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Outsourcing of core Logistics function of Warehousing is fast becoming popular not only for Multi National Companies with global operations but all organizations in medium and small sector too.

Outsourcing may fall into two categories. One category would be the flow through warehouses, merging and distribution centers that are but a consolidation points in the supply chain network. These can be managing finished goods or raw material supplies or even spare parts etc. The project size is relatively smaller and the warehouse is not expected to hold inventories beyond a few days.

The Second category of warehouses could be the larger distribution centers managing finished goods inventory and related operations in large scale, catering to exports or supplies to a region, continent or country level or inbound raw material warehouses managing JIT or VMI operations, in plant management, Plant FG operations, etc. These warehouse operations are critical in nature and are primarily categorized by the volume & value of inventory held, size of operations and its relative position and important in the supply chain network.

In the first case of a flow through consolidation center, the selection of a 3PL vendor is relatively simpler and the criteria lesser. In the second case the SCM managers of the Buyer and the procurement have to set up a project to float the RFP, invite bidders, evaluate the bidders, negotiate and award the contract.

RFQ should contain complete details of the said project to enable the 3PL to propose a solution and prepare a solution design document. The RFQ should contain at least the following details as minimum information:

  • Detailed explanation of the business requirements, service specifications coupled with details of the business process, IT Process and product, etc.
  • Project Scope should cover details of activities, volumes, IT infrastructure, interface requirements, report requirements etc.
  • List service level expected along with performance metrics for all operations of the warehouse
  • RFQ dates for vendor meets, presentations and submission of bids.
  • Project span including timelines for selection of a vendor, criteria, and process of selection, project implementation & Go Live.
  • Contract Period and Extensions
  • Pricing and Costing expectations, methodology & approach.
  • Legal and statutory compliance requirements.
  • Liability requirements including inventory liability, third party liability, and insurance.
  • Contract and agreement terms and draft of proposed contract
  • Any specific requirement of the buyer with regard to services or project etc.
  • Confidentiality agreements if any.

RFQ Process

RFQ document is normally prepared by the business function manager along with project lead and procurement leaders.

Once document is prepared and internal processes and approval are in place, the procurement issues the RFQ to either all vendors in the market or shortlisted vendors.

Post RFQ, the buyer invites all participants for Question and Answer session either in a face to face meeting or on mail. Normally all answers to the received questions are posted to all vendors participating to ensure fair chance for everyone.

The vendors can be allowed to meet and discuss the scope in detail or visit the proposed site to collect more details.

Buyer facilitates clarifications and discussions with all relevant internal business functional groups whenever required by the vendors to be able to give them better insight into the requirement.

On due date of the RFQ, vendors are required to submit detailed bid response document.

Short listing of vendors happens internally with participation from related functional teams and project leaders. Response documents are studied, graded and tabulated based on an evaluation of solution design, capability as well as pricing. Shortlisted vendors are given opportunity to present solution to the buyer’s team on selected dates.

Final selection happens after the vendor is selected internally and procurement further negotiates with the selected vendor and comes to agreeable terms and conditions.

Lastly, internal management approval is obtained from concerned, selected vendor is announced, and LOI is released to the selected vendor.

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