When it comes to outsourcing logistics, it is estimated that approximately 20% of customers are very satisfied with the performance of their contractor, about 50% are moderately satisfied and up to 30% are largely dissatisfied believing that the contractor’s performance has failed to live up to expectations. And the reason this continues, is that companies will often continue with a disappointing contractor either because of the difficulty in terminating a legal agreement or simply the amount of work required to re-tender the operation. Getting it right during the tender process is therefore of critical importance.
Successful Contractor Selection
So, what are the key things that a company can do to maximise the likelihood of a successful contractor selection process:
Define your current and future needs
The time and effort required to appoint a new contractor is considerable and therefore, ideally, companies should plan to remain with the successful contractor for a minimum of five to ten years even if the contract is for a much shorter period. For this to happen it is essential to try and anticipate your future operational requirement.
Identify suitable contractors
As part of finding a suitable partner, undertake a comprehensive review of the market place to identify those contractors that have the resources, quality standards and skills to meet both current and future needs. Determine which contractors are committed long term to the services you require and whether they have the financial resources to be a leader in their chosen sector.
Document your requirements
A clearly defined statement of requirements and data set will be crucial in evaluating competing contractors and will be core to the contractual agreement. When things change, as they will, it is essential to have a ‘touchstone’ to commence discussions.
Determine the most appropriate pricing system
A good pricing mechanism is fair to both parties but encourages the contractor to reduce costs and improve productivity to the benefit of both parties. This can be tariff based, open book, activity based or a combination.
Ensure a structured and rigorous approach to the tender process
It is essential that the process is well structured with all contractors being provided with the same information and sufficient time to respond. In a complex tender process it is all too easy to land up comparing ‘apples’ with ‘pears’.
Encourage contractors to provide creative and innovative solutions
Whilst contractors should respond to a common brief they should be encouraged to provide innovative and creative solutions. Avoid designing yesterday’s solution for the needs of tomorrow.
Prepare a comprehensive legal agreement
In addition to standard legal obligations, the agreement should clearly define each party’s operational responsibilities, performance standards and reporting requirements. A successful relationship should not require constant reference to a legal agreement but it will depend on establishing solid foundations.
Visit the contractors operation and meet the people
Take time to see where the operation will be based, the systems to be used and the people that will be responsible for the operation. Complementary cultures play a key role in successful relationships.
Follow up on references to gain a greater insight as to the culture and standards of the short listed contractors
Find out how things have been handled when things have gone wrong. You will only know how good a contractor is when things have gone wrong not when they have gone right.
Ensure a comprehensive implementation plan is prepared
Ensure that tasks have been clearly identified with named individuals and timescales and include within the legal agreement for both the contractor and the company.
YOUR OUTSOURCING SOLUTION
If you would like support in finding your perfect logistics contractor, please call us on 01327 349090 or CONTACT US.