Subscribe to our free, weekly email newsletter!


5 Steps to improving your 3PL relationships

Members of the University of Tennessee's center for Executive Education share their five steps and a series of tips to improve your outsourcing relationship right from the start.
By Kate Vitasek, Pete Moore, and Bonnie Keith, University of Tennessee Faculty Members
February 24, 2011

Back in October 2010, we eagerly opened our issues of Logistics Management (LM) to read the feature article about Armstrong World Industries and how they won the coveted 2010 NASSTRAC Shipper of the Year award after bringing their outsourced transportation back in house.

As I read the case study I was actually disheartened to learn that the reason they brought the work back in house was due to a failed third-party logistics services provider (3PL) relationship.

Yes, there are some bad service providers out there. But my experience is that there are always two sides to every story. I’m sure that the service provider Armstrong parted ways with would have their own story to tell from which we could all learn a lesson or two.

However, this month’s article is not about assigning blame, but pointing out practical steps, tips, and advice on how to improve a 3PL relationship and prevent one from becoming a failure. As experts and outsourcing coaches, members of the University of Tennessee’s Center for Executive Education have created five steps to improve your outsourcing relationship from the start and help maintain that partnership once it gets rolling.

Over the next few pages, we’ll explore each of these five steps and provide some of our favorite tips and advice to help you improve your 3PL relationships.

Getting started
Many of the problems companies experience stem from jumping into the contract prematurely without a solid understanding of the ramifications. With this in mind, our first tip is to slow down and take the steps to get outsourcing right before you start any work.

To do this properly, we recommend the five-step implementation approach that is profiled in the book Vested Outsourcing: Five Rules That Will Transform Outsourcing. The book goes into detail on each of the five crucial steps companies and service providers can take to create a successful 3PL relationship:

1. lay the foundation;
2. understand the business;
3. align interests;
4. establish the agreement or contract; and
5. manage performance.

When taken individually, these steps can offer shippers and service providers valuable insight into current operations. However, they tend to work best when implemented as a process for outsourcing by allowing companies to implement a true collaborative 3PL relationship where the company outsourcing and the service provider have a vested interest in the other’s success.

All too often, companies dust off an existing Statement of Work, rush to competitive bid, and give the service provider three months or less to transition the work—we’ve seen many that only allow for a four-week transition.

The great thing about the five-step framework is that it can be used during a request for proposal (RFP) or with an existing supplier to improve a relationship. Skipping steps usually results in a poorly conceived business outsourcing agreement or worse—a total disconnect in what the service provider is doing versus what the customer actually needs.

About the Author

image
Kate Vitasek, Pete Moore, and Bonnie Keith
University of Tennessee Faculty Members

Kate Vitasek is a faculty member at the University of Tennessee’s Center for Executive Education and is author of the popular book Vested Outsourcing: Five Rules that will Transform Outsourcing. Pete Moore and Bonnie Keith are Program Faculty members for the University’s Vested Outsourcing and Air Force Strategic Sourcing programs. Moore is also author of LM’s “Moore On Pricing” column.


Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

Seasonally-adjusted (SA) for-hire truck tonnage in July headed up 1.3 percent on the heels of a 0.8 percent increase in June. The ATA’s not seasonally-adjusted (NSA) index, which represents the change in tonnage actually hauled by fleets before any seasonal adjustment, was 133.3 in July, which outpaced June’s 132.3 by 0.8 percent, and was up 2.8 percent annually.

Volumes for the month of July at the Port of Long Beach (POLB) and the Port of Los Angeles (POLA) were mixed, according to data recently issued by the ports. Unlike May and June, which saw higher than usual seasonal volumes, due to the West Coast port labor situation, July was down as retailers had completed filling inventories for back-to-school shopping.

With a 0.8 cent decrease, this week’s average price per gallon is $3.835 and stands as the lowest price since hitting $3.844 the week of November 25, 2013.

LTL carriers are rapidly investing in expensive, on-dock, three-dimensional size measurement capturing machinery, and they are hoping one day of being able to more accurately charge shippers rates based on the actual dimensions of their shipments, rather than the traditional weight-and-distance-based formula that has been in effect since the 1930s or even earlier.

The Department of Transportation’s Bureau of Transportation Statistics (BTS) recently reported that its Freight Transportation Services Index (TSI) dipped 0.9 percent from May to June.

Comments

Post a comment
Commenting is not available in this channel entry.


© Copyright 2013 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA