Selecting the right-fit contract logistics provider(s) is a crucial decision with lasting customer impacts. Third party logistics (3PL) or Contract Logistics is defined as outsourcing all or much of a company’s logistics operations to a specialized company. Activities might include global supply chain design and planning, facility design, warehousing, transportation, distribution, inventory management, returns (reverse logistics) and defective repairs. Industry providers include freight forwarders, couriers and other specialized contract logistics providers. Global Sourcing organizations and business unit leaders should not be content with the “lowest” bidder. While cost drives most sourcing decisions, other important factors to consider in a Total Cost of Ownership (TCO) analysis should focus on engaging a logistics partner who consistently acts in their customer’s best interests, raises awareness about global risk reduction opportunities and fosters responsive customer interactions across all levels.
Fostering win-win 3PL relationships is rare given intense global manufacturers cost pressures and outdated contracting relationships. However, contract logistics providers make a virtual handshake to their customers’ customer when delivering products and services, so supplier selection should not be about cost alone but how building a solid relationship can be a conduit to win kudos and increase loyalty with your customers! An example of a customer I worked with to implement a global 3PL across the Americas, EMEA and APAC regions received this flattering customer feedback from one of their important customers …“Working with your company we receive the fastest spare parts replacement service in the industry”.
Supplier Selection Drivers Although Key Performance Indicators (KPI) will vary by industry, the below criteria can serve as a framework to objectively rank contract logistics providers to address the requirements of many logistics outsourcing efforts. Developing the evaluation framework before developing the short list of candidates is important to ensure the team gives adequate consideration to desired outcomes, improving performance and closing existing business process gaps without bias toward certain suppliers or technologies. Continue reading