Third Party Logistics: How to Avoid a Service Disaster
PHILADELPHIA, Sept. 4 /PRNewswire/ — A third party logistics provider
(3PL) can be a great ally for heavy duty truck and automotive components
manufacturers. Outsourced services now may include transportation,
warehouse management, inventory replacement and order fulfillment.
Aftermarket service has not only proved to be a critical component of
customer satisfaction but is a key component of top line revenue and
profit. According to Leading Edge Logistics in Philadelphia, aftermarket
service generally accounts for up to 20 percent to 30 percent gross revenue
and 40 percent of profits of parts suppliers.
To satisfy increasing demands for visibility into inventory levels,
correct poor customer service, stop overflow of inventory and
stock-outs…along with blunting pricing pressure and revenue demand…
manufacturers have begun outsourcing procedures that are not core
competencies to strategic partners who are better equipped to drive
efficiencies.
“There are, however, some things that you should consider before you
join forces with a 3PL provider,” warns Leading Edge Logistics president
Tom Torcomian. “To simplify the process, we’ve boiled it down to six key
questions to ask before you spend a dime on the project”:
1. Know if you are ready for a 3PL.
Make sure that your company is ready to venture into outsourcing…
everyone has to agree that logistics is not a core component of your
business… including the managers in charge of the process.
2. Have realistic expectations of a 3PL.
Do not expect more out of the provider than you do of yourself. Trust,
flexibility, and responsiveness are indispensable elements on both sides
of the 3PL provider-user relationship to move ahead. What will help with
all of this is communication and relationship.
3. Understand that sometimes things just go wrong.
The 3PL provider that you chose might not be the right fit, or they
might not deliver on all their promises in a timely fashion. Try to be
offensive before having to be defensive. You can set up an “Exit Clause”
on the contract, and after six months you will be able to reassess the
situation and decide whether or not things are working out with the
partner you have chosen.
Third Party Logistics: How to Avoid a Service Disaster (continued)
4. Know your problems and guess at possible solutions.
If you do not know the definition of the problem yourself, then it is
unrealistic to think that the provider will be able to find the solution.
5. Document your requirements and your current service levels.
As you document requirements, it forces you to look at the operation in
depth. Companies should first go through a meticulous self-evaluation and
establish a standard against which the 3PL’s performance can be measured.
6. Give the selection process the proper amount of time and assessment.
Create an initial list of three to four providers and from that list
narrow down the choices to two providers.
The five most important criteria in selecting the 3PL are price,
technology capabilities, financial stability, customer service capability,
and creativity in problem solving. Take site visits and interview the
3PL’s past clients in order to get a realistic view of their performance.
“A 3PL study published by Georgia Tech found that in order to improve
the quality of this specific business relationship, both parties should
think of 3PL providers in three related contexts:
— As a key resource directly to 3PL user organizations;
— As a key link between supply chain organizations, and;
— As a key to supply chain integration.
You just can’t afford to shortchange any of these,” LEL’s Torcomian
concluded.
About Leading Edge Logistics
Leading Edge Logistics is a non-asset based, third party logistics
provider that guarantees customer cost reduction by using a proprietary
approach, including customized monthly reports, to focus on the root causes
that effect logistics costs. LEL operates i2 Supply Chain Software… one
of the most powerful logistics tools available. Leading Edge Logistics’
special service philosophy is to work for their customers as opposed to
working for their own assets.
For More Information on LEL services, go to
http://www.leadingedgelogistics.com