Four Questions To Ask A 3PL

June 10, 2007
Know who you are dealing with and understand the terms of the relationship

Before you plan to outsource your supply chain and logistics management efforts to a third-party logistics provider (3PL), Ron Cain, president of TMSi Logistics, recommends that manufacturers consider four key points:

1. Can your 3PL demonstrate expertise and proven performance-based results?

A 3PL needs to inspire confidence. To start, it should provide clear case studies to prove its ability to execute and achieve demonstrable results for a client with a similar distribution or supply chain challenge. A 3PL should prove that it has successfully confronted logistics challenges similar to those your company faces before you sign on the dotted line.

2. Has your 3PL offered clear and mutually agreed upon key performance metrics?

Your 3PL should report line-item detail of costs, quality and performance weekly to the key performance indicators (KPIs) you develop together. This brings a needed focus on what matters and impacts the operation. These will create an "accountability recipe" -- a methodology or approach that makes clear how the 3PL and client measure results.

3PLs, In 25 Words Or Less

A third-party logistics provider (3PL) manages one or more logistics processes or operations (such as transportation or warehousing) for another company.

3. Does your 3PL plan for cost-out and continuous improvement initiatives?

3PLs can provide cost savings that businesses can't achieve on their own, while still maintaining a high level of service. 3PLs keep a close eye on the inter-relationship of costs and services. An effective 3PL won't view this as a one-time event or a once-a-year focus. 3PLs should be constantly striving to identify potential cost savings in a client's supply chain -- not waiting for the client to say what projects to work on.

4. Does your 3PL focus on a true partnership to support your core mission?

As businesses work to expand their markets and increase their customer bases, a strategic partnership with a 3PL that understands their business cycles is an invaluable asset. One of the reasons that 3PLs can act as strategic partners is that they bring the benefits of scope and scale to the table. By leveraging their scope, 3PLs are able to act as a highly specialized extension of the company's own team, focusing on solutions that will drive down costs, increase efficiencies and help identify opportunities for future development. Most 3PLs make significant investments in their core capabilities to develop the people, processes, technology and infrastructure to support the array of services they offer. Combining these capabilities with their business acumen and significant industry expertise allows 3PLs to provide clients with scalable solutions that support their distribution requirements.

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