Increasing Roles for 3PLs

3PL wire featured a great article in Global Services magazine entitled What Can Logistics Do For You? which discusses the increased roles that third party logistics providers are taking on in company's supply chains.

New roles 3PLs have ventured into include:

• asset recovery and recycling management
• field-tech support
• on-site repairs
• preventative maintenance
• returns and repairs management
• service parts logistics
• reverse logistics
• after market services
  

Logistics and Warehousing in the Media

This is a quote from a recent article by Hiawatha Bray a Reporter for The Boston Globe

"Don't bother me with a pitch for a story that would never, ever appear in the Boston Globe. This is a newspaper, not a technical trade rag. Your hot new breakthrough in supply chain management may wow them at the next convention of the International Warehouse Logistics Association, but the readers of the Boston Globe won't give a rip. So keep it to yourself, okay?"

Looking at this statement I wonder why supply chain management and warehousing are not given more mainstream business news coverage. Third Party Logistics services are those which can be and are utilized by just about any company producing products or raw materials.

Maybe news releases on innovations in the storing and trucking of goods is not as exciting as the latest PR blitz by Google offering some new service that only a small percentage of the population will actually use, but if it is not already, logistics should be considered of vital importance to the business community.

Logistics and Supply chain management are not some fad. They are necessary business processes. But maybe the reason I'm writing this is because this site is an "online technical trade rag."

Third Party Logistics Contracts

According to an interview I recently came across with Rob O’ Byrne at the Logistics Bureau, many companies are dissatisfied with their Third Party Logistics (3PL) provider.

Robs mentions that the majority of companies that have used his consulting services over the last ten years, feel that their providers “don’t understand them, and don’t respond to their needs.” Typically when he starts working with them they have had it with their 3PL and are looking for assistance in moving on to a new relationship. While this is an option, it is also worth working to rebuild and re-evaluate the relationship with your existing provider.

Open communication will always be one of the most important things to maintaining a third party logistics contract. This is something that needs to be worked on by both parties.

Rob mentioned that 90% of cases where 3PL contracts are underperforming it is not always solely the logistics providers fault. Many times logistics contracts are awarded without taking the proper steps to understand the details of the logistics program.

One of the biggest problems that typically happen in 3PL relationships is that companies provide inaccurate information regarding their programs and in return the Logistics provider doesn’t budget accurate resources.

Logistics Services are quoted using very strict criteria, and it is essential for 3PL’s to have accurate inventory information to bid on. When data supplied during the RFP process turns out to be inaccurate or understated, this is typically when problems arise, but this is also the time when open communication helps the most.

Logistics companies by their very design exist to provide flexible services. Inventory fluctuates and 3PLs are ready to react. But when the program completely deviates from how it was initially quoted, the contract needs to be revisited or the relationship has a chance of deteriorating very quickly.

According to the Logistics Bureau there are six key areas to focus on when evaluating a failing 3PL contract.

“1. Commercial arrangements - firstly, how is the contract resourced and costed? And secondly, what pricing mechanism is in place to ensure cost visibility as well as incentives for operational improvement.

2. Contractual arrangements - are the expectations of the customer clearly articulated in the contract, along with appropriate Key Performances Indicators (KPIs)? Does the contract term fairly reflect the required investment and commitment? What are the business risks involved in termination?

3. Service and cost performance - what has been the real performance of the contract, when compared to expectation? What has contributed to under performance?

4. 3PL processes - is the 3PL adopting appropriate processes in fulfilling the contract? Can these be jointly improved?

5. IT systems - are there IT issues that impact the performance of the contract and are there some easy fixes that can be employed?

6. The customer/3L relationship - at both the operational and account management level are there issues with the relationship? These might be due to a mismatch of culture, or more often due to individual clashes.”

Links:
Third Party Warehousing Contracts
Logistics Bureau

Selecting a 3PL

Today I've decided to compile a few 3pl whitepapers for people that are just starting to research the possibility of outsourcing their company's logistics to a third party provider.

All three whitepapers are direct links to the PDFs and do not require you to provide any contact information. Personally that is the thing I have always hated about white papers. If you are just beginning to look into 3PL outsourcing, you typically just want to get ahold of some quality information on logistics outsourcing before you actually start talking to sales reps.

Whitepapers such as these are an excellent way to "do your homework" so that you can go into the discovery process with a better understanding of third party logistics companies and their business processes.

3PL Selection and Implementation
This is a great overview on both selecting and implementing a 3PL provider provided by Capacity LLC.

"Outsourcing logistics functions to 3PLs has been a source of competitive advantage for most companies. Most companies cite greater flexibility, operational efficiency, improved customer service levels, and a better focus on their core businesses as part of the advantages of engaging the services of 3PLs."
Read 3PL selection and Implementation

Selection Factors in Logistics Outsourcing - A View from Third-Party Logistics Customers
This is a great report provided by the past president of the International Warehousing Logistics Association.

"Logistics and supply chain management have often
been among the first functions to be outsourced.
This has moved beyond the warehousing and
trucking functions and spread to ancillary services
such as light assembly. However, once a
manufacturer or retailer makes the business decision
to outsource its logistics function, what are the
primary factors that influence its choice of thirdparty
logistics (3PL) provider? Is it price, service,
location or technology?"
Read Selection Factors in Logistics Outsourcing

The Business Virtues of 3PLs
How Third Party Logistics Providers Pass Value Down the Supply Chain
A helpful 3PL Whitepaper provided by Maritz

"Third Party Logistics Providers (3PLs) are focused on
fulfillment and nothing else. They manage inventory, ship
it, and attend to all service functions accompanying both.
Any 3PL worth its salt will be equipped with an arsenal of
cutting edge fulfillment technologies. It will also employ
proven methodologies and demonstrate a broad range of
skills acquired as a result of spending years on the job.
Great 3PLs are managed by fulfillment experts and staffed
by professionals well trained in the art and practice of
getting product out the door. To customers, the service
assets possessed by 3PLs translate to far greater efficiency
and cost savings. For the people at the opposite end of the
supply chain, clients, consumers, and end-users, the song
remains the same."
Read The Business Virtues of 3PLs