Once your company grows large enough that you cannot meet the needs of all of your clients simply by fulfilling orders from your garage, you will have to outsource some services to other businesses. Whether this means choosing a fulfillment partner or finding a warehouse that provides inventory management to store your eCommerce products, or simply outsourcing shipping or customer service, third-party logistics (3PL) is a complex process.
Plenty of warehouses are willing to store your merchandise and handle your shipments, and people will claim to be experts on anything from sales and marketing to order fulfillment if it means that they can make a buck, but you can tell little about their handling of the execution of your fulfillment services just by listening to their sales pitches and watching their promotional videos.
Instead, you should thoroughly evaluate each vendor or service provider before you engage their services or pay them any money. You need a comprehensive 3PL evaluation template to get a realistic view of the service levels you can get from a prospective provider to see whether signing a contract to include this company in your supply chain logistics will be beneficial to your business.
Understanding the 3PL Evaluation Template
Think of the 3PL evaluation template as a job application. When you engage the services of a 3PL provider, you are not becoming partners in the sense of owning a percentage of each other’s business. The selection process is more like an employer choosing from among job applicants. You need to find out the details about how well the company can do the aspects of logistics that you need them to do, whether that is integrations, freight delivery, or returns from customers.
Before you decide which company to hire, you should write a checklist of evaluation criteria on which to base your decision. The criteria should not be vague, such as “quality of work.” Start by thinking about your requirements. For example, “We need A, B, C, D, and E,” and then write a list of questions that will tell you how well the prospective logistics provider can perform the services you need them to perform.
What is a 3PL Evaluation Template?
A 3PL template is a list of questions that a company you’re thinking of outsourcing some of your logistics processes to should answer in its proposal to provide services for your company. Many companies include the 3PL evaluation template in their request for proposals (RFP), and the applicants’ responses form the bulk of the proposal. If the proposal seems promising, then your company visits the service provider to discuss more details of a prospective business relationship before you make a commitment to hire them. The 3PL evaluation template could be a form that you ask prospective vendors to fill out, or it could simply be a detailed list of instructions and elements for them to include in their proposal.
Why Use a 3PL Evaluation Template?
A 3PL template enables you to be organized in the process of choosing service providers for outsourcing. By organizing your RFPs in checklist form, you can compare different companies’ answers to the same question at a glance. This will help you save time in the decision process and to focus on KPIs with greater accuracy and reliability. It also enables you to get down to nuts and bolts about costs and rates early in the process. Using a 3PL evaluation template is a mark of good planning and wise use of your company’s resources. When you take the responsibility to set goals before making demands of others and to communicate your expectations early and clearly, the result is greater success for the project and your supply chain partnerships.
Understanding the Importance of 3PL Evaluation and Selection
Service providers are more likely to want to participate in the operations of projects when the people in charge of the project have their act together. The worst boss is someone who does not know what they want and who wastes everyone’s time and resources by constantly changing their mind about procedures and workflow and giving self-contradictory instructions. If you are organized and forward-thinking enough to distribute a uniform 3PL evaluation template to all of your prospective logistics providers, you make a good first impression.
Even more importantly, a 3PL evaluation template with a breakdown of all of your requirements and specific questions about fees, pricing, and charges enables you to choose the company that will best meet your needs more accurately. You will find out a lot more about the company’s flexibility and capacity for meeting your needs than you would by simply asking open-ended questions such as, “What can you do for us?” If you have a system for evaluating 3PL providers, this will give you the insights that you need for the growth and success of your company.
The Role of Logistics Outsourcing in Supply Chain Management
Only the biggest companies have the capabilities to manage an entire supply chain network. Some examples of areas where companies outsource operations include warehouse management systems (WMS), fulfillment, and shipping. You know your business has outgrown your garage when you consider signing a service level agreement (SLA) with another company to outsource some of the work.
The Essentials of 3PL Evaluation and Selection Phase
Service level agreements are only the beginning of the last steps in outsourcing items on your to-do list. First, you should gather as much data and information about the company to which you are thinking of outsourcing work.
Data to source includes:
- Technology platform and specifics
- Pricing schedule & contract requirements
- Service level agreements
A 3PL evaluation template is one of the most valuable tools to which you have access. An effective 3PL evaluation template will help you pick the best company to meet your needs. Best of all, even an evaluation template with multiple categories doesn’t take up any storage space. It is small enough that numerous completed templates will fit in your email inbox.
At the beginning of the template, you should state your requirements for the services you wish to engage in, the term of the anticipated agreement, and the rights that each party will retain if you sign an SLA. You should then include a section with questions about the company’s products or services, capabilities, and previous projects and one for prices, at minimum.
Key Points in the 3PL Evaluation Phase
There are three key points of the 3PL evaluation phase.
Introduction
This stage usually begins with exchanging links and slide presentations by email and then proceeds to virtual meetings. During this phase, you get to present your brand idea and get a feeling of whether your company’s style of doing business is compatible with that of the other company.
Evaluation
The next phase is the reporting of first impressions. You and other team members at your company discuss whether you want to explore a business relationship with the service provider. Factors such as the company’s location might be as important as whether the company has a proven track record of success. It could be a small detail that tips the scales in favor of the company or against it.
RFP
The third step is to send a request for proposal (RFP). It is much easier to do this if you have already prepared an evaluation template, or several variations on one, that you send to all 3PL providers with which you are considering a business relationship.
Preparing for the 3PL Evaluation Phase
In a perfect world, you could use the exact same evaluation template for every company to which you outsourced tasks. It is not realistic, however, to ask the same questions to a company that provides an application programming interface (API) such as a trucking company or one from which you want to rent warehouse space.
If you have previously made a 3PL evaluation template when outsourcing other services, you are on the right track. You can simply modify your existing template. Some of the questions will still be relevant, but you may need to remove some of them and write some new questions.
Designing an Objective Scoring or Evaluation Process
It is not enough to decide on a list of questions to ask all prospective vendors in your 3PL evaluation template. You must also decide on the criteria according to which you will rate their answers. For example, fill in the responses that the ideal respondent would provide, and see how closely actual applicants’ responses match them. For example, if you need a company to do A, B, C, and D in a particular part of the process, give an applicant four points if it promises to do all of those things, three out of four if it only does three of them and so on. If you are willing to pay X dollars for a particular service, assign the applicant four points if they quote you X or less than X, three points if the amount they quote you is between 100 percent and 110 percent of X, two points if it quotes you between 110 percent and 120 percent of X, and so on.
Formulating Your Request for Tender (RFT)
A request for tender (RFT) is a formal invitation for suppliers to submit proposals to provide their services. You should finalize your 3PL evaluation template before issuing the RFT. You may choose to include the evaluation questions in the RFT, or you may simply include a general description of the services you need and the criteria on which you will evaluate applications. If you choose the latter option, then ask prospective applicants to email you to request the complete application form.
You should include a deadline on your RFT. The level of detail in which applicants can complete the proposal by the deadline can tell you a lot about how successfully they can complete the tasks that you are outsourcing to them.
Building a Cross-Functional RFT Evaluation Team
If the RFT has a single author, this is a recipe for trouble. It is almost as bad as downloading a sample RFT and simply adding your company’s name and logo to it. If one person writes the RFT singlehandedly, it will only reflect that person’s vision and concerns. You should assemble a team of employees from different departments of your company. They should write the RFT together, or at least review the draft of the RFT that you have written by yourself.
The people who wrote the RFT should review the applications, and so should others who did not participate in writing the RFT. You may wish to hire outside consultants to contribute to the writing of the RFT or the review of applications.
Maintaining Objectivity Throughout the Evaluation Phase
An objective process for evaluating 3PL bids is part of fair competition in business. Even if you have contacted certain companies individually to ask them to submit bids, the people who review the applications should not know which applicants submitted which bids. If an applicant later asks you why you did not choose them, you should be able to give specific reasons, none of which relate to your pre-existing relationship with another company.
Key Takeaways
Before you outsource services to another company, you should know what you are looking for. A uniform 3PL template will help you accurately choose a company that provides the services that you need. It can also help you be fair and objective during the selection process.
Frequently Asked Questions (FAQs)
Outsourcing requires as much planning and organization as doing everything in-house. These are some common questions that eCommerce businesses ask about 3PL evaluation templates:
How Can I Improve My 3PL Performance?
You can improve your 3PL performance by accurately assessing which tasks your company can handle in-house and which you should outsource. When you outsource work, you can get the best results by being clear with suppliers from the beginning about your expectations. 3PL evaluation templates serve this goal.
How do you Evaluate Logistics Performance?
You can evaluate logistics performance by measuring the speed and accuracy with which the logistics provider fulfills its tasks within the supply chain. You can also evaluate the extent to which the supplier helps you save on costs.
What are the Four Functions of 3PL Providers?
The four functions of 3PL providers are warehousing, transportation, distribution, and consolidation. Many eCommerce companies find it cost-effective to outsource their warehousing tasks to a company that deals exclusively with warehousing.
Contact ShipHero today for a demo.
