Outsourcing Logistic Operations

In a commoditised Logistics Market how do you secure value?

Many firms turn to logistics outsourcing as a way to restructure their distribution and warehousing networks to gain competitive advantage. Logistics outsourcing in which third party (“3PL”) and forth party (“4PL”) providers are contracted for all or part of an organisation’s logistics operations has seen consistent growth.

Outsourcing logistics or supply chain operations is a major undertaking, and requires full and detailed analysis of 3PL or 4pl proposals from (1) quantitative (2) qualitative (3) cultural perspective.

Tendering Process

The objective – Outsourcing services to specialist providers should result in a better quality of service and value for money.  Clear goals and well-defined requirements can ensure that your suppliers understand your needs and can meet them. They provide you with expert guidance and support, improved supplies or services in compliance with industry standards – all at a lower overall cost.

Organisations need to get the Invitations to Tenders (“ITTs”), Requests for Proposals or Quotations (“RFPs/RFQs”) right!

Operational Profiling

Is about understanding the current operation and the different risk management issues. There are different types of supply chain risk, and nowadays, these can be very easily exposed due to the power of social media and be incredibly detrimental to the companies’ business. You need to know the strategic intent of the business going forward.

Validating the need

The process associated with the collection and production of intelligence should confirm that the information gathered is sufficiently accurate to justify the requirement and does not duplicate any existing methods and satisfies the commercial and operational needs to outsource.

Identifying Suitably Logistic Providers

In 1865 The English mountaineer Edward Whymper and his 6 companions were the first to conquer the famous Matterhorn. On the decent 4 of the party were killed. In honour of his lost companions Whymper wrote the following poem about the disaster.

“Climb if you will, but remember that courage and strength are nought without prudence, and that a momentary negligence may destroy the happiness of a lifetime. Do nothing in haste; look well to each step; and from the beginning think what may be the end.

Outsourcing ultimately requires trust. It should not be about the total subordination of responsibility, but you are handing over various aspects of supply chain operations to a partner. Like any relationship, it will have to endure times of tension and despair.

With the digitalisation of the transactional economy it is still common for organisations not to view their suppliers as cooperative partners.

It is critically important to “think at the beginning what you want at the end”

Macdui are not the traditionalist. We operate in a commoditised market where the ‘dating process’ for potential partners, should reflect the times we work in.

Producing The Tender Document

Managing the Tender Document of a bid can be likened to managing a typical small project:

There is a deadline.
There needs to be a clear understanding of the scope
It involves managing resources.
There is a process to be followed.

Like any good project, a clear planning document should be created and issued to all those involved. The tender response document needs to be crafted with care and attention illustrating an understanding of the salient points.

Logistics providers need to convince the readership that it has understood and communicated this in their response. The ITT should cover the operational profile, commercial framework, modelling constraints and IT requirements, along with strategic plans and a clear objective statement.