select few. Then do a deep dive on each to arrive at the best solution.
Choosing a partner based solely on price
Price is a big deal when choosing an outsourced fulfillment partner. But when it becomes the sole factor, you minimize other critical selection criteria, like the company’s track record of success, experience in your industry, and quality process. The low-price provider may save you a few cents per order, but may also make mistakes that can drive your customers away. Be careful how much weight you give different measures in your selection criteria. Understand that the lower price could result in a higher actual cost.
OK, It’s Time. Make Your List.
The outsourcing equivalent to the grocery shopping list is the RFP. This document must gather the information you need from potential providers to make the right choice. As we’ve discussed, RFPs should prompt providers to explain their operational solution for the scope of work, detail their ability to deliver the KPI performance you expect, and tell you how much it will all cost. But you’ll need other information, as well, to solidify your decision.
Just as a shopping list will differ family to family, your RFP questions will reflect your priority issues. Questions to consider:
- “What experience do you have serving brands like ours?” Have they handled commodities like yours before? If your company is growing 3x per year, has the provider dealt with this level of growth? You don’t want to be the provider’s guinea pig.
- “Can you detail your past and future technology investment aimed at controlling labor costs?” Does the provider operate in a strictly manual environment, or do they leverage technology for high-volume fulfillment projects?
- “Do you have the bandwidth to handle my project?” Start-up implementation is a critical stage in an order fulfillment outsourcing project. Customer confidence can be irrevocably lost if the start-up is mishandled. Dig deep to determine if the 3PL is starting up other projects at the same time as yours, or if they have an implementation team dedicated to bringing on new projects seamlessly.
- “Can we talk to a handful of your current customers with challenges similar to ours?” Don’t rely on a company’s reputation. Talk to people who’ve actually shared a foxhole with your potential partners. A restaurant can say it has the “best burgers in town,” but it’s always best to check with someone who has actually eaten there.
Read our blog article for other smart questions to ask about e-fulfillment services.
When Choosing a Fulfillment Partner, Learn from Grocery Shopping Best Practices
How many times have you come home from the market with a quart of milk only to find you already had two in the fridge and had to throw one out? Being a smart shopper comes down to careful planning. Apply those same lessons to your outsourced order fulfillment projects.
Want to bring your fulfillment operations to the next level? If so, contact the fulfillment experts at Amware Fulfillment to start a discussion.