3PL Selection: Know What You Want Before You Buy

By Gary Weiss

So you've committed to implementing a third-party logistics (3PL) solution to manage parts in your service organization. Now what? Before delving into the laundry list of where you need to be and what inventory to allocate, step back and view this question from a macro level. You are not just implementing a parts management and deployment solution; you are about to radically change the business practices of your service organization.

This is a great opportunity to take a hard look at your current business practices and question what you do and don't like about the way things work now. More importantly, ask yourself why you do or don't like the way things work. Hiring another company to do the same thing that's being done internally today may offer some benefits, such as the capability to scale and a more variable cost model. However, you might miss a golden opportunity to strategically redefine your organization.

Establishing a Vision

To capitalize on this opportunity, third-party logistics must become part of your long-term strategic vision as opposed to simply being viewed as a tactical maneuver. Today's 3PLs offer a range of services that may reduce your organization's administrative requirements. By taking over "back room" activities across a global footprint, third-party logistics providers allow minimal staff to manage only the interface with the service providers as opposed to personally managing the warehouses.

In addition, 3PL suppliers offer IT systems that specialize in managing the services they provide, benefiting from an economy of scale that few companies can attain themselves. They are a resource to manage call flows, returns processes, pipeline management, warranty management, inventory utilization, service-level analysis and many other services that were previously considered to be internal functions only.

However, before you engage with a 3PL, ask yourself what your objectives are. It's gut check time.

• Do you know what your service organization does best and where you want to focus your internal resources?
• What areas of your service logistics organization are "off the table" and will remain internal?
• Which systemic tools are absolute requirements and must be utilized or interfaced with?
• Can management effectively run your business using data from multiple sources, including both your systems and the 3PL's?
• Do you and your company have a strategic objective, or are you both just looking for someone else to assume your day-to-day headaches?
• What are your personal and the company's commitments to implementing this solution as part of a long-term objective?

Other questions are less philosophical but just as important for determining how ready your organization actually is for this change. These may include:

• Is your company receptive to change?
• How can you ensure buy-in from executive peers and field staff?
• Which systemic tools are absolute requirements and must be utilized or interfaced with?
• Do cultural issues need to be factored in?
• Will conflicting priorities or projects require your company to juggle resources during the implementation?
• Will the commitment to implement this program spread beyond the departments that own the parts deployment responsibility?
• Will these changes be utilized to differentiate your company from the competition?

Selecting a Partner

Now that you've defined your strategic vision and selected those parts of your business that you will shift to a third-party logistics provider, you are ready to begin the selection process.