By Mike Challman, Vice President, North American Operations, ChemLogix, LLC
So, you’ve made the decision to contract a third party logistics provider (3PL) to optimize your logistic operations. While the resources and market intelligence offered by the 3PL promise to address your transportation challenges and help you better maintain a competitive edge, companies – and their staff – must be prepared to work with the 3PL and commit to the program. Here are some keys to outsourcing success:
Upper Management Buy-in and Commitment to Program
Getting the funds and approval from executives to implement and/or expand transportation services and systems sometimes takes the assistance of 3PLs who can provide detailed explanations of the long-term benefits of specific supply chain strategies. Executive approval is necessary for supply chain programs to move forward. Experienced in providing transportation solutions to customers in the same industry but with varying scenarios, 3PLs can readily provide informed answers to the questions posed by executives and give examples of the successes and pitfalls associated with certain actions. 3PLs, essentially, become a part of the logistics team when presenting ideas and updates to the board room.
Successfully Managing Internal Rate of Change
Shippers must realize that with the promise of optimized supply chain operations, 3PLs bring with them new processes, techniques and efficiencies that must be deployed in varying departments. As a result, supply chain solutions affect the way in-house personnel have operated in the past. Companies must communicate and manage change activity so there is complete “buy in” at every level. Employees of every level should understand the reasons for change, their role and the corporate implementation schedule. Lack of visibility of new supply chain strategies throughout the company can result in key players not knowing what to do to affect change. At the same time, lack of flexibility to change by employees can cause implementation delays and impend the overall success of the new supply chain strategy. Changing the ways activities have been done in the past may be one of the hardest challenges faced by shippers. Inability to make changes may results in loss of savings as the hard changes make the most effect in driving out cost.
Cross Functional Commitment
Personnel in varying departments at different management levels must accept the supply chain solutions presented by a 3PL for the company to succeed. While corporate executives might be all for change, it is actually the department heads that must implement new processes and direct their staff in new activities. Communication is key for “buy in” as everyone from the warehouse and dispatching to accounting and customer service is critical component in change. Plants and business units may be upset with loss of control over specific activities that they managed for many years. Open discussions on the reasons and methodologies for deploying a 3PL to optimize current logistic operations may be warranted with different groups to ensure a smooth transition.
Make Supply Chain Activities a Priority
Most companies are extremely busy and juggle a number of competing projects. As a result, staffs often “multi-task” to the point that they have too many projects on their plate. Lack of resources and over activity is often the reason some shippers elect to outsource their logistic functions.
While busy, shippers must make the 3PL and associated supply chain activities a priority to obtain the qualitative and cost improvements promised by contracted managed services. Companies must fully commit to make appropriate in-house changes according to the implementation schedule.
On-going Commitment – Solution is Never Final, Always Evolving
In addition to satisfying the terms of a contract to manage specific freight activities on a monthly or cost-per-transaction basis, 3PLs should proactively present cost management ideas as part of their services. Rather than wait for problems to arise, a 3PL should lead a periodic review of supply chain processes with appropriate personnel to discuss new transportation solutions, specific cost reduction ideas, service levels, and any issues that the client may have with current operations.
On the client side, shippers must make a commitment to truly partner with a 3PL to inform them of their business strategy and competitive landscape. Without in-depth information, a 3PL cannot create a well-defined process that meets corporate needs and requirements. A non-disclosure agreement should be established so a 3PL and client feel comfortable exchanging information. And as the supply chain evolves, companies must disclose new business strategies, threats and competitive information to 3PLs to constantly re-evaluate current supply chain strategies and make necessary adjustments.
Working together, the 3PL and shipper should continue to assess performance and set new goals that enhance supply chain performance.