I was speaking with a sales executive at a leading logistics service provider (3PL) earlier this week and I asked him a simple question: “Do you have an example of a good RFP from a customer or prospect that you believe asks all the right questions a prospective customer should ask?”

Boy, did I hit a hot button with that question!

The executive answered me (and expressed his frustration) by sharing two recent examples.  In one case, the customer hired a blue-chip consulting firm to help them with the 3PL evaluation and selection process.  It was clear, however, that the consultant in charge of the project was relatively clueless about the logistics industry.  His questions were very basic, and the 3PL often had to define and explain common terms to the consultant that he should have been familiar with already.  For example, the consultant didn’t know what TOFC stood for, even though a significant portion of his client’s transportation moves are trailer-on-flatcar.

The second example was even more outrageous.  A company actually performed a reverse auction (using Ariba) to select a 3PL.  Now, this was not your typical “transportation procurement” engagement to secure trucking capacity.  This company was selecting a 3PL to manage its nine-figure transportation spend and daily operations.  In other words, this company was turning over several hundred million dollars of transportation management responsibility to the lowest bidder!

Is this what selecting a logistics service provider has come down to?

A couple of weeks earlier, I spoke with a sales executive at another 3PL whose main objective moving forward is to “short circuit” the RFP process.  Rather than wait for a prospect to submit an RFP, he wants to proactively approach prospective clients (preferably the CEO or CFO) with a well-researched, well-defined business plan and value proposition.  Although he didn’t quite put it in these words, the problem with the RFP process is twofold: (1) clients are often blind to the broader opportunities available, and (2) if procurement takes the lead in the evaluation/selection process, the conversation quickly becomes one dimensional-it’s all about cost.

The latter point is certainly a growing issue in the industry, especially when procurement professionals who only have experience buying commodity goods are put in charge.  The other issue, which I’ve written about before, is the lack of in-depth, high-quality information about the true strengths and capabilities of logistics service providers (see “Who Is The Best Logistics Service Provider (3PL)?“).  The net result is that 3PLs with little or no experience/capabilities relative to a client’s needs are sometimes included in a bid, while those who are arguably better qualified are often left off the list.  We’re actively working to address this problem (details to come soon), which is what prompted me to ask the 3PL sales executive for a good RFP example.

Is there any hope for improving the way companies evaluate, select, and manage 3PLs?  In several postings this year, I’ve positioned Performance-based Outsourcing (PBO) as the next frontier in 3PL-customer relationships (see “Performance-based Outsourcing in Logistics” and “Performance-based Outsourcing: What’s In It For ‘We’?“).  And although I still remain optimistic, the more stories I hear about the current state of logistics outsourcing, the more distant the promise of PBO becomes.  The chasm that exists between what is practiced today and what PBO entails continues to widen.  I find myself asking: Is it really possible to build a bridge across the Grand Canyon?