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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.


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