3PL Selection: Know What You Want Before You Buy

Setting a vision is the first step in picking a third-party logistics partner


Talk to references. Clients and partners are often very willing to share their experiences in vendor selection and why they chose the vendor in question. Then consider how the references' selection criteria compare to your own. If this sounds like a dating service, it's because the reality is that we all want to do business with people with whom we feel comfortable and we trust, just as with any long-term relationship that we form.

Once you define your requirements (often with the help of a 3PL) you can research and start to analyze pricing components. Here, it is critical to consider your long-term objectives. Improved customer service, inventory optimization, ability to interface with inventory planning packages, global presence and improved productivity all come at a price. You may view this price differently if you apply activity-based costing methods and realize that the premium you pay is only incurred on an as-needed basis. And, as with most things in life, you often will get what you pay for, so do your due diligence and determine whether the company is financially stable, their tools are accessible and their personnel are and will remain available to you when and where you need them.

Is bigger always better when it comes to selecting a 3PL partner? Some cite the saying that "no one gets fired for picking the best-known name in the business." While this may be true, people do get fired when programs don't deliver the expected results. The trick is to ensure that the 3PL has the "bandwidth" — the full scope of resources — to support your needs in the manner expected, while ensuring that you will be in a position to gain and keep their attention. How do you stack up against their other clients? In addition, your business needs will evolve, and as they do, your 3PL supplier must be in a position to support that growth. Remember: The contract is simply the beginning of the business relationship. This is an organic relationship that must allow for growth, and the contract must serve as the baseline for the expected service level. A third-party logistics provider can be a great source of ongoing value, but a 3PL is not fulfilling its responsibilities if it does not continually bring new value into the relationship.

Now that you have established the criteria most critical to you, outlined a program of deliverables that you can afford, and involved your staff and all the relevant departments in the process so that everyone has a shared sense of ownership, it's time to trust your gut and pick a partner.

Importantly, a reputable 3PL will work with you from the whiteboard stage through implementation and beyond, making an investment when it engages with you in a new relationship. Significant time is spent upfront to design the exact solution, map out and evaluate strategies, model anticipated expenses, and manage the implementation while providing ongoing and simultaneous support/development capacity. Quarterly business reviews and other regular meetings are part of the core services that are to be expected from your 3PL.

The fact is that it is in the best interest of the 3PL to "get it right" the first time and to become a true extension of your service organization. Many expenses incurred by the 3PL should be amortized over a period of time, and this will often apply to your company as well. A long-term relationship will bring increased returns; while the cost of making changes after the fact is significant in terms of money and internal credibility. All parties have a vested interest in making the relationship work, so let the teamwork begin.

About the Author: Gary Weiss is executive vice president of global operations at Choice Logistics, a third-party logistics organization specializing in the design and implementation of mission critical spare parts supply solutions. More information at www.choicelogistics.com.

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