I’ve often heard that a Procurement or Logistics Director’s least favorite part of his or her job is 3PL selection. Why?
It’s simple; selecting the wrong 3PL can cause repercussions throughout the supply chain, ultimately leading to delays or outright failures in getting product into the hands of consumers, impacting sales and profits. It is your life line and one that many people depend on; stockholders, employees, their families, your customers, and their families. A broken link in your supply chain could cause loss of sales due to lack of trust and downtime, not to mention the effect it can have on your business' cash flow.This possibility of failure makes 3PL selection one of the most strategic (and scrutinized) decisions that these managers will ever have to make. Here are 6 C’s that can make the difference between a successful 3PL partnership and a need to go back to the drawing board.
A lot goes into 3PL selection and it’s easy to get caught up in the price for the service, but this is not where you want to focus all of your attention. If the provider does not have a successful track record as a 3PL partner, but they have the best price, your business will suffer in the end and you could end up paying more in the long run. When reviewing your options, instead of focusing solely on cost, pay attention to:
- Will the 3PL deliver positive value as compared to the services being provided?
- Do they have contingency and disaster recovery plans to keep product flowing toward your customers?
3PL providers have the space, technology, transportation, and staff in place which ultimately lowers your overhead costs; but is their current capacity enough? Adequate technical capacity is paramount in this day, it’s important that the 3PL provider will be able to meet any growing demands.
- Does the 3PL have capacity to handle my business?
- If not, do they have the balance sheet strength to make the investment and process to handle their deployment?
- Will a surge in sales volume crash the WMS?
Everyone loves doing business with companies that are convenient to work with. Take Amazon, from my phone I can order the simplest of items and have it delivered to my house in 2 days. I’m not sure how they can make it easier than that!
Same thing goes with finding a 3PL partner, communicating with them needs to be convenient. After all, they are a partner in your supply chain and should be viewed as a member of the management team as they play a part in achieving company and departmental goals.
- Is the 3PL responsive to my needs and easy to do business with, or will we be fighting through a bureaucratic nightmare to get things done?
- Are AR/AP functions well-designed and reporting needs transparent and accessible?
It’s important to clearly communicate with potential 3PLs the capabilities that are required to adhere to your processes. Be upfront about what it is that they need to accomplish for you and document KPIs. The 3PL provider needs to fit your needs and have the ability to help you reach your goals. Consider the following when selecting a 3PL partner:
- Does the 3PL have the capability to do what I need?
- Or, will I have to mold my processes around their capabilities?
- How flexible will they be?
The 3PL you choose should view your relationship as a partnership. Share your goals with them and find out how they plan to work with you to become more efficient operationally. Logistics is a service oriented business so check references and look for evidence of efficiency and reliability with past and current customers.
- Will the 3PL be committed to this partnership, or will I be ‘just another customer’?
- Will they be willing to grow where we need them to be, or will we have to grow where they are?
Your 3PL operations must run as efficiently as possible and it’s an ongoing process to document, test, and implement improvement. With a Continuous Improvement program in place, a 3PL is always looking for ways to reduce waste and operate more proficiently, which can have an impact on your bottom line.
- Does the 3PL have a formal Continuous Improvement program?
- Can they provide resourceful solutions to minimize waste in my supply chain, both in my operations and theirs?
It’s no wonder that 3PL selection can be a very stressful selection and integration process for the Procurement or Logistics decision maker.
Keller Logistics Group is a small company with big company capabilities; whether your need is for transportation, warehousing, fulfillment, or packaging services, we’ve got you covered.