What to Expect From Your 3PL
Q: As supply chain operations continue the migration from an afterthought in the warehouse to a priority in the boardroom, what are some questions a shipper should ask before adding a 3PL to their supplier base?
A: It largely depends upon what level of partnership a carrier is seeking. Managing spot capacity is very different from integrating a TMS and/or outsourcing bid management. Ultimately, shippers need to understand what internal mechanisms ensure accountability from the third-party logistics (3PL) provider, and what insights will be brought to bear for continuous improvement.
The first step is the solution design phase. What are the pitfalls and challenges the shipper is facing today? It’s important the shipper be candid and share their goals so the 3PL can have the right people and processes in place. That said, it’s a given that an issue will arise at some point, so what is the 3PL’s infrastructure or process for performing a root cause analysis and then implementing an SOP to prevent a repeated failure? What type of data harvesting or analytics is the 3PL performing, and where are key areas they look for optimization after the partnership has begun?
Q: What are some best practices for the shipper to hold the 3PL accountable to its promises after onboarding?
A: It’s critical to identify mutually agreed upon KPIs and a cadence for measuring the 3PL’s performance. Many of our large-scale clients have formal monthly or quarterly scorecards where they measure metrics including:
- On-time pick-up and delivery
- Tender acceptance
- TMS update compliance
- Service failures
- Benchmarked savings
- Freight bill pay and audit accuracy
The 3PL should be prepared to discuss any discrepancies, but also to proactively suggest solutions, including data submitted with the tender, potential for drop-and-hook or consolidation programs, or the possibility of altering a shipping schedule to ensure maximum ROI for all affected stakeholders.
Transactional clients typically have more fluid conversations with their account executive regarding response time, tracking updates, and billing accuracy. Regardless of the size or scale of the relationship, the 3PL should be the subject matter expert, so the shipper should hold them accountable to being responsive to requests and proactive with suggestions.