3: Assess LSP market

1. Understand LSP Types

Different LSPs offer various services and have different strengths. Understanding the type of LSPs available and what they specialize in helps in identifying the right fit for your needs. Consider the following types of LSPs:

• 1PL: Refers to organizations that handle their logistics in-house, managing transportation, warehousing, and distribution using their own resources and assets

• 2PL: 2PLs typically offer specific logistics services (e.g., managing transportation networks, providing shipping solutions, storing goods in warehouses, and basic inventory management) to clients using their own assets

• 3PL: 3PLs offer a more comprehensive range of logistics services compared to 2PLs. They handle various logistics functions, including warehousing, transportation, inventory management, order fulfillment, reverse logistics, and possible value-added services like packaging and labeling

• LLP: Asset-owning companies that manage full-scope logistics services by coordinating multiple LSPs, including themselves

• 4PL: Providers that manage resources, technology, infrastructure, and coordinate external 3PLs to design and run integrated supply chain solutions

Practical considerations: 3PLs can provide comprehensive logistics solutions, including reverse logistics and value-added services like packaging, while 4PLs offer strategic oversight and manage other LSPs. For example, a 4PL might be the best choice if your logistics strategy requires coordinating multiple providers across a complex supply chain, such as a national distribution network. Knowing these distinctions helps you choose a provider that aligns with your logistics strategy and specific requirements.

2. Identify potential LSPs

Start identifying potential LSPs that can meet your logistics needs. This includes looking at both local and international providers who operate within your geographic scope. It is crucial to understand the market landscape and identify LSPs that have experience in managing logistics for similar organizations or sectors, particularly in public health supply chains. Conduct thorough market research to gather relevant data on potential LSPs. Use a combination of approaches, such as:

• Past responses: Review past outsourcing responses and/or partnerships with LSPs, examining their performance and lessons learned to identify potential matches

• Desk study: Conduct research on LSPs using online search engines, logistics industry reports, or more advanced AI-enabled supplier discovery solutions

• Interview colleague organizations: Speak with organizations with similar logistics needs, such as local health ministries or non-governmental organizations, for insights into the LSP market

• Interview private sector entities: Engage with industries reliant on (partly) outsourced logistics services to understand how LSPs can adapt to complex supply chains

• Industry day: Organize an event for direct interaction between potential LSPs and your organization

• Share a Request for Information (RFI): Depending on the sourcing approach you use (see more details in Step 6), you can decide to issue an RFI to gather general information on potential LSPs’ capabilities and services. This is particularly useful for new or lesser-known LSPs

Ensure that the assessment approach, or a combination of approaches, aligns with the size, scope, and complexity of your logistics needs. Below are examples that can guide this process:

• Rural health distribution: Consult local non-governmental organizations for insights into LSPs capable of managing logistics in challenging terrains

• Distribution to urban hospitals: A desk study might reveal LSPs with advanced technological capabilities for efficient inventory management and optimized routes

• Outsourcing a nationwide distribution network: Consider combining approaches, such as RFIs and industry days, to gather a comprehensive understanding of potential LSPs

• Outsourcing a nationwide immunization program: Engage with LSPs experienced in cold chain management, ensuring vaccines are stored and transported at the appropriate temperatures

3. Evaluate LSPs & set shortlist

After identifying potential LSPs and gathering initial information, assess their capabilities against your specific logistics needs. The assessment will result in a shortlist of LSPs that can potentially meet your logistics needs. Key evaluation criteria include:

• Service Capabilities: Can the LSP provide the range and quality of services required?

• Geographic Reach: Does the LSP operate in all required areas, including remote or hard-to-reach locations?

• Technological Capabilities: Does the LSP have the technology needed for efficient logistics management (e.g., real-time tracking, data analytics)?

• Compliance and Risk Management: Does the LSP comply with all relevant regulations, particularly in handling sensitive health products, and have robust risk management practices?

• Past Performance: If possible, review LSPs' performance in previous contracts, particularly in health supply chains, to assess reliability and service quality. For example, an LSP managing cold chain logistics for vaccines can demonstrate their ability to maintain temperature-sensitive environments