So are you involved in any aspect of logistics outsourcing maybe as a service
provider or as the client you know I sure I read somewhere that something
like 85% of businesses around the world now outsource some element of day
logistics and supply chain so I've got a question
why does so many screw it up what I'd like to share with you this week is four
things that so many companies screw up when they're going through the
outsourcing process coming right up
okay in terms of logistics outsourcing I've probably been helping companies for
at least 23 years in a consulting capacity helping them through the
process of selecting appropriate service providers and negotiating contracts and
all kinds of things and I've seen the trend for outsourcing grow in that time
but I've also seen companies make the same mistakes over and over and they've
really silly mistakes to the extent that very often my team and I are called in
when things have kind of fallen apart and we've got to fix up an outsourcing
contract that was kind of doomed to failure right from the start so look I
could probably spend at least an hour going through maybe a dozen things that
people get wrong and that lead to a bad outsourcing contract but let me just
pick on four if you'd like to know more comment below and I'll happily share
more maybe create some more videos about this topic but let me just focus on the
top 4 for now so number one and we're talking generally here in logistics
outsourcing so it could relate to Freight or warehousing number one they
don't allow enough time and companies will come to us and say hey we'd like
you to help us through the outsourcing process we know that you've got a robust
system for doing this and we'd like it all done in the next two months and we
have to say hmm that's a bit of a push you've probably got to allow a little
bit more than more time than that and obviously depending on what you're
outsourcing in the complexity but just think about the timeframe for a moment
you've got to put together a document which the potential providers are going
to bid against and that's quite a detailed document you're going to
outline all of the services that are going to be provided the service levels
you're probably going to put in a draft contract I always recommend that so that
you know it's the power of the draft you also want to put in you know things
around KPIs and how you're going to measure their performance you know lots
and lots of detail have to go inside this is not a three-page letter a
request for tender document it's hard to put page numbers on it but it's gonna
run at least 20 pages if not 50 there's got to be a lot
of detail in there and a lot of attachments because if you think about
it you've got to provide enough information for those potential service
providers to really understand your operation and how they're going to
resource it so time frame for something simple three to four months at least
more often not it's going to be six months because you're putting out your
documentation you're going to allow them four to six weeks minimum to respond to
it again unless it's something really basic you're then going to evaluate all
of those responses and you're going to go and visit the various potential
service providers and you're going to negotiate contracts and implementation
so it is quite a time consuming things so what I would say to you is that if
you're thinking of outsourcing or for some reason you're thinking of changing
outsourcing partners think about the time frame and get started soon just as
an aside if you're already outsourcing and you're thinking of changing partners
I would ask you why it's a very disruptive thing to do for your business
did that initial contract get upset set up poorly is it is
can you save it can it be renegotiated because to go through the whole
outsourcing thing again it's very disruptive to your business so number
one was time make sure you got plenty of time
number two this is probably equal first in terms of something that goes wrong
data I have been involved in outsourcing contracts both frightened and
warehousing where we've looked at a value of a contract for anything from a
couple hundred thousand dollars up to 20 or 30 50 million dollars and the thing
that people get wrong so often is not providing enough data and I've spoken
about this before I'm going to talk about it again because it's critical you
need to provide very detailed information as part of your request for
tender process around the products you know product master and weights and
dimensions of products around the customers where are they where
products being dispatched to delivered to around you know your existing
performance transaction history you know typically I'd be saying you want to
provide 12 months of transaction history here's all the orders that went out the
order lines you know because the service providers have to analyze your business
to that level of detail because they're going to design a solution to meet your
business needs and if you can't provide that level of detail they're going to
make it up not not quite that I mean they're generally more professional than
that but they're going to have to take a bit of a guess and they're going to have
to make some assumptions and they're going to have to put in some contingency
and it's going to end up costing you more and of course if the cost is here
when you start it's very hard to peel it back through the life of the contract
so data is really important now you might be thinking but what if I don't
have all the data okay well sometimes you don't but you really have to make a
best guess at you know the profile of the orders and so on and if you can't
even do that you need to make sure that the people bidding on this work can
actually get access maybe to your facilities and so on to have a look
because you really got to do everything you can to help them understand the
operation because otherwise they're just guessing about you know what resources
to provide to help you in delivering this service so we've had time and data
clarity is the next one be very clear about what you're outsourcing and what
you're not and don't hide things I have seen outsourcing contracts go right down
the toilet because the 3pl turned around after about six months and said hey you
didn't tell us that you had 10% level of returns or you didn't tell us that we
had to do kitting you know we had to put Australian power cords in the packs you
know with all the products and all of that takes more work and more resource
and more cost and if it wasn't costed in guess what's going to happen they're
going to come to you and say hey we're doing things that we hadn't budgeted for
we need some more money and so don't don't think that you're going to get
away with that kind of stuff I'm sure you won't be thinking like that but
sometimes come bunnies will think it's hard to quantify
that or we're not quite sure you know we don't need to put it in the rft the
request for tender you do you need to put in everything that the service
provider is going to have to resource and if you're lacking in some
information well maybe you can sit down with them and make some really good
estimates okay so we've had time data and clarity
the last one is approaching the right people so I have seen companies over the
years kind of do a web search and say oh we found you know 10 companies that seem
to be a good fit for us let's invite them all
I'd suggest that's probably a little bit too many I have seen companies really
invite the wrong types of service providers so let's say for example we're
doing chilled food distribution and you're inviting a company that doesn't
do chilled food distribution they only do ambient products they're going to be
wondering why they've been invited to tender and I'd be questioning why are
you asking them because they don't have the experience in the services that you
need so be quite selective and be smart about who you're picking to participate
in the tender process because if you pick too many or if you pick some that
are you know clearly not appropriate to look after your business
you're basically undermining your own credibility you're demonstrating to the
market that we don't understand the market enough to know who to talk to now
there are some exceptions so I've been involved in a lot of government
contracts where they have to basically go to open tender I understand that
understand the reasons for us generally what we do there is we'll put an extra
step in the process which is like an expression of interest and then selected
companies will go forward to the request for tender the reason we do that is the
expression of interest is just like a filtering step it doesn't require too
much effort on part of it on the part of the people bidding it gives them an
opportunity to to demonstrate you know if they're capable of doing the work and
so on but it doesn't make them go through that whole RFP process which can
be lengthy and costly for someone bidding on the contract so that's
another way if you are obliged to actually go to a much
broader market okay so as I mentioned there could be at least a dozen things
that I could share with you on why logisitics outsourcing goes wrong for
now just think about the time frame have you left enough time think about the
data are you providing enough information for them to accurately
resource and cost this contract think about clarity about which services the
service levels you require and think about making sure that you're
approaching the right people okay so if that's helpful I'll put some links below
which will give you all I might actually give you not a draft contract but
actually a it's a what do you call it contents page of a draft rft which would
really help you in understanding the complexity involved if I can share that
I'll show that below but I'll certainly put some links below to other articles
and videos which will help you and don't forget if you find this video of use
please make sure you subscribe we have a new video coming out every Wednesday if
you'd like any more information about logistics outsourcing or if you want to
share some experiences please do comment below and other than that we'll see you
next week with another topic on supply chain logistics