Manufacturers, distribution companies, wholesalers and those associated with supply chains have all been proven to benefit from outsourcing their logistics activities to 3PL providers. Several significant reports also indicate the growing use of 3PLs by shippers as a means of gaining a competitive edge. The following points will assist you in forming a partnership and putting in place a successful 3PL partner.
1. SWOT Analysis
The SWOT analysis assists in determining the advantages, disadvantages, opportunities, and risks associated with outsourcing logistics versus in-house solutions. Conduct detailed research on the benefits, opportunities, and cost savings associated with outsourcing to a third-party logistics provider. To prevent gaps in the 3PL provider’s understanding and expectations, businesses should adopt Standard Operating Procedures for all outsourced procedures.
2. Robust Selection Process
Conduct initial research to compile a preliminary list of 3PL contenders. All eligible 3PL companies should be surveyed to ascertain facility locations, logistics operations, the technology used: WMS/TMS system integration, warehousing and distribution (LTL/TL) strengths and weaknesses, as well as their service areas concerning your customer locations. Developing a comprehensive technique for objectively evaluating the skills of third-party logistics (3PL) candidates can make or break an outsourcing selection process: Are they capable of warehousing your type of product? Are they knowledgeable about how to handle/manage your particular product/SKU? What is the most critical factor in your decision to use a 3PL?
3. Project Implementation Plan
There should be a clear project implementation strategy in place and frequent evaluations to ensure that everything is proceeding according to plan and that no significant deviations from the project’s scope occur. The process of transforming thoughts into actions is called project implementation, and it requires active cooperation and coordination on both sides of the connection. Implementing a project entails integrating IT systems, customising operational procedures, comprehending service metrics, and determining the escalation process, among other things. All of these actions demand talent and a committed team. Typically, 3PL firms have their own process for project implementation.
What is crucial in this case is customisation to meet the client’s unique requirements and maintain agreed-upon service levels
4. Obtain Request for Quotation(RFQ)
The request for quotation (RFQ) is a method for gathering information and assessing the outsourcing firm’s capabilities. When selecting a 3PL, the RFQ should be as detailed as possible and should be accompanied by all pertinent documents regarding the project and expectations: approximate monthly volumes, projected square foot usage, seasonal demand, different pallet sizes and cubage, number of SKUs, unloading costs etc. The RFQ should include a detailed analysis of the areas to be outsourced, including the contract’s scope, locations, facilities, and departments; information on the volumes involved, the number of orders and the logistics tasks to be performed. Additionally, the RFQ should provide a structure for price quotations and a response timeframe.
5. Visit the potential provider's facilities.
Arranging visits to a prospective 3PL provider’s facilities and conducting interviews with existing clients is a critical next step. In preparation, send a plan outlining the information you require during this initial visit. Visiting the company’s premises enables you to assess the company’s adaptability and desire to work with you as your demands evolve. Is this a viable partnership? Are they able to supply you with what you require? Do they face competition from other companies to maintain their successful 3PL standards?
Are they third-party logistics providers for transportation, warehousing/distribution, or both? Are they equipped with cutting-edge WMS/TMS/YMS systems to fulfil your requirements? These are some of the questions you should consider asking them to get better clarity about their work and operations.
6. Measuring performance
Establish key performance indicators (KPIs) and a service level agreement(SLA) to manage the performance of the 3PL. The SLA is a critical document for managing the 3PL’s service level. During the relationship’s launch phase, the customer must take the initiative to develop key performance indicators (KPIs) and reporting techniques that align with the company’s business objectives for the outsourcing strategy. The performance of the 3PL should be evaluated regularly using qualitative and quantitative performance measures. The purpose of performance assessment is to quantify performance and take appropriate remedial steps in the case of poor performance and to examine the prospect of profit-sharing in the case of excellent performance to foster continual development. Regular performance measurement provides the ideal chance for both the customer and the 3PL to interact effectively and successfully manage the outsourcing partnership.
Final Thought: Why you should choose a 3pl Partner?
By outsourcing the logistics function to a third-party logistics supplier, you can reallocate your resources to core business. Even if you have sufficient resources, another company within the supply chain may perform the task more efficiently due to its relative supply chain position, supply chain experience, and economies of scale. 3PL businesses can share responsibility for managing worldwide supply chains, maintaining adequate inventory levels for consumers and stores, and consistently delivering the ideal order. Outsourcing logistics to a third-party supplier can be a cost-effective strategy to reengineer distribution networks to suit global market demands and acquire a competitive edge.
