Key considerations for choosing the right third party logistics partner
Whatever your motivations are for looking to outsource all or part of your supply chain operations you need to make sure you find the right partner.
This can be a challenging process, not least because of the plethora of information that needs to be taken into consideration. This is not a decision you want to rush, nor get wrong, especially as the success or failure of your business can hinge on the efficiency of your supply chain.
Although it might be tempting to go with the lowest bidder, cost control or saving should be carefully weighed up against a number of other factors. Here are five of the key areas we would recommend you take into consideration.
Define a clear process
Before you can engage with any third party supplier you need to have a really clear idea of what you need them to do. How will they fit into your processes and culture to ensure a seamless transition and ongoing operations? Try to avoid companies that offer the same cookie-cutter solution to every company. One-size rarely fits all when it comes to storage, handling and distribution. Look for a partner that is able to tailor a solution to meet your specific business needs. A strong contender should be prepared to help you map out the process required and come to the table with ideas about how you can make improvements to strengthen operations. In addition to defining processes, make sure you also agree any KPIs (key performance indicators) and or SLAs (service level agreements) that need to be met to measure success.
Make sure the solution is scalable
There is a direct correlation between the efficiency of your supply chain and its ability to scale. The capacity to scale up operations as a business grows is one thing, but before you engage with a supplier, it’s important to feel confident that they can support bi-directional scalability. They need to be prepared to cope with sudden spikes in demand without skipping a beat, but should also be able to scale down operations during quieter times. Often, it is multi-user warehouse solutions that offer the most flexibility and scalability, ensuring the same level of service, regardless of the level of demand.
The supply chain doesn’t sleep and there are always new ways to increase efficiency and identify cost savings. Finding a partner that can demonstrate a proactive approach to innovation is a major contributor to developing a relationship that will have a positive, long-term impact on your business. As part of a continuous development programme you should expect suppliers to regularly review all aspects of the operations they are undertaking for you. These reviews might be forum discussions covering topics like IT systems and reporting, carriers and packaging. Technology in particular has great potential to improve processes, drive efficiency and provide complete, real-time visibility of your operations. To ensure you maximise the potential, it’s worth taking a close look at the supplier’s systems such as the WMS and make sure it has the ability to integrate with your own internal systems and provide the management information that you need to make informed business decisions.
Proven track record & industry references
It goes without saying that checking the financial stability of any potential supplier is a box that must be ticked before formal engagement can begin. However, in addition to checking the financial background of the 3PL, it’s also important to look at their track record with other customers. Some companies can deliver an efficient solution that will get the job done, but will they go that extra mile to deliver additional value? Do they really care about your business or are you just another customer? What better way to find this out than talking to or reading about those with first-hand experience.
You’ve put a lot of effort in up front to define the processes and how success will be measured, so don’t fall at the last hurdle. Aside from staff and infrastructure, the success of handling a quality supply chain operation lies in the ability for all parties to engage in regular communication. Make sure your chosen supplier can demonstrate a good understanding of our business and the markets you operate in. More importantly, confirm that they have a comprehensive structure in plain to maintain regular communication which include regular meetings to evaluate the performance of the operation and discuss opportunities for improvement.