If you are a food and beverage manufacturer and processor, you might have had the unfortunate experience of having little to no options for servicing your storage needs. What if there was a way to get a leg-up on warehouse providers? What if you were not limited by available existing facility options in your market? What if instead of taking whatever pallet space is available in an existing warehouse, or being stuck agreeing to a rate without a fixed term, you were able to dictate your own terms, location and economics for a warehouse supplier contract? In this installment of Farm to Frozen, we will dive deep into a strategy to help manufacturers and processors capitalize on the need for cold storage warehouse operators to have an anchor customer for new locations and learn about using a request for proposal (RFP) process to get warehouse operators to compete for your business.
Understanding the RFP Process
An RFP is simply a formal document that solicits proposals from potential suppliers, detailing the requirements and expectations for the services needed. It serves as a structured communication methodology between a manufacturer and potential suppliers, ensuring that all parties have a clear understanding of the scope and criteria of the project.
Cold storage warehouse operators, like any other business, are looking for ways to expand and grow, while minimizing risk to any extent possible. To do so, an ideal scenario for a cold storage warehouse operator is to open a new facility with a long-term contract, dedicated to a customer with extraordinary staying power. Second to that, a warehouse operator looks for anchor customer opportunities. Meaning that they have half or a majority of their facility utilized by a single customer preemptively, while leaving the balance of their space available for sale to speculative pallet customers. Having an anchor customer allows these public refrigerated warehouse (PRW) operators to expand to a new location to increase overall revenue, while removing the speculative sales risk associated with expansion.
As you read, keep these best practices in mind for a successful RFP:
- Engage stakeholders: Involve key team members from procurement, operations, logistics and quality assurance.
- Be transparent: Clearly communicate your scoring criteria.
- Stay consistent: Simplify the future comparisons of by creating a standardized response template.
- Manage timelines: Set realistic deadlines for submissions and evaluations.
- Seek innovation: Encourage suppliers to propose innovative solutions to enhance efficiency or reduce cost.
Step 1: Identifying the Need
As a manufacturer, the first step in a warehouse supplier RFP process is to identify the specific needs of your operation. This includes understanding the types of products you produce, the volume of goods that require storage and any special handling or temperature control requirements. Consider factors such as:
- Pallet counts and volumes.
- Inventory turnover rates.
- Shelf-life considerations.
- Regulatory compliance requirements.
- Desired location of the facility.
- Transportation between the warehouse and the plant.
- Current warehouse capabilities and limitations
- Technology requirements (WMS, automation, tracking solutions).
- Future scalability needs.
- Service level (delivery times, accuracy, reliability).
Step 2: Writing the RFP
Many supply chain professionals reading this are no strangers to RFPs, however I feel it is important to make note that constructing a clear and detailed RFP is crucial. It should include:
- Background information about your company and its products.
- Scope of services required, including storage, handling and distribution.
- Specifications for storage conditions, such as temperature and humidity controls.
- Volume and frequency of goods to be stored and shipped.
- Quality assurance measures and certifications required from the supplier.
- Budget constraints and pricing structure preferences.
- Location targets such as contiguous to the plant, or next to a strategic customer.
- Submission guidelines, including deadlines, formats and contact information.
- Evaluation criteria, such as cost, experience, technological capabilities and service levels.
- Timeline for the RFP process, including key dates.
- Confidentiality agreements or non-disclosure requirements.
- Supplier qualifications and experience requirements.
- Terms and conditions that will apply to the agreement.
- Contact information for queries or clarifications regarding the RFP.
Step 3: Distributing the RFP
Once the RFP is prepared, distribute it to a curated list of potential warehouse suppliers. These suppliers should have a proven record in handling food products and be capable of meeting your specific requirements. Look for ones with experience with your product type and your geographical focus.
You may be thinking now that most of what you have read so far is pretty generic. This is the part of the article where we depart from the conventional approach. Here is something you will only read in Refrigerated & Frozen Foods: It is one thing to get warehouses to respond to your RFP, but what if you can go one-step further? What if you combine developer incentives and layer that on top of the warehouse company’s desire to compete for your business?
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Put another way, manufacturers can further leverage the RFP process by engaging with a real estate developer to facilitate the RFP process to PRWs, not as suppliers, but as tenants. This way, a manufacturer can take advantage of the incentives and expertise that a developer spends their entire career sharpening. Firms such as ours (Yukon Real Estate Partners), specialize in working with end-user of cold storage to implement an RFP process that provides the manufacturer with every possible advantage to obtain the most desirable contract with a warehouse operator.
By collaborating with a developer, the manufacturer ensures that the project is delivered on time and on budget, as the developer has many incentives to do so. The alternative to a developer-led structure, a warehouse owner/operator, will likely not have a purpose-built in-house real estate development team. Without this specific expertise, an owner operator might struggle to ensure the project is fast-tracked and value engineered for the best possible outcomes.
Another benefit of a developer-led approach is that a developer is typically better connected to potential land sites for the new development. In a best-case scenario, the developer might already control or own a parcel that meets the desires of the manufacturer. However, even without existing ownership of land, a developer with the prowess for land site search, selection, due diligence and acquisition can often move swiftly and with better results than a warehouse owner/operator.
Yukon Real Estate Partners recently broke ground on a plant-attached warehouse for Upfield, which incorporated a developer driven RFP process. By dual tracking the RFP process and a land acquisition, Yukon and Upfield were able to expedite RFP responses. In partnership with Upfield, an RFP for pallet storage was issued to major warehouse operators by Yukon, while Yukon also secured greenfield land with direct proximity to Upfield’s New Century, Kansas plant. Respondents to the RFP benefited from clear and concise desires from Upfield, their future customer, while also having a clear picture of real estate and occupancy cost. With both sets of inputs, the RFP respondents were able to provide accurate estimates with more advantageous economic terms to Upfield for a service contract.
Step 4: Evaluating the Responses
- Upon receiving proposals, evaluate them based on predefined criteria such as:
- Supplier experience and reputation in the food industry.
- Facility location, capabilities and integration.
- Compliance with food safety regulations and certifications.
- Cost-effectiveness and value-added services offered.
- References and case studies from previous clients.
“As Upfield looked at finding the right solution, we assessed all of our short term and long term needs. It was important to have sufficient space for future growth, a solution with a good ESG/sustainability model, and of course a good financial proposition,” said Byron Alvarez, Upfield's director of North American Supply Chain. “Since the warehouse will be attached to the factory, it was important to select the right partner. In a traditional RFP, we may have completed the process in three months but because of the unique permanence of this project, we worked on this process over the course of a year fully ensuring we had the right design and objectives.”
If considering a developer-led RFP process, evaluating the supplier’s financial wherewithal is also an important analysis. Does this warehouse company have staying power? Another benefit of decoupling the warehouse developer/owner from the warehouse operator is that in the unfortunate event that the operator is unable to continue operating, the warehouse itself is under separate ownership. The real estate developer is able to re-lease the warehouse to another operator, creating a new opportunity for the manufacturer to negotiate a service contract. Making the best of the situation, and having a new warehouse contract with a new warehouse operator is a far better result than if the warehouse operator owned the building and was forced to sell the property in the event of not being able to continue operations. The latter scenario can result in an unknown future for the property, potentially preventing the future service availability for the manufacturer.
Step 5: Selecting the Right Supplier
When working through an RFP process, it may be necessary to incorporate multiple phases in order to filter down to the final winner of the RFP. After evaluating the first round of respondents, it is recommended to make a short-list of respondents for in-person presentations to the various stakeholders. Often, it is during these future phases that there is a greater cross-flow of information between the warehouser and the manufacturer. This iterative approach allows further refinement of economics and terms between the stakeholders, generating comprehensive proposals for manufacturer’s selection.
“A key component for us in developing an RFP response is to align on all phases of the solution's development lifecycle” said Gregg Gill, senior vice president of Marketing & Business Development at CJ Logistics. “This includes business requirements & profile, engineering design, and the operations model. By the time we get to pricing, all parties have achieved comprehensive alignment across each phase, eliminating any surprises in the proposal. This methodology has benefited us immensely and has led to enduring partnerships with leading food and CPG customers.”
CJ Logistics was awarded the supplier contract in Upfield’s recent warehouse services RFP in New Century, Kansas. After a thorough evaluation, select the supplier that most closely aligns with your desired criteria, while also heavily weighing which supplier will be the best long term partner.
“Ultimately, successful long-term partnerships are built on collaboration and trust," Gill said.
The chosen supplier should be a partner that contributes to the performance and growth of your food manufacturing business, not just the one that presents the best economics.
Conclusion
The beauty of an RFP process is that it typically does not require major capital expenditures on the part of the manufacturers. Instead, food manufacturers can take advantage of the need for suppliers to grow their business and solicit these same suppliers for solutions of any type, effectively free. Further, the issuance of an RFP does not necessarily obligate the manufacturer to pick any one solution, if any at all. By adding in a shrewd development partner with experience in the cold chain, the manufacturer can take advantage of even more expertise, along with an outsourced quarterback, again all for free.
This process is a strategic endeavor that requires attention to detail, clear communication, and a focus on long-term partnerships. Remember, the goal of the RFP process is not just to find a supplier but also to find the right supplier—one that aligns with your company’s values, quality standards, and operational goals. With the right approach, the RFP process can be a powerful tool in optimizing your supply chain and ensuring the integrity of your food products from production to plate.
