How to Foster a Long-Term 3PL Partnership
When companies begin working with a third-party logistics provider (3PL), they are generally looking to address a functional pain point. The partnership is transactional and fills an operational gap. But the true value of 3PL partnerships can grow infinitely greater when shippers take a long-term approach that focuses on sustainable gains rather than short-term savings. In these circumstances, the contractual relationship often moves beyond simply procurement to more strategic leanings that benefit both parties.
In the 3PL industry, true partnership is demonstrated by the presence of two primary factors: a mutual understanding of goals and objectives; and the development of trust between shipper and service provider, allowing information, ideas, and innovation to flow freely back and forth.
4 Tips to Remember When Tying the 3PL Partnership Knot
- Be honest. When shippers enter a partnership, they should be willing and able to admit their shortcomings. Whether it’s a matter of acknowledging pain points and limitations, or recognizing that bid data may be inaccurate, being upfront with service providers from the beginning is an important step toward building a collaborative relationship. Conversely, 3PLs should be equally candid about their capabilities. Such reciprocity builds trust.
- Ask for help. Shippers should solicit ideas on the best ways to address a problem or optimize a network. Acknowledging areas that need improvement sets the table for developing attainable goals and expectations. This can begin in the bid process by providing accurate information regarding key performance indicators (KPIs). Sharing strategies, ideas, or concerns, and demonstrating a willingness to invest in the process and solution creates trust. Taking that first step establishes a team approach, rather than an adversarial one.
- Focus on operational excellence instead of the procurement process. When companies put out 3PL bids, they often focus time and attention on the bid itself, instead of assessing whether a new logistics service provider can perform to the level of operational excellence it needs. Shippers need to consider what the optimal scenario should look like once the implementation is complete, and how they can work with their 3PL partner to improve upon it.
Often a shipper will include KPIs that may not exist in order to complete a bid. The 3PL bids to those KPIs, wins the business, implements a solution, then realizes that the data included in the bid process doesn’t match the customer’s operational profile. There is a huge disconnect. Immediately, the shipper doesn’t meet the expectations of the 3PL, and very soon the 3PL will likely fail to meet the expectations of the shipper.
- Recognize what’s in and out of scope. Many procurement-driven companies will push for more from their service providers. The danger of scope creep is that it can slowly erode the relationship. With the understanding that customers have leverage, 3PLs may build walls and become less willing to give more when customers are taking instead of asking. On the other hand, shippers that recognize when they are asking for out-of-scope solutions, and acknowledge it upfront, are likely to find 3PLs more amenable to help out and invest in the relationship. That recognition and honesty builds trust.