March 2012 | How-To | Ten Tips

Gaining More From 3PL Relationships

Tags: 3PL, Partnership

Whether your third-party logistics (3PL) service provider is a niche player or a global behemoth, you can take steps to draw more value from the partnership. Valerie Bonebrake, senior vice president at supply chain consulting firm Tompkins International, offers the following tips for getting your 3PL to do more for you.

1. Become an expert at managing 3PLs. Your 3PL managers must be strong leaders, trained in developing and managing strategic relationships with the authority to act decisively on behalf of the company.

2. Invest time in key relationships. Make sure you develop meaningful relationships—not just with one person, but throughout the 3PL's staff. If your partner isn't willing to invest time and talent, pick another partner.

3. Ensure your 3PL is vested in your company's supply chain goals and initiatives. Share your ideas. Encourage and reward your 3PLs for making suggestions and implementing solutions that improve performance.

4. Pay for results, not just activities. Create an environment that rewards innovation. Develop shared goals and key performance indicators (KPIs). Tie compensation and incentives to the results achieved, not just the tasks performed. This approach takes more work on your part, but well-designed compensation incentives will enable you to reap the benefits, and everyone will win.

5. Be willing to enter into long-term agreements. If the improvements you seek require your 3PL to make capital investments, enter into agreements that enable a return on investment. One- to three-year agreements with 30-day cancellation for convenience options do not allow for meaningful investment.

6. Conduct annual strategy sessions. Develop joint goals and initiatives; formalize tracking and reviews; and create a collaborative environment that inspires your 3PL to work hard for you.

7. Invest in joint training and team building. 3PL relationships take time to develop. There is a learning curve during the start-up process before new teams become peak performers. Working together as one team is key to long-term success. Conduct joint-sponsored training and team-building sessions. Creating a bond between the two groups will ensure your 3PL is on the same page as your company's employees—and all are working toward a common goal.

8. Treat your 3PL as you would your employees. Think of your 3PL as an extension of your company—its employees are your employees. The more you put into the relationship, the better the 3PL will perform. At the same time, smart 3PLs know that effective talent management is critical to long-term success. Your 3PL needs to invest in the team that services your company, and should share its employee development plans with you.

9. Seek advice—and take it. Many 3PL representatives say, "I could do so much more for my client, if only it would let me." Give your 3PL the field of play to drive amazing results.

10. Measure results. Most 3PL service level agreements and KPIs are tied to execution. But you may be overlooking areas of shared responsibility where joint performance can create a strategic advantage for your company. Think end-to-end, track performance, and recognize it. Celebrate success, and make corrections when necessary.