Should I Be Auditing Our Current Receiving Process Before Starting an RFP?

You are preparing for a 3PL RFP. You know you need to understand what the 3PL will be doing. So you start researching 3PLs, preparing your RFP, getting quotes. But there is a step you might be skipping: auditing your own current receiving process. Most brands do not know their own operation well enough to communicate it to 3PLs. They know roughly how many orders they process, but they do not know: - How long receiving actually takes - What format their inventory arrives in - What is causing bottlenecks or inefficiencies - How much receiving costs them now (if they have in-house fulfillment) - What problems they are trying to solve Without this baseline understanding, you cannot: - Communicate accurately to 3PLs (they ask, you guess) - Benchmark 3PL quotes against current costs (no comparison point) - Identify whether a 3PL's receiving is actually efficient - Know what improvements to ask for - Identify whether you are overpaying now This is the guide to understanding whether you should audit your receiving process before starting an RFP, what to audit, and how it improves your 3PL evaluation. ## Should You Audit? The Short Answer: Yes, Almost Always **You should audit your receiving process if:** - You have in-house fulfillment (you have current data to understand) - You are moving from one 3PL to another (you have current costs to benchmark) - You have never measured your own receiving (you have blind spots) - Your inbound process feels chaotic or inefficient (there are improvement opportunities) - You want to negotiate effectively with 3PLs (you need baseline data) **You can skip the audit if:** - You are a startup with no receiving history (you have nothing to measure) - You are starting fulfillment from scratch (no baseline to understand) - You are working with a consultant or 3PL who has already done the analysis But even then, some basic measurement is valuable. **Timeline:** Audit before you send RFPs out. You want this data when you communicate with 3PLs. --- ## What to Audit: The Receiving Audit Framework ### Audit Element 1: Volume and Frequency **What to measure:** - How many shipments arrive per month? - How many boxes/units per shipment? - What days of the week? - What time of day? - Is it consistent or variable? **Why it matters:** 3PLs need to know receiving volume to plan staffing and capacity. If you say "we receive about 10 shipments per month" and do not mention they all arrive on Monday mornings, the 3PL will underbid capacity. **How to measure:** - Count shipments for 4 weeks - Log box count per shipment - Note arrival day/time - Calculate average and range **Red flag:** All shipments arrive at the same time (bottleneck). Spread them out so 3PL can receive throughout the week. --- ### Audit Element 2: Format and Unitization **What to measure:** - What % of shipments are palletized? - What % are floor-loaded? - What % are mixed (some pallets, some loose)? - Are pallets wrapped and labeled? - Are boxes labeled individually? **Why it matters:** As covered in a previous blog, pallet vs. floor-loaded dramatically affects receiving cost. If you are floor-loading now and do not realize the cost, you will not know what improvement to ask for. **How to measure:** - Track format for each shipment for 4 weeks - Note if pallets are wrapped - Note if boxes are labeled - Calculate percentages **Red flag:** Most shipments are floor-loaded. This is expensive and should be a priority improvement. --- ### Audit Element 3: Receiving Time and Labor **What to measure:** - How long does it take to receive each shipment? - How many people does it require? - What is the bottleneck? - Is there downtime or waiting? **Why it matters:** If you are doing receiving in-house, you can calculate labor cost. This becomes your benchmark. A 3PL charging significantly more is expensive. A 3PL charging less might be rushing the process. **How to measure:** - Time a few shipments end-to-end - Count staff involved - Note any delays or issues - Calculate hours per shipment and cost **Red flag:** Receiving takes longer than it should (> 2-3 hours for a typical shipment). There is inefficiency you should improve before moving to a 3PL. --- ### Audit Element 4: Receiving Workflow **What to measure:** - What are the steps in your receiving process? - Where are the bottlenecks? - Is there a system, or is it ad-hoc? - Is receiving documented (process, QC, bin assignments)? **Why it matters:** Your receiving process tells you about your operation's maturity. A 3PL will inherit your processes (for better or worse). If you have ad-hoc receiving with no QC, you will get the same from a 3PL unless you intentionally change it. **How to measure:** - Document current steps: unload → scan → QC → bin assignment → storage - Note where each step happens - Note who does what - Identify what goes wrong **Example of poor workflow:** Unload → Pile boxes on floor → Eventually scan → Put in bins (if remembered) → Sometimes QC This is chaotic. A 3PL will inherit this chaos. **Example of good workflow:** Unload → Immediate scan to system → Visual QC against manifest → Assigned to bin → Moved to storage → Tracked in system This is systematic. A 3PL can maintain this. --- ### Audit Element 5: Accuracy and Issues **What to measure:** - How often are there discrepancies between shipment manifest and actual contents? - How often are boxes damaged on arrival? - How often are items lost during receiving? - What are the common issues? **Why it matters:** If you have accuracy problems in receiving, a 3PL will likely have the same problems (unless you change the process). Understanding your baseline helps you know if a 3PL is actually improving things or just shifting the problems. **How to measure:** - Track discrepancies for 4 weeks - Log what the discrepancy was (missing items, extra items, damage, wrong items) - Note the root cause (supplier error, receiving error, damage in transit) - Calculate error rate **Red flag:** High error rate (>5% of shipments). This is a process problem you need to solve before or during 3PL transition. --- ### Audit Element 6: Current Costs **What to measure:** - If you have in-house receiving, what is the labor cost? - If you are using a 3PL now, what are you paying for receiving? - What are your storage costs? - What is your total inbound cost? **Why it matters:** This is your benchmark. When you get 3PL quotes, you can compare: "We are currently paying $X for receiving. You are quoting $Y. Is that more or less? Why?" **How to calculate:** If in-house: - Calculate staff time on receiving × hourly wage - Add equipment costs (pallet jacks, scanners, etc.) - Add any other receiving expenses - Divide by number of shipments or units received - That is your current cost If using a 3PL currently: - Look at your invoice - Extract receiving line item (if itemized) or estimate as % of total - Compare across months - Understand what drives cost up/down **Red flag:** You do not know what you are currently paying. This means you have no baseline to negotiate with. --- ### Audit Element 7: Pain Points and Inefficiencies **What to measure:** - What is most frustrating about your current receiving? - What slows you down? - What causes errors? - What would improve your operation? **Why it matters:** Understanding your pain points tells you what to prioritize in a 3PL. If your biggest pain is variability in delivery times, you need a 3PL with flexible receiving hours. If your pain is inaccuracy, you need strong QC. If your pain is high labor cost, you need efficient processes. **How to identify:** - Ask your team what is hardest about receiving - Observe the process and note friction points - Track what problems repeat - Ask: "What would make this easier?" **Common pain points:** - Receiving backlog (shipments pile up, cannot process fast enough) - Inaccurate inventory (counts do not match system) - Damaged inventory (boxes arrive damaged, products broken) - Slow turnaround (takes days to get received inventory into stock) - High labor cost (too many people needed, inefficient process) - Variability (never know when shipments will arrive or what format) --- ## The Receiving Audit Checklist Use this checklist to conduct a basic receiving audit: ### Volume & Frequency - [ ] Average shipments per month: ___ - [ ] Average boxes per shipment: ___ - [ ] Peak shipping day(s): ___ - [ ] Variability (low/medium/high): ___ ### Format & Unitization - [ ] % palletized: ___ - [ ] % floor-loaded: ___ - [ ] % mixed: ___ - [ ] Are pallets wrapped? Yes/No - [ ] Are boxes labeled? Yes/No ### Labor & Time - [ ] Average time per shipment: ___ hours - [ ] People required per shipment: ___ - [ ] Estimated labor cost per shipment: $___ - [ ] Monthly receiving labor cost: $___ ### Workflow - [ ] Process is documented: Yes/No - [ ] Process is systematic or ad-hoc: ___ - [ ] QC is performed: Yes/No - [ ] Receiving is tracked in system: Yes/No ### Accuracy - [ ] Average discrepancy rate: ___% - [ ] Most common issues: ___ - [ ] Average loss/damage rate: ___% ### Current Cost - [ ] Monthly receiving cost: $___ - [ ] Cost per shipment: $___ - [ ] Cost per unit: $___ ### Pain Points - [ ] Top 3 pain points: 1. ___ 2. ___ 3. ___ - [ ] What would improve receiving the most: ___ --- ## How the Audit Improves Your RFP Once you have baseline data, here is how it helps: ### Benefit 1: Accurate Communication **Before audit:** You to 3PL: "We receive inventory from our suppliers." 3PL: "How much? How often? What format?" You: "Uh... varies? Maybe 5-10 shipments per month? Mix of stuff?" 3PL quotes conservatively and overestimates receiving cost. **After audit:** You to 3PL: "We receive 8 shipments per month, averaging 350 boxes per shipment. 60% are palletized, 40% are floor-loaded. Shipments arrive Mondays and Thursdays, typically 1-2 per day." 3PL can quote accurately based on real data. --- ### Benefit 2: Benchmark Comparison **Before audit:** You get a quote for $300/month receiving cost. Is that good? You have no idea. **After audit:** You know your current receiving costs you $800/month in labor. A 3PL quote of $300/month is a 62% savings. That is meaningful. Or: You know it costs $800/month. A 3PL quotes $1,200/month. That is more expensive. You can push back. --- ### Benefit 3: Identify Improvement Opportunities **Before audit:** You assume 3PLs all do receiving the same way. **After audit:** You know your receiving is 40% floor-loaded and takes 2.5 hours per shipment. You identify this as a problem. In your RFP, you specify: "We want to transition to 100% palletized shipments to reduce receiving cost." A 3PL can now quote lower because you have committed to better inbound format. --- ### Benefit 4: Spot Red Flags in Quotes **Before audit:** 3PL quotes $250/month receiving. You do not know if that is real or if they are hiding cost. **After audit:** You know your average shipment takes 2 hours to receive with 1.5 people. That is ~30 minutes per person-hour. At $25/hour, that is $12-15 per shipment. 8 shipments/month × $14 = ~$112/month. A 3PL quoting $250/month is either less efficient, or has higher labor costs, or is including something else. You can ask why. --- ### Benefit 5: Set Realistic Expectations **Before audit:** You assume a 3PL can instantly receive your inventory and have it ready to ship within hours. **After audit:** You know receiving takes time. You understand the steps, the labor, the throughput. You can now negotiate realistic SLAs: "Receiving and availability for pick within 24 hours of arrival" is reasonable. "Instant receiving" is not. --- ## Red Flags in Your Own Receiving While you are auditing, watch for red flags that signal bigger problems: ### Red Flag #1: Receiving Backlog **What it looks like:** Shipments arrive faster than you can process them. Boxes pile up. It takes days to get inventory into the system and ready to pick. **Why it is a problem:** A 3PL will inherit this problem. You need better processes or more capacity. **What to do:** Before moving to a 3PL, improve receiving throughput. Add staff, improve workflow, or consolidate shipments to reduce frequency. --- ### Red Flag #2: No Receiving Process Documentation **What it looks like:** There is no written process. Everyone does it their own way. New hires have to figure it out by watching others. **Why it is a problem:** You cannot communicate to a 3PL what you want them to do. A 3PL will create their own process, which might not match your needs. **What to do:** Document your receiving process before talking to 3PLs. Then you can specify to the 3PL: "Here is our process. Can you do it this way?" --- ### Red Flag #3: High Discrepancy Rate **What it looks like:** >5% of shipments have discrepancies. Missing items, wrong items, damaged goods, unexplained loss. **Why it is a problem:** A 3PL will not fix this. If your suppliers ship poorly or your process is flawed, a 3PL inherits the problem. **What to do:** Fix your supplier quality or QC process before moving to a 3PL. Then the 3PL can maintain good accuracy rather than inherit poor accuracy. --- ### Red Flag #4: Receiving Is Not Tracked **What it looks like:** No system for logging when shipments arrive, what they contain, when they go into inventory. Receiving is manual and off-the-books. **Why it is a problem:** A 3PL needs system-level tracking to manage inventory. If you do not have it now, they will implement it (good). But if you do have it and are not using it, you signal poor operational maturity. **What to do:** Start tracking receiving systematically. Implement a system or process to log arrivals and status. --- ### Red Flag #5: Receiving Happens Whenever, Not Scheduled **What it looks like:** Shipments arrive randomly throughout the week and month. No pattern. No dedicated receiving time or staff. **Why it is a problem:** A 3PL needs predictability to plan staffing. If your inbound is chaotic, it is hard for them to serve you efficiently. **What to do:** Request suppliers ship on specific days/times. Create a receiving schedule. Make receiving a planned activity, not a random event. --- ## What to Do With Audit Data Once you have completed the audit: ### Step 1: Organize Data Into a One-Page Summary **Template:** "Our Receiving Profile: **Volume:** 8 shipments/month, 350 boxes/shipment, range 200-500 boxes **Format:** 60% palletized, 40% floor-loaded **Schedule:** Mondays and Thursdays, 1-2 per day, typically 8am-12pm **Time:** Average 2.5 hours per shipment, 1.5 staff **Current Cost:** $800/month (in-house labor) + $200/month (equipment/systems) = $1,000/month **Accuracy:** 4% discrepancy rate, mostly supplier errors **Pain Points:** Floor-loaded shipments are slow, labor-intensive, inconsistent formatting from suppliers **Improvement Opportunity:** Transition to 100% palletized shipments, reduce receiving time by 40%" --- ### Step 2: Use This in Your RFP Include your receiving profile in the RFP: "Our receiving profile is attached. Based on this: 1. What is your estimated monthly receiving cost? 2. Could we reduce cost by transitioning to palletized shipments? 3. What SLA do you recommend for receiving time (manifest to availability for pick)? 4. How would you reduce our current discrepancy rate (currently 4%)? 5. Can you handle variable shipment sizes (200-500 boxes) within your standard receiving process?" --- ### Step 3: Use This to Benchmark Quotes When you get quotes back, calculate: "We currently pay $1,000/month for receiving. You quote $[X]. That is [Y]% [more/less]. Why?" This drives real conversation about value. --- ## Timeline: When to Audit Relative to RFP **Ideal timeline:** - **Week 1-2:** Audit your receiving process (gather data, document findings) - **Week 3:** Finalize RFP questions (informed by audit data) - **Week 4:** Send RFP out to 3PLs - **Week 5-6:** Receive quotes (can benchmark against your baseline) - **Week 7-8:** Evaluate and negotiate (using audit data as reference point) Ideally, audit takes 2 weeks and RFP takes another 2-3 weeks. Total: 4-5 weeks from start to having comparable quotes. --- ## The Cost of Not Auditing If you skip the audit: **Risk 1: Inaccurate Quotes** You cannot communicate your operation clearly. 3PLs quote based on assumptions. Quotes are not comparable. **Risk 2: No Benchmark** You have no way to know if 3PL pricing is good or expensive. You choose based on gut feel. **Risk 3: Hidden Costs** After you sign, you discover hidden costs (high accessorials, receiving surcharges, etc.) because you did not ask the right questions. **Risk 4: Missed Improvements** You do not identify obvious improvements (like switching to palletized shipments) that could significantly reduce cost. **Risk 5: Unrealistic Expectations** You expect the 3PL to fix operational issues you did not understand were your responsibility. **Total cost:** Overpaying by 10-30% on fulfillment, or signing with the wrong provider and having to switch. --- ## The Bottom Line: Audit First, RFP Second Most brands do the opposite: they send RFP first, then figure out what they need. But the better approach is: understand your own operation first, then communicate that clearly to 3PLs, then evaluate quotes against your baseline. An audit does not have to be elaborate. It can be simple: - Observe receiving for a week - Log shipments and timing - Calculate labor cost - Identify pain points - Document the process This takes 2-3 hours of observation and 1-2 hours of analysis. Total: 4-5 hours of work. That investment saves you months of regret and thousands of dollars in overpayment.