Defining the connection between a 3PL and a shipper is nearly impossible, as each one is unique. Some are short and transactional in nature. Others are long-term
arrangements between highly integrated organizations.
It’s much easier to point out characteristics common to strong, healthy relationships and the warning signs indicative of failure. Communication is the key indicator.
“Everybody says they’re good at communication, but not everybody is,” says Tim Boyce, chief marketing officer of Mississauga, Ontario-based Wheels Group Inc.
Boyce says both parties need to understand what is expected right from the start.
“Tell me what you need and how you want it.”
Guy Toksoy, vice-president and general manager of supply chain solutions for Ryder Canada, says understanding can’t occur unless the fundamentals of the relationship are defined.
“You need a definition of the goals and the metrics wrapped around those goals—measurable outcomes, timelines and penalties. You have to have a common understanding of what is defined as a success, but it’s not enough just to define it. You have to expect both sides’ teams to be accountable to achieving success.”
Not only do metrics need to be established, both parties need to ensure the data flow, used to determine success or failure, is reliable.
“Information flow is the most important criteria—two-way information flow—accuracy of data and timeliness of data or information. Knowing about changes in their supply chain ahead of the time makes it easier for us to adapt and manage to” says Andrew Kirkpatrick, director of sales and marketing with Mississauga, Ontario-based Sherway Group. “EDI and automation of information and dataflow obviously help because there is less human intervention and potential keying errors.”
It’s also important to keep in mind that there are often outside forces and additional parties involved in the relationship, which means that it’s not just about making data flow in two directions or having a two-way conversation, it’s about multi-directional co-operation.
Dan Einwechter, chair and CEO of Challenger Motor Freight Inc, in Cambridge, Ontario, says just because a shipper hires a 3PL, it doesn’t mean the 3PL will handle all the cargo movements. Often it will use trucking firms, adding an additional party to the relationship.
“There needs to be a level of understanding and appreciation for all parties to do their jobs profitably,” he said.
Part of the understanding is recognizing the realities of market conditions and working with partners in a way that acknowledges the challenges everybody faces.
“There is subtle and continuous growth,” he says. “I know the market will be tight for the year. Used truck prices have firmed up, so it will be a rather interesting year or two.”
Along with the shipper, the 3PL and the carrier, there is another player who has to be kept happy.
“A good relationship is where you are actually working together to satisfy the ultimate customer,” says Sandro Sagrati, director of key accounts at Mississauga, Ontario-based Schenker of Canada Ltd. “In many cases, shippers have been told to use freight forwarders or 3PLs by the ultimate customer and there is some resistance so it is a matter of working together with the shippers to satisfy the customer’s needs.”
Building a relationship and creating a sense of trust takes time and effort.
Einwechter suggests looking at “the financial strength, the integrity and the skill set of the people involved,” as a way of evaluating the other partner’s ability to deliver on promises.
Once the partnership has begun, Toksoy says it can’t be allowed to rest on its laurels.
“You need to remain engaged and remain invested in the outcome. And that needs to be driven from the top down,” he says. For example, he says Ryder uses a LEAN approach and a philosophy of continuous improvement to manage clients’ accounts.
Some relationships develop to the point where 3PL staff work on-site at the shipper’s business. Others sit in on planning meetings and offer their input on everything from constructing new DC facilities to better ways to ship new goods.
“Gaining visibility earlier leads to planning loads much more effectively by consolidating shipments and reducing costs for everybody, not just for customer but also the 3PL,” says Sagrati.
Of course not every relationship is meant to be. When supply chain relationships break down, usually there are often warning signs.
“Errors start happing,” says Kirkpatrick. “If you need to have a lot of dialogue, asking ‘why do we have errors’ that’s an indication things need to be changed.”
And when the communication stops, that’s when it’s really over.
“In the perfect situation, the customer tells you [why it’s over]. In the worst situation they go, and don’t tell you anything,” says Boyce.