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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

Step 5: Manage performance
This is a most crucial step around which the other steps revolve. Outsourcing is not a “throw it over the fence” business process. Neither should it be an exercise in micromanagement.

Our eighth tip helps to make this clear: Develop a governance structure based on insight versus oversight. A sound governance structure outlines how the business will be managed, not just the service provider. The service provider is in essence an extension of the firm with regards to the work they provide.

If you have picked a service provider you trust and it is aligned with your interests, we find it’s often futile to micromanage the service provider. We often refer to this as a “junkyard dog” syndrome because the company outsources and then leaves in place employees who watch over and guard the old processes that have been in place for years. We hypothesize that this may have been the case in the Armstrong relationship, as the case study notes that they kept four people in place to manage the service provider’s 10 employees.

Coming full circle
The lines of demarcation between doing outsourcing effectively and doing it ineffectively can get a little blurry. As such, instead of drawing a line in the sand we promote an integrated “full circle” approach that includes the five steps we have outlined above.

We believe that even though Armstrong World Industries was the winner of the Shipper of the Year award, we’d have to give both Armstrong and their service provider a failing grade on their ability to outsource effectively. Even if the service provider was 100 percent at fault, we believe an outsourcing failure is a failure.

Read the University of Tennessee’s "Back to Basics: Managing The Basic Supply Chain Functions" articles on Supply Chain Mangement Review

About the Author

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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