What You Need to Know When Working with a 3PL

No-nonsense tips on how to avoid a logistics service disaster.

To satisfy increasing demands for visibility into inventory levels while improving customer service, some manufacturers are outsourcing supply chain procedures that are not core competencies to third-party logistics providers (3PLs) who are better equipped to drive efficiencies. Before joining forces with a 3PL, Tom Torcomian, president of Leading Edge Logistics, a Philadelphia-based 3PL, suggests manufacturers answer these six key questions to ask before they spend a dime on the project:

  1. Know if you are ready for a 3PL. Make sure that your company is ready to venture into outsourcing. Everyone has to agree that logistics is not a core component of your business, including the managers in charge of the process.
  2. Have realistic expectations of a 3PL. Do not expect more out of the provider than you do of yourself. Trust, flexibility and responsiveness are indispensable elements on both sides of the 3PL provider/user relationship. What will help with all of this is communication and relationship.
  3. Understand that sometimes things just go wrong. The 3PL that you choose might not be the right fit, or they might not deliver on all their promises in a timely fashion. Try to be offensive before having to be defensive. You can set up an "exit clause" on the contract, and after six months you will be able to reassess the situation and decide whether or not things are working out with the partner you have chosen.
  4. Know your problems and guess at possible solutions. If you do not know the definition of the problem yourself, then it is unrealistic to think that the provider will be able to find the solution.
  5. Document your requirements and your current service levels. As you document requirements, it forces you to look at the operation in depth. Companies should first go through a meticulous self-evaluation and establish a standard against which the 3PL's performance can be measured.
  6. Give the selection process the proper amount of time and assessment. The five most important criteria in selecting the 3PL are price, technology capabilities, financial stability, customer service capability and creativity in problem solving. Take site visits and interview the 3PL's past clients in order to get a realistic view of their performance.

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