Selecting & managing logistics company

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The Holy Trinity of Manufacturing (having the right product, at the right time, and at the right price) is a need for all which is only growing. It is important to understand that collaboration with logistics companies, and even third-party logistics companies, can help in achieving this Holy Trinity. The reason for outsourcing certain processes like transportation management, fulfilment among others to logistics companies is evident and clear. Logistics companies help manufacturers and shippers improve customer service and satisfaction, reduce risk, enable rapid growth, and reduce current and future costs.

The way to making an effective selection rests in understanding what the 3PL brings to the table and how it will be advantageous for the organisation. That’s why shippers need to know how to choose a 3PL company to partner with.

1.       Carry an Internal Assessment: An organisation needs to figure out its own needs and current resource deficiencies. It must review what is currently happening before trying to select a 3PL company. Also, it must be certain of its measured factors that reflect actual processes within the existing structure.

2.       Plan the 3PL Selection Criteria: Since some organisations may not necessarily specialise in outsourcing services through 3PL companies, they can opt to hire a consultant with the selection process.

3.       Narrow Down the Selection: Statistically speaking, a 3PL only has a 20% chance of securing the contract. That’s why they do not provide as much information as possible. Thus, a smaller pool of potential 3PLs will give them a better chance which in turn, will allow organisations to fetch more information.

Once a list of likely 3PLs is made, the next question is what requests are to be made to select one among others. Each request helps in understanding what type of relationship will exist between the organisation and the 3PL. An organisation can make a request for a quotation, proposal, proposed solutions or partnership. Bear in mind that besides the request for quotation, all other requests reflect a healthy and long-term solution with mutual benefits.

Now that the organisation would have found one to partner with, the other aspect of working in alliance with harmony is to know how to manage a 3PL, which it is actually quite simple. It revolves around contracts, performance measurement and management, and governance. The contract sets the standard, whereas performance measurement and management through a detailed set of Key Performance Indicators (KPIs) help in understanding the obligations or improvements met. Governance refers to how well the shipper and the 3PL interact. The best solution to this is to encourage a continuously improving environment and strengthen the bond between the parties.

The demand for a faster, more effective, better, more visible, disciplined, and cost-effective solutions will continue to grow. Certain decisions carry a greater risk or opportunity for organisations that are currently considering outsourcing certain processes to third-party logistics companies. But with the help of the above steps, your organisation can make the right decision.

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