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Consumer Goods Logistics Blog


It’s Valentine’s Day: Are You Still in Love with Your 3PL?

Published by Alex Stark

Marriages and logistics partnerships all start with an assumption of a happy ending. But it doesn’t always work out that way – in either case.

Why do 3PL outsourcing relationships fail? A lot of the top reasons parallel what we hear in divorce courts. If any of the following reasons feel familiar to you, it might be time to ask yourself, “Are we with the right 3PL partner?”

You’ve changed.” 

3pl outsourcingPeople change over the course of a marriage and that affects relationships. They may become very different people with different priorities, politics, and even life philosophies.

In the 3PL world, the rash of M&A activity could mean you, as a shipper, are now dealing with different people and even a whole new company than the one you originally signed on with. That could be a good thing if it gains you access to more services and expertise. But it could also be a bad thing if the qualities that led you to the provider in the first place start to disappear.

For instance, as merging companies become bigger, they often become less responsive and less flexible. That’s a real problem if your business requirements are dynamic and you need an agile logistics partner. Swapping out the brand decals on trucks doesn’t change the fact that many of today’s large 3PL providers are really a patchwork of smaller companies, all with different systems and cultures. They are simply not the same as the original company you fell in love with.

 

“Are we in financial trouble?”  

Stress related to financial troubles are a big reason couples split. There’s a parallel in 3PL outsourcing as the increased involvement of purchasing professionals has led to a greater tendency to select providers based on service cost, not service quality. 3PLs anxious to win cost-based bids will often cut back on necessary expenditures, resulting in quality problems that, ironically, will actually increase costs.

For instance, what if a new provider, who offered a 10% rate reduction for space and labor, gets to the new price point by cutting down on essentials? Examples we’ve actually heard include:

  • Reduced safety and sanitation practices that led to an infestation and a $150,000 remediation project
  • Reduced training and an increase in temp labor usage that led to lower order accuracy performance on pick and pack activities and an extra $90,000 in returns-related expenses

When such things happen, relationships are damaged, sometimes irreparably. 3PLs that cut corners to reach a cost-cutting target aren’t doing you a favor. Operations managers understand that; purchasing managers may not.

 

“Is there someone else?”

Just as shippers may look elsewhere if they are not happy with their 3PLs, providers can go through something similar. They could decide, for instance, that customers in a certain vertical are not delivering the level of profit required, so they begin to put less focus on these customers and more on those in their new target verticals.

Like most extramarital affairs, this happens without the shipper’s knowledge. Few 3PLs will be forthright in admitting that a specific customer or vertical market no longer fits their strategic plans. They say it more with their actions.

Do you believe your company might be the unwitting victim of a 3PL’s changing strategy?

 

“You’re taking me for granted.

No spouse wants to feel like they are being taken for granted. The same with shippers who outsource 3PL services. Evidence of a 3PL that’s mailing it in:

  • No evidence of a “how can we do it better mindset” to drive continuous improvement in core operating metrics
  • Lack of fresh thinking
  • No investments technology and innovation to transform processes
  • No future orientation, where the 3PL proactively thinks about how to prepare in advance – to support the next big sales push or to support the customer’s 5-year business expansion plan

 

“We don’t talk like we used to.”     

When a couple doesn’t talk, emotional space develops between the two people and they grow apart.

We see that in certain 3PL relationships, particularly with larger companies where on-site managers assume responsibility for managing the relationship, while company executives, who were very visible at the start of the relationship, fade into the background. Day-to-day communications are important, but must be complemented by more strategic discussions – about operating trends, about future business initiatives, and about the relationship itself.

When this type of strategic communication is absent, shippers get frustrated. Most want to build a true strategic partnership, and they want a communications cadence that supports a close, collaborative relationship. But, according to a survey on outsourcing relationships, only 1 in 5 customers describe their relationships with service providers as truly collaborative.

It’s important, at the start of a shipper-3PL relationship, for both parties to agree on a set schedule for communications – and then stick to that schedule, rather than treat it as changeable should something “more important” come up.

 

“I’m not happy.”

The search for happiness is profound and deep-seated. When a spouse or significant other begins to undermine, rather than contribute to, that happiness, relationships quickly end.

It’s a fair question to assess 3PL relationships, as well. 

How about you? Are you happy?

If not, it could be time to take stock of your 3PL relationships and determine if you’re better off moving forward with another provider – perhaps one that uses “customer happiness” as its core corporate metric.  

 

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Filed under: 3PL Outsourcing

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