The whole idea behind using a third-party logistics provider (3PL) is to avoid having to devote corporate resources that could be better-used on core manufacturing tasks. That doesn't mean, though, that a manufacturer should abdicate responsibility for keeping an eye on what the 3PL is doing, particularly since a logistics provider typically has direct contact with your customer base.

According to Dan Montgomery, vice president of business development for APL Logistics, a provider of third-party warehousing and other logistics services, there are several techniques that manufacturers can use to effectively measure and monitor their 3PLs. The following from Montgomery are some basic dos and don'ts:

Do:

Define KPIs. Develop a set of highly descriptive key performance indicators (KPIs) that include precise times, quantities and other numerical measurements so that everyone is on the same page about what it will take to achieve acceptable on-time, accurate and cost-effective performance levels.

Establish a comfortable reporting schedule. In addition to giving you consistent access to the measurements you value most, the consistency with which your 3PLs stick to this reporting schedule is another good measurement of their ability to meet your company's needs.

Insist on logs or time stamps. Having your 3PLs keep a log of when individual trailers arrive at and leave their distribution centers -- or using time stamps to achieve the same objective -- has excellent measurement potential. It can help your company monitor any performance issues that might be contributing to excessive detention claims.

Take advantage of visibility systems. Have your 3PL set up visibility tools to prompt your company anytime there's a notable exception to a delivery schedule, fulfillment rate or inventory level. That way you can easily pinpoint any minor performance glitches before they result in supply chain disruptions.

"Lean" on your provider. Many 3PLs now participate in continuous improvement programs such as lean. Encourage your 3PL to include your company in these programs, because the tools these programs rely on usually include a variety of detailed performance measurements -- and improvements.

View article on one page