Inside Logistics

The value of relationships: What to consider when dealing with 3PLs

Learning curve


March 3, 2011
by Tracy Clayson

MM&D MAGAZINE, JANUARY/FEBRUARY 2011:

Third-party logistics (3PL) providers continue their huge presence in the supply chain world this year, as they work to build specialized global networks that meet the range of markets in the manufacturing sector.

Companies need a large amount of trust—as well as a great deal of control—if they plan to rely on outsourced solutions. When doing business with a 3PL, companies must consider the risk of revenue loss due to supply chain mishaps, as well as rising costs as they work to tap new markets for sourcing, distribution and demand.

Shippers are finding many challenges related to 3PL management, starting with selection. The RFP process is important in the early stages of the relationship between shippers, suppliers and logistics service providers. The importance of a working agreement is not just setting the framework for the operational process, but as information that can find its way into a courtroom if the service failures and claims grow beyond acceptable levels. The bid process requires expectations to be outlined with clear guidelines, as well as open communication between procurement and supplier groups.

Companies regularly review practices in 3PL management and seek to develop better relationships with 3PL providers. Usually, these efforts are driven by problems somewhere along the supply chain. Some companies have narrowed the selection of suppliers to make sure the process goes smoothly and to reduce the risks that come when too many parties get involved. Shippers are also sourcing providers that specialize in each market area, as these providers bring a wealth of knowledge and experience in their areas.

Successful partnerships with 3PLs may involve more interaction between client and supplier, where the supplier’s expertise is used in more of a consulting role. By jointly developing a model of the requirements, both the shipper and supplier have a vested interest in succeeding. They also have—right from the start—more shared knowledge of the expectations and challenges their involvement in the process will require.

The ongoing assessment of the working arrangement with the 3PL requires consistent and integrated performance reporting. Both sides must provide feedback through structured, scheduled meetings and through dialogue on daily issues. Reports and score cards can be burdensome, but there’s a need to ensure the 3PL is meeting goals on service expectations, and that appropriate measurement tools are being used.

Even with the serious hit the economy has taken in recent years, the supply chain field still faces a troubling talent shortage. Human capital remains a key competitive advantage and landing top performers in all areas of logistics requires a good internal recruiting team, as well as help from experts in the talent search.

From financial control, market position, IT advancement, space optimization and seamless movement of materials, each component of the business requires a suite of experts and a team of top players to keep businesses thriving and growing.

The talent search is only part of the requirement. Companies need to continuously invest and engage the supply chain talent. Determining retention risks should certainly remain a top priority for any company looking to stay ahead. Supply chain professionals need to be challenged and rewarded for their innovations, dedication and efforts. Bear in mind, job satisfaction and commitment are driven by management and company culture.

Like many industries, logistics experts are in contact with a large pool of clients, suppliers, competitors and colleagues. They can therefore easily access leads on professional opportunities and employment offers. The wealth of networking opportunities in the supply chain has intensified through social networking pages like LinkedIn, along with blogs, podcasts, web postings, association job boards and other recruiting tools.

Companies that train and develop their teams, expand their technology use, provide efficiencies for workplace mobility and communication and offer access to higher learning are helping to enrich their workplaces.

When working with third-party recruiters, companies should supply them with the same orientation and training material employees see. A critical step in avoiding low performance and hire failures is to address any information disconnect between user and provider in search, selection, employment offer and position outlines.

Tracy Clayson (tracy@in-transit.com) is managing partner, business development, of Mississauga, Ontario-based In Transit Personnel.