In logistics outsourcing, how close should you be with your third party logistics provider (3PL)? How much information should you share? The answers to these questions say a lot about your attitude toward outsourcing.
Let’s look at two professionals who provide outsourced services of a sort: a financial advisor and a bank teller. If you use a financial advisor, it’s likely that you are willing to spend considerable time meeting with her, answering questions, and exploring your financial objectives. Your rationale: the more she knows about your situation, the better position she will be in to help you build wealth.
A bank teller, on the other hand, will command less of your time. It is a transactional relationship involving regular deposits and withdrawals. And, if you choose, you could completely automate these transactions and avoid any contact with the teller.
Banks often ask deeper questions about your financial situation to determine if you are a prospect for the bank’s own advisory services. But few customers offer up this information. They just want their bank to efficiently manage the checking and savings accounts without a hitch.
Investing Time in Outsourcing Relationships Can Have a Huge Upside
The main difference between these two relationships is the UPSIDE. It’s huge with a financial advisor but it’s limited with the teller, who performs tactical money management tasks.
Shippers who view their logistics outsourcing relationships as strategic invest time to deepen these relationships. Discussions go beyond day-to-day operations to include sharing of business strategies and future plans. Shippers actively solicit the 3PL’s ideas on how the company’s supply chain needs to evolve.
Other shippers view their 3PL relationships as more tactical. Discussions tend to focus solely on an examination of performance metrics and how to fix problem areas and improve existing processes.
This creates a dilemma. Research with 3PL users clearly indicates that they want innovative ideas from their providers. But unless the 3PL becomes more integrated with the shipper’s supply chain team, they will lack the context to bring new thinking to the table.
Logistics Outsourcing: The Embedded 3PL
The ultimate antidote to the above dilemma is to embed a member of the 3PL’s team inside your organization. We write about it in our viewpoint paper, “Managing Logistics Outsourcing Relationships.” In this model, the 3PL resource resides on site at the shipper’s offices and works as a seamless extension of the logistics/supply chain department.
There is a parallel here between the financial advisor and the embedded 3PL. OK, you’re not going to clean out the spare bedroom so you’re financial advisor can move in, but the rationale for building closer relationships with the two are the same. There is a huge upside to a close partnership since both financial advisor and 3PL can turn a small investment of your time into ideas that can have a significant financial return.
How would you describe your logistics outsourcing relationships? Are you overseeing tactical relationships that focus on day-to-day performance only? Or, are you investing time to give the 3PL the data and the context they need to suggest changes and drive breakthrough thinking?