January 2009 | Commentary | 3PL Line

Why You Don't Want an Obedient 3PL

Tags: 3PL

What is an obedient third-party logistics provider (3PL)? It is one that doesn't share responsibility for its customers' success and simply does what it is told. It keeps quiet when it knows the shipper's request is misguided, and doesn't offer new ideas for re-thinking project goals.

When a shipper views its 3PL simply as a tactical service provider, you can be sure the relationship will not yield the kind of results either party expects.

Collaboration is key to avoiding obedience. The most successful relationships are ones where the shipper realizes that outsourcing supply chain activities doesn't mean relinquishing supply chain management responsibility. Shippers must strike the delicate balance between managing the 3PL relationship and managing the services that are being offered.

Wise shippers tap into the 3PL's deep experience and actively solicit new suggestions for improving operational efficiency. They also define shared accountability and key performance indicators to ensure that top-line goals are met, while giving the 3PL freedom to contribute new perspectives and ideas.

Daily management of the 3PL relationship is just as crucial to achieving desired performance results as getting the strategy right on paper and negotiating a well-defined contract. In addition to establishing success metrics for your supply chain, establish success criteria for your supply chain partnership: flexibility on both sides, an understanding of challenges, and ownership of each other's problems. A supply chain partnership is only as strong as the skills and cooperation its participants bring to it.

A STRONG PARTNERSHIP

So how can you prevent an obedient relationship with your 3PL? Here are some places to start.

  • Establish mutual interests and share goals. 3PLs and shippers should have a vested interest in each other's success.
  • Focus on performance rather than cost-cutting. 3PLs will always be able to deliver cost-cutting efficiencies; the best relationships also ensure high performance and customer service levels.
  • Share more information than you normally would with a supplier. Include your logistics provider in upfront discussions about infrastructure, sourcing, IT, and overall business strategies.
  • Be open and honest. Insist on frank discussions about expectations, price, and projected work levels. If you are not comfortable taking this step, you shouldn't outsource your supply chain.
  • Keep the relationship on track. This approach requires daily discussion. The relationship can't be evaluated once a year if it is to be successful.

When a company's goals are short-sighted and focused just around skimming the budget, the long-term goal of improving supply chain performance becomes more difficult to achieve. If shippers want to harness the power of their supply chains as a competitive advantage, supply chain management needs to become part of an overall change management strategy. This means taking a holistic approach to improving productivity, not just cutting costs.

Shippers will always have to address tactical functions and cost pressures. For the most successful shippers, competitive differentiation comes from recognizing the value of collaborating with a non-obedient 3PL.