More companies than ever are choosing to partner with a third party logistics (3PL) provider to meet their needs for manufacturing support. And in today's tough economy and competitive marketplace, it's a sound business move.
Up-to-date providers can help untie the sticky knots associated with tasks like assembly, distribution, order fill, packaging, warehousing, and information technologies-- even order processing and customer service aren't out of scope of a good logistics expert.
Choosing the Best Provider
Each third party logistics team brings a unique set of skills to the table, so if you're still in the process of choosing a provider, make sure your partner offers you the range of services you need to not only meet your fulfillment needs, but help improve your business.
While not every provider will offer every service, there are some standard benefits you can expect from working with a good 3PL partner.
- Cost reduction. Because 3PLs manage fulfillment for many different companies, their high shipping volume allows them to negotiate better rates over various shipping routes and a variety of shipping methods. This saves you money.
- Concentration on core functions. Your 3PL provider lives and breathes logistics. While you must split your attention between product development, marketing, customer service, and logistics if you manage an in-house team, your logistics partner is able to focus on the one thing it does best: logistics.
- Ease of expansion. Outsourcing key functions, such as warehousing and inventory tracking, allows you to expand without adding expensive fixed assets.
Making It Work
Deciding to use a 3PL and finding the best partner for particular business needs is only the first step. As with any business relationship, once you have your logistics partner in place, there are things you can do to make sure the relationship is successful.
Here are four steps you can take to ensure that your 3PL partnership works smoothly.
1. Keep the lines of communication open.
A 2013 article published by the Association for Operations Management, author Richard E. Crandall, PhD., states that it is often the managing of outsourced business operations, not the skills of the provider, that become a major stumbling block to a successful 3PL relationship.
Because handling outsourced services requires a unique skill set, managers on both sides of the relationship should be, as Crandall writes, "knowledgeable and dependable." They should always try to communicate with each other openly whenever a problem arises.
2. Strive for complete transparency.
When working with a 3PL, you need to know what decisions are being made and why. While your third party provider offers the expertise your company needs in the areas of warehousing, shipping or packing, that doesn't mean they know your business, your products or your customers as well as you do. You're the expert on your own company. Transparency will allow you to provide input when it is needed to reach your unique business goals.
3. Demand flexibility.
Any successful business relationship is always evolving, and that requires a certain amount of flexibility. In fact, that particular ability is probably one of the reasons you chose to work with a 3PL in the first place.
Maybe you wanted to accommodate sale volatility or a changing market landscape. But, there are other areas where your company may need some flexibility, as well. Be sure your 3PL is willing to customize their services for you, even allowing exceptions when your business needs it to satisfy customer demands.
4. Measure performance.
It can be hard to measure the success or failure of a third party service provider. After all, unlike your in-house departments, your 3PL isn't on-site. That can make tracking progress -- or lack of progress -- challenging.
Establish a clear set of guidelines for what you expect from this relationship. Whether that is increased shipping speed or reduced warehousing costs, you must have concrete goals in order to measure success.
The Bottom Line
Third party logistics partners bring a wealth of benefits to the table. By choosing a partner carefully, and continuing to work on the relationship, you can ensure that your company reaps the maximum rewards from those benefits.