The choice and effectiveness of your 3PL relationships have an enormous impact on your company’s profitability and its reputation with your customers. We find that the factors that lead shippers to seek out 3PLs in the first place – things like freight capacity, experience in an industry, expertise with a particular service – often are not the reasons that companies choose and stay with a 3PL provider. It’s more the intangible benefits, beyond service and cost, that make the biggest impression.
In our last article, we looked at what shippers could do to maximize logistics outsourcing benefits. In this article, we’ll focus on the intangible benefits that you should look for to ensure positive, long-term 3PL relationships. Consider asking yourself the following questions in your 3PL evaluation process.
Is flexibility in their DNA?
There is efficiency in standardization of 3PL systems and processes – of running product through the same standard distribution machine, day after day. That’s why some 3PLs don’t welcome changes that stop the machine from churning. But let’s face it, “predictable” is not a word any of us would assign to the current business environment. When market changes demand a change in how you serve customers, your 3PLs must be flexible and agile to facilitate that change.
Look for clear evidence of a 3PL’s willingness to adapt standard processes to quickly accommodate a customer need. You need to be nimble in support of your company’s distribution requirements. Invest in 3PL relationships that get you there.
Will they say “no?”
You want your 3PLs to be enablers of an agile supply chain strategy. When they say YES to a new challenge, that’s a good thing – unless they can’t deliver on that promise. Be wary of 3PLs who, in an effort to please (and perhaps realize revenue from a new project) say YES to every new request. You may be disappointed to hear NO, but that tells you you’re working with a thoughtful provider who doesn’t make promises the company can’t keep. A 3PL’s affirmative commitment to a project leads you to make a promise to your own customers. You don’t want to have to backtrack on that promise if the 3PL determines, mid-project, that it can’t be done.
Is the culture genuine?
Culture matters in 3PL relationships. You want the 3PL’s team, from the CEO to the account manager to the order pickers and packers, to be thinking and acting like members of your team. But beware of 3PLs whose culture is more about words on a banner than an authentic way of working embraced from the top down. There’s no litmus test to verify that a culture is authentic and truly embedded. You’ll want to talk to people at every level of the organization to see if their attitudes reflect what their written culture suggests. In competitive situations involving 75-page RFP responses evaluated by large selection committees, it’s amazing how often the final choice comes down to chemistry. It just feels right.
Are you getting facetime with senior executives?
You don’t want a strategic 3PL relationship where you feel you need to go through channels to speak with the highest-level executives. That might be an indication that the provider is too big and bureaucratic. When quick decisions are needed on major issues – for instance, those requiring a capital investment – you don’t want to find out only then about a lengthy, four-level approval process. Establish a relationship with senior 3PL executives from the start and get a sense of their commitment to the relationship.
How well do they communicate bad news?
It’s human nature to want to put off communication of bad news. But in logistics, you need to hear that bad news as fast as possible so you can mitigate the impacts. Whether it’s a large inventory discrepancy, a late shipment of a big order, or a lack of freight capacity to handle forecasted volumes, you want a 3PL partner that tells it like it is. Everyone likes a good surprise. But it’s the bad surprises that can jeopardize your business. Seek 3PL relationships that are 100% transparent.
How often do they ask, “what if?”
One of the raps against 3PLs is that they do a good job identifying inefficiencies at the outset of relationships but are not as committed and adept at ongoing innovation and continuous improvement. One way to judge that is how often they pose “what if” questions. What if we removed these two steps from the current packing process…? What if we delivered two times a week instead of three…? What if we used bags instead of boxes for smaller eCommerce shipments…? This is a sure sign of a quality-driven organization that is hard-wired to look for better ways.
HAPPINESS is a metric
The success of 3PL relationships requires performance excellence. Getting the right product to the right place on time and intact. But your ultimate happiness as a 3PL customer is also based on a host of intangible benefits. That’s why, at Kane Logistics, customer happiness is our primary success metric.
In our experience, the happiest customers are satisfied with operational performance but also feel a tight connection with the 3PL provider based on critical attributes like flexibility, honesty, integrity, commitment, and innovation. When you achieve this tight connection – when the 3PL’s team is thinking and acting like part of your team – the value potential goes far beyond the negotiated per-unit or per-mile rate.