The bar has been raised on logistics performance. Retail customers want perfect orders (expect a fine if they’re not perfect), and they want them faster and delivered within tighter and tighter time windows.
As a logistics manager, the spotlight is shining brighter on you and, by extension, your logistics service providers (3PLs). You want and need your 3PLs to be great. But, ironically, achieving that result may have as much to do with how hard and how smart you work, as your 3PL.
Here are 5 things you can do to elicit greatness from your logistics service provider. To learn more, download our full eBook: The Ultimate Guide to Being a Great 3PL Customer.
1. Assign the appropriate resources to manage the relationship
Doing the work of logistics requires skill. Managing the work of logistics requires skill.
Those two skill sets are not the same.
While outsourcing logistics relieves you of the daily burden of warehousing and transportation tasks, it adds a new and very different set of management requirements. Studies have show that the top reason outsourcing projects don’t work is a failure, on the part of the outsourcing company, to put in place adequate resources to manage the relationship.
It’s one of the reasons larger companies have introduced positions like “3PL Relationship Manager,” that never existed before. Management-type skills that this role requires include:
- Communication. Strategies and priorities change all the time, and that information needs to be relayed clearly and understandably.
- Planning and organization. Goal setting and managing to deadlines is an important capability. In some cases, such tasks may involve working with a skilled project manager on the 3PL side on what needs to be done, by when, and by whom.
- Analytical skills. Shipper and 3PL teams need to collaborate to set and monitor KPIs to identify problems and opportunities.
When it comes to managing relationships with logistics service partners, make sure someone is assigned to the role as a significant part of their job.
2. Define a cadence for regular communication
Outsourced logistics execution is a not a “set it and forget it” thing. Regular communication is essential to sync up activities with changing priorities. Agree with your 3PL on the right cadence for such meetings (daily, weekly, monthly) and then stick to that schedule.
Regular meetings can be used to address requirements for forecasted order volumes, special projects and other day-to-day issues. But we suggest periodic strategic reviews. These are meetings where you leave today’s fires behind and focus ONLY on big picture issues – the state of your business, logistics strategies to support business priorities, and the overall state of the relationship.
There is one Shipper-3PL relationship model that makes the issue of meeting timetables moot. In an embedded logistics outsourcing model, a 3PL resource is officed at the customer location and functions as a seamless part of that customer’s supply chain organization.
3. Identify and measure the most important KPIs
You can’t manage what you can’t measure, so a good Key Performance Indicator (KPI) dashboard is essential when managing your logistics service provider’s performance. But just because something can be measured doesn’t mean that it should be measured. After all, you want your 3PL to be a performance machine, not a report-generating machine.
Most of the operational metrics that matter can be calculated within the WMS or TMS systems, so that eases the time burden of metrics reporting. But as to which metrics deserve careful analysis, businesses should remember that the first letter in KPI refers to “key.” Decide on the key metrics that impact revenue gains, productivity gains, customer service gains or other important business results. Then build a shared commitment, at every level of your organization and the 3PL’s team, to positively influence these numbers.
4. Share long-term business strategies
Some outsourcing companies continue to micro-manage partners, assuming this extreme level of oversight will result in the best performance at the lowest price. They make up for a perceived loss of control by trying to exert mega-control over the daily details of the operation. Ironically, far more value is delivered when shippers let go a little and treat their logistics service providers as strategic partners.
Part of this involves sharing long-term business plans and priorities. At the start of a relationship, shippers may be reticent to share what they consider sensitive competitive information. But as trust develops, it’s wise to bring your 3PL partner into the tent.
The best 3PLs are problem solvers who want to make a material difference for their customers. Having intelligence about where that customer wants to take its business is empowering and provides the context needed to suggest innovative solutions.
Remember that most logistics services companies have experience across a wide range of customers and a wide range of logistics challenges. You want to leverage their experience, and their creativity, to help you solve your biggest competitive challenges. That doesn’t happen if the relationship and communications are focused solely on the execution of daily, tactical requirements.
5. Collaborate with your 3PL on important improvement initiatives
Let’s say two traditional brick and mortar retailers are at a similar competitive crossroads. Amazon and other online sellers have poached a good portion of their sales and profits and each company needs to revamp its omni-channel fulfillment strategy to stem the tide. Company A invites its 3PL partners (the people who ship the products) to a multi-day summit meeting to discuss potential strategies. Company B’s logistics team holds a similar multi-day meeting, but without its 3PL partners. The company simply sends those 3PLs the post-meeting action register.
Which approach do you think would lead to a better outcome?
Getting great performance from your logistics service provider
Outsourced logistics is largely an execution business. Partners must be able to accurately and efficiently pick, pack and ship orders. That’s the price of poker in the 3PL industry.
But what are the things that turn the 3PL’s team from execution robots into continuous improvement ninjas – a team that thinks acts like an extension of your organization?
The 3PL’s own culture is a huge part of this. Make sure you’re aligned with partners that know enough, and care enough, to do it right the first time – and then come back the next day and try to do it just a little bit better.
Getting maximum value from logistics service providers also comes down to people like you, on the shipper side, who manage the relationships. Have you created an environment where 3PLs have the detailed knowledge of your business to guide their actions…where the 3PL’s team feels like its contributions are valued…and where people have the freedom to explore innovative approaches that drive breakthrough performance?
Creating such an environment takes time and hard work, on both the client and 3PL side. This effort isn’t described in any outsourcing contract. But it’s where greatness is found.