When receiving bids from multiple third party logistics providers for your company’s warehousing and distribution program always beware of the company with the lowest bid.
There that RFP response is sitting on your desk from XYZ logistics. Its got to be bugging you. 3 dollars a pallet less than anyone else that bid on the program? On first thought you’d think that is clearly the best deal, but chances are that outsourcing your program to the company with the lowest bid could have the potential to be a problematic business relationship.
3PL’s sell time, talent, and space. To get a 110% effort out of your logistics company you need to enter into a truly mutually beneficial partnership. You are looking for them to create efficiencies in your supply chain and generate cost saving opportunities, they are looking for solid relationships with companies that are looking to grow their business that will in turn make them successful.
The lowest bid can sometimes be a result of the company improperly pricing your program based on the inventory characteristics and volumes you provide. This can cause substantial problems with the 3PL/Customer relationship.
Also alot of times you will find that third party logistics companies will take on clients just to cover large amounts of empty space at a loss. This can sometimes work out in your favor and sometimes also in theirs if they are in a particular stage with their business. But many times this can be a problematic situation because you can usually guarantee that if they are operating your account at a loss you are probably not going to get the best service and some may even terminate the relationship once they find a profitable customer to take your place. Now by no means am I saying this always happens but it is something you should be aware of.
As I said before the most successful 3PL relationships are mutially beneficial. Be sure to keep that in mind when selecting a provider. A high quality logistics provider is typically going to have excellent service, more enhanced technology offerings, and some of the best talent in the industry. In additional to the big players in the logistics industry, there are also alot of mid-market 3PLs that provide great value for companies of all sizes and budgets. When reviewing bids on your distribution program be sure to use diligence researching companies. You definitely can afford the 3PL with the lowest rates, but can you afford the headaches if it turns out you selected the wrong provider?