Sep 2022

Tender Management for E-Commerce Fulfilment - A User Guide

Introduction

Fulfilment is all about getting your stored goods to the end customer. Sounds easy. However, what if these goods have specific requirements for storage space, storage conditions (e.g. temperature) or delivery options? Especially in these cases working with the ideal logistics provider becomes highly relevant. How to find the perfect 3rd party logistics partner (3PL)?

There are many things to consider in a tender process. This guide is designed to help merchants step through this process clearly, and avoid the pitfalls that scatter this path. 

What to consider when running a tender?

If you are an e-commerce merchant looking to find a suitable 3PL to deliver your goods, it’s often a good idea to issue a formal Tender to prospective partners, in order for you to make the best informed decision on this strategic question. 

What are the reasons for the need for new logistics providers? There are quite a few: geographical expansion, expected order increases e.g. in peak seasons, expanding product range, changing external or internal conditions, price negotiation, and many more. 

What are the most important criteria for the right logistics service provider?

Three things to consider at least:

1. Consider the services and limitations of the fulfilment service provider's product assortment requirements (e.g. hazardous materials, 2-man handling, etc.).

2. Check the geographical location of the warehouse sites in the respective target countries.

3. Consider the different service levels of the service providers (delivery times to the end customer).

Why run a Tender and how?

The goal of a tender process is to find and afterwards collaborate with the best logistics service provider for your product range and your market. Why run a tender to find the best fit?

Because you can’t just choose any 3PL that says it provides e-commerce fulfilment services, whatever their salespeople say.  Most 3PLs have particular markets that they address, and for which they have specialist knowledge and experience.  A logistics company specialising in sports apparel may not best placed to help with liquor.  If it’s food, they may require GSFi certification.  If it’s hazardous goods, well, they may need much higher insurance cover. If it’s fashion, there might be a need for handling specific packaging, returns, and repacking.

Equally, size matters; think again about going for a 3PL that can just squeeze you in to their facility, if you have big growth plans - look for a 3PL that can scale alongside you. However, many bigger 3PLs are simply not interested in working with smaller e-commerce merchants, and some set the bar at €1m in annual value to them before engaging.

Thirdly, fourthly and fifthly, location, location, location.  Where they are geographically situated makes a difference; and where they are situated in relation to carrier hubs also makes a difference.

And what about technology? How is the 3PL set up to integrate to your Order Management System?  EDI? API? CSV?  How quickly can they onboard you?  How do they print labels?  How are they going to report back to you with their KPIs? And how exactly are they going to keep your promises to your customers?

We hear horror stories of 3PLs trying to serve high volume clients with teams of workers typing out delivery labels manually. E-commerce needs to be technology led, as the high volume / low value ratio demands this in order to remain profitable and for service levels to remain high.  One complaint resulting from a wrong address label can have severe consequences if the brand has a high social media profile.

And what about the sheer time needed to handle everything?  Researching the territory; creating a structural dataset of your product range; long-listing and then contacting the 3PLs; briefing a dozen or more different interested parties; fielding additional questions; consolidating and measuring comparative data to enable analysis of the best options; all effortful and time-consuming.  It’s a full-time and stressful job, which comes around once every 3 years for many merchants - and not really one you can palm off to a junior or intern. This know-how and the free time resources are rarely given.

Why decide for a Tender Process powered by Codept ?

Codept is not only an Integration Platform provider but its team has a lot of experience and expertise in both e-commerce and logistics industry. To give only one example: Felix Ostwald, Managing Director of Codept, has worked in the e-commerce logistics industry for 8 years with a strong focus on fulfilment and software implementation. Knowing the e-commerce and logistics processes by heart and having access to a large network of logistics providers we can run a tender process and, if requested, handle the 3PL integration faster, cheaper and to high quality. Outsourcing the tender management to Codept means collaborating with an industry expert plus saving time and money for a work-intense, necessary process you need to run in any event to find your ideal 3PL Partner.

Two examples where Codept has proven expertise to run a high quality tender: 

1. Food & Supplements:

Fulfilling food requires specific conditions depending on its type. Not every warehouse can provide the ideal consistent temperature or humidity to store food items. To know which 3PL meets all the parameters, the law, the certifications for handling food is a knowledge built up over years that we can provide the merchant to find the best fit quickly.

2. Car Batteries:

Codept ran a tender for car battery fulfilment in Europe. The goal was to find four additional warehouses in four regions across Europe that are able to store car batteries as hazardous goods plus are well distributed across Europe. Having fulfilment centers in different countries also means facing different regulations and laws in different countries. Again, a tender process that needed industry expertise to consider the key criteria, a bit of legal knowledge and access to a large network of 3PLs. All of this you get collaborating with Codept.

What does a typical Tender Process look like with Codept?

1) Codept gets in touch with 3PLs 

  1. Kick-off: Codept and merchant define requirements with all relevant attributes for 3PLs
  2. Codept filters, creates a long list, gets in touch with relevant 3PLs and sends tender documentation to the interested 3PLs
  3. Various 3PLs decide to take part in the tender and send a first rough quote
  4. Codept goes back to the merchant with comparable first quotes from the 3PL 
  5. Codept creates a short list of fitting 3PLs

2) Merchant chooses the best matches

  1. Further details and questions to be exchanged and answered, moderated by Codept
  2. Merchant gets the 2nd more of more detailed quotes by the finalists
  3. SLA and contract negotiation between merchant and 3PL
  4. Merchant decides for the perfect match

3) Codept integrates chosen 3PL

  1. Add-on: Codept cares of the system integration of 3PL and the merchant customer