It seems that in some quarters, the jury is out on the value of using requests for proposals (RFPs) when searching for a third party logistics provider. If you’re on the fence regarding this matter and planning soon to engage a 3PL (or you are a leader in a 3PL company), this article might provide some food for thought.
Perhaps too, it will give you a reason to consult with your executive colleagues and peers. They may be able to help you decide if an RFP is the way to go, or a big no-no in the search for a winning logistics partnership.
Key Players in the Debate
The request for proposal has its advocates and critics in both the buyers’ and vendors’ camps. Among those experienced in procuring 3PL services, some believe the RFP is still an essential part of the buying process. Others say it degrades the selection activity to an examination of functional cost, potentially discouraging the best service providers from pursuing your company’s business.
Vendors meanwhile, are also divided on the value of responding to RFPs. The naysayers posit that a request for proposal:
- Is the beginning of a vicious circle, where no matter how good a job is done, the vendor will have to go through the same process at the end of a contracted term
- Commoditises third party logistics and turns the bid process into little more than a price war
- Stifles innovative vendors by forcing them into a customer-led concept of service
- Might just be a cover for a buying decision which has already been made
- Is bad for employee morale
On the other hand, vendors that support the RFP process believe that:
- RFPs are no more subject to price-slashing tactics than any other competitive scenario which vendors may take part in
- A request for proposal forces the vendor to deliver tailored, focused information to the potential customer
- Vendors that choose never to respond to RFPs miss many valuable business opportunities
Whether you are a potential buyer of 3PL services or one of the vendors, discussing the pros and cons of RFPs with leaders in other organisations might help you figure out whether you want to issue/respond to future requests for proposals and if so, to identify how you might improve upon the way your company has managed RFPs in the past.
Polarised by Size
For buyers of 3PL services, the length of a request for proposal appears to be a polarising issue. One camp argues that there is little point in generating a lengthy, highly detailed RFP requiring great effort for vendors to complete a satisfactory response. The view is that much of the vendor-supplied information will not be used in selection.
Proponents of brief RFPs also feel that suppliers with plenty of business (in other words, the ones which deliver the best services) won’t bother to respond to a lengthy RFP, leaving the buyer picking through a raft of responses from mediocre or less experienced organisations.
Conversely, those who advocate for volume say a lack of granularity will bring only incomplete vendor responses or solutions which lack relevance or innovation. These buyers say great 3PL companies will take the time and effort to respond fully to a highly detailed RFP. Furthermore, the best vendors are very likely to ask for additional detail, so they can show just how well they can fit a solution to the buyer’s needs.
Invite Your Peers to Weigh-in
As with any practical topic which becomes subject to debate, bystanders can take their side, analyse the arguments, or simply enjoy the discussion. When the subject is something which you actually need to take your own decision on though, the debate can take on worrying dimensions and be a source of executive stress.
One way to improve your confidence is to talk to the trusted members of your professional network.
What are the experiences of other leaders who’ve procured 3PL contracts? Do you know any executives in service industries who can give you tips from a vendors’ point of view?
It can be comforting to get insights from people you know and whose experience you don’t have to doubt. That’s why Logistics Bureau is launching the Supply Chain Leaders Boardroom this year. The Boardroom is a forum where you can discuss issues like the “request for proposal debate,” and share information and advice with other supply chain executives.
If you’d like some more information about the Supply Chain Leaders Boardroom, just complete the form on our homepage, so you can get the latest news straight to your inbox. Meanwhile, if you have your own view on the use of RFPs for selecting a third-party logistics partner, please feel free to share them in the comments.