Yes, there are more than 5 ways to optimize your 3PL relationship, but these are right up there as most important.
The more I thought about writing this article, the more I thought 3PL optimization has a lot in common with marriage! In fact, I almost called it, “How Optimizing Your 3PL Relationship is Like Marriage!” Don’t believe me? Take a look.
1. Just like in marriage, you have to make sure that it’s the right fit.
We all know what happens when a couple get married and they are too much unalike than alike – divorce. And that’s what will happen with your 3PL relationship if you don’t ensure that the relationship works for both parties and both are compatible – shared goals and interests.
Too many times outsourcers get into these relationships based only on pricing or promises. The 3PL wants more business and may promise you the world. You need to be fully vested, honest, and open with each other before signing an agreement. Sure, requirements can change, but try to discuss what could happen before-hand. Share as much about future plans and strategic direction as you can.
That’s the best way for the relationship to start and continue to flourish for the long term
2. Stay Connected.
After the honeymoon is over, it’s what happens from then on that matters. Don’t drift apart like partners in a bad marriage. Your 3PL is your partner and vice versa. You need to help them be successful for the relationship to prosper. That means not taking advantage of them if something in either of your businesses changes.
Part of staying connected is measuring performance – But not just on time deliveries, turnaround time, or other “standard” measures.
· Did your 3PL help you with an emergency delivery or pick up?
· Did they bring you an unexpected cost saving or process improvement?
· Are there other important areas that they’ve helped you with?
Make sure you recognize them for that when you look at and communicate overall performance.
3. Be Flexible.
Sure, your legal advisor drew up a favorable contract for you. But “set in stone” is not always advantageous – to either party.
I’ve seen 3PL’s close their doors unexpectedly in part because they either promised too much and couldn’t deliver or the outsourcer wouldn’t budge on contract terms that ultimately led to them going out of business.
Just like in your personal relationships, you probably don’t get your way every time. And when situations change in your logistics program, you should remain flexible enough for the sake of the relationship to change with them.
4. Look for and Establish Methods for Continuous Improvement
It’s not too much to ask for continuous improvement plans from your 3PL relationship. Here are some things you can ask for them to deliver on:
· Shared cost savings –
· Best practice initiation and implementation –
· Route optimization –
· Trailer utilization –
· Lean practices –
There are more, but these are some top ones. Ask your 3PL to bring them to you as they are in many ways the eyes and ears of what’s happening in logistics.
5. Keep What You do Best In-house
This one really made me think of personal relationships. Growing up, my family and I would occasionally eat out at a restaurant. My mother cooked Italian food like nobody’s business, though. I can still smell the meatballs frying in the pan before their luxurious hot bath in her tomato sauce!
So we rarely went to an Italian restaurant because Mom’s Italian food was so good. That was her core competency (among others).
There are core competencies that your company has – so don’t outsource them just because you can. Make strategic decisions based on your needs and the strengths of your 3PL partner.
BONUS. Hold Regular “Formal” Meetings with you 3PL supplier
Meeting for lunch or dinner with your 3PL is nice and you may even talk about business, but you should also hold formal Strategic Business Review (SBR) meetings with them on a regular basis.
SBR’s (also called QBR’s for quarterly business reviews), are an important part of managing your 3PL providers.
Here are just a few keys to include in your SBR:
· Invite the family – Anyone that has a vested interest in your program from both sides. That means, executives, managers, schedulers, drivers, assistants or anyone that has a part in how the program works.
· Past performance – Things like sales, production volume, on time pickup and delivery, quality, etc.
· Strategic Direction – New locations, new products, new routes, marketing events.
· Risk and loss – Hopefully you measure risk and discuss ways to eliminate risk.
With these basics of good relationship management and optimization, your 3PL marriage is sure to remain optimized for the long haul.