The Case for Seeking Third Party Support in a Complex Sourcing Process
This article describes how a fast-growing Quick Service Restaurant (QSR) chain based in the U.S. achieved success in Latin America by ending the right consulting partner to source and transition to a new distribution vendor. Do sourcing intermediaries (or consultants) add value in the procurement of logistics or distribution services?
The dilemma is: hire sourcing intermediaries or not? And, if so, how to select the right one? When an intermediary has extensive industry insight, exceptional communication skills, and established best-practices developed over a history of successful projects, engaging the intermediary can be benecial for the company in need of sourcing support, for the bidders in general and, most particularly, for the service provider who ultimately is awarded the contract. This was the case recently when several distributors in Mexico participated in a bid led by Tsol to serve as a national distributor for Little Caesars Pizza® locations in Mexico.
Little Caesars® understood the potential value of engaging experts. The global chain had no signicant service issues with the incumbent provider. However, after a very successful expansion of stores over ve years, with more on the horizon, and the desire to ensure local franchisees would have the most competitive in-country distribution costs, the franchisor made the decision to hire intermediaries to assess the situation and develop a plan. Little Caesars® had market knowledge of distribution service providers in Mexico, but recognized that deep local market knowledge would be key to an accurate assessment of the chain’s distribution strategy and costs.
Tsol developed a strategy and a plan to facilitate the decision whether to maintain the services of the incumbent or transition the distribution to a new vendor. From start to nish, pricing that was signicantly less than had been in place prior to the sourcing project. More importantly, several highly-qualied bidders were identied and, among the finalists, signicant potential cost-avoidances and savings were identified.
What made this project so successful for Little Caesars® and its franchisees?
Like all projects, clearly dened processes and thorough project management made this endeavor successful. However, most important perhaps was the decision to engage local in-country resources, with process expertise, industry experience and local country/market knowledge.
Yet, in addition to serving as a sourcing intermediary, after the contract was awarded to the winner, Axionlog, Tsol was asked to continue working with Little Caesars® through the transition from the prior distributor to the new distributor. Operational intermediaries from Tsol worked hand-in-hand with Axionlog’s leadership team to develop project and change management plans. Initially, the business was anxious to rapidly transfer inventories from the incumbent’s distribution centers to Axionlog’s order fulllment facilities. However, with hundreds of stores depending on uninterrupted supplies of food products and franchisees depending on awless project execution,
there was no margin for error.
Input from all constituents was critical. For example, franchisees were asked to provide their key objectives in the beginning of the process. Face-to-face meetings were held and regular updates were provided to explain the RFP in detail to franchisees. Axionlog scheduled transition planning meetings at franchisee corporate oces with store operators throughout the country. In the end, every DC’s planned “go-live” date was executed on-time and with no service compromises.
In this example, Tsol worked through the details with Little Caesars® and Axionlog to ensure that the metrics were met.Tsol’s Sourcing Practice is prepared to support the execution of a rigorous sourcing process because the transition is something we consider from the get-go, and we are prepared to stand by the results of our recommendations.