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Manufacturers and 3PLs: A Match Made a Bit South of Heaven

July 14, 2010
Advice on how to build a lasting relationship with a logistics provider.

Manufacturers sometimes refer to third-party logistics (3PL) relationships as marriages, and not necessarily matches made in heaven. "Not all third-party logistics relationships are long-lasting," admits Will O'Shea, chief marketing officer of 3PD Inc., a 3PL provider that specializes in last-mile transportation of heavy goods. "But I think a lot more of them would stand a better chance of enduringand achieving better resultsif companies were more careful about choosing and negotiating with 3PLs during the courtship and honeymoon phases."

O'Shea recommends the following best practices for manufacturers seeking something closer to a "happily ever after" partnership with their 3PLs:

What You Should Tell Potential 3PLs

The unvarnished truth. Although it's an external document, an RFP shouldn't be confused with a public relations tool. Be up front about all of the factors that inspired your search. Don't hold back about any operational realities that could limit your new 3PL's success in achieving your objectives.

"This doesn't go any further than here." Having a legally binding two-way confidentiality agreement during the RFP process tends to elicit a higher level of candor and a more strategic level of information from respondents because they know that anything they say won't find its way beyond your selection committee or into any of their competitors' hands.

Exactly what you expect. If you want your relationship with a 3PL to be as successful as it can be, sit down and negotiate key performance indicators (KPIs) before, not after, the contract is signed. It's the only way to ensure a true consensus between both partiesand to avoid uncomfortable debates down the road.

What You Should Ask Potential 3PLs

• Tell us about a time when something you did for a client didn't go as well as you'd expected, and explain what you did to get through it.
• What are your corporate values, and how are they reflected in how your company does business?
•When can we take a tour of your facilities or operations?
• What is the last piece of business your company said no to, and why?
• Can we meet your company management?

What You Should Ask Yourself
Will O'SheaWhat's our track record with 3PLs and other suppliers like? If your company's current or previous relationships with 3PLs or other outside providers have been fraught with conflict or confusion, it's highly likely that your new third-party logistics relationship will be, toounless you take the time to pinpoint and correct any potential causes of friction.Who's on board with our decision to outsource, and who isn't? It's not essential that your company's decision to work with a new 3PL be unanimous, but there should be as much consensus as possible. Identify any potential internal resistance to working with your 3PL of choice because this could have a definite effect on your 3PL's ultimate efficacy.

Have we set realistic goals for our new 3PL, or are we setting them up for failure? Be sure that all of the objectives you communicate in an RFPand all of the KPIs you set with your provider of choicehave some grounding in reality. In other words, use a real-life baseline of your current logistics costs and service levels. It's a fair and realistic point of reference when setting goals for your service provider.

See also: Offshoring May Have Extended the Recession

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