Outsourcing parts of your supply chain can create a huge opportunity for business growth. However, if not careful, it can lead to a “hands-off” approach that has the potential to negate any sort of benefits that the outsourced help may bring. Learning how to manage your 3PL performance will not only help your business growth but also establish long-term work relationships that will build your reputation as well.
3PL, or third-party logistics, are companies that offer services such as distribution, warehousing, and fulfillment services within the broader scope of logistics and supply chain management. Many businesses outsource to 3PL warehouse companies because they can provide customized supply chain solutions that can flex and scale to meet their customer’s unique needs. However, hiring a 3PL company will not automatically improve the quality of supply chain or their 3PL ecommerce fulfillment. To ensure the efficiency of outsourcing to a 3PL, it is important for a company to have a clear communication with their provider, keep track of the operation, and always be willing to collaborate.
3 Tips for Managing 3PL Performance
1. Clear Communication With 3PL
Start business relationship with a good RFP
- Nothing can sour a relationship with a 3PL center faster than a poorly written RFP made with inaccurate data. If you company cannot complete a baseline and benchmark costs in an accurate fashion, then your business needs to reevaluate whether or not outsourcing is the right step for you.
- Specify what the 3PL is expected to do before the contract is signed. Nailing down what your shared goals and expectations is very important and will lead to less confusion down the line. This would be spelled out in your service level agreement.
Define your KPIs
- Your Key Performance Indicators (KPI) are the metrics that help define your success. Communicating those to your logistics and fulfillment partner is critical when agreeing on how they will be evaluated. Explaining why they matter can help incentivize your partner to strive for maximum performance as well.
- KPIs can include on-time percentages, shipping and order accuracy, return rate, and inbound receiving time.
2. Regular Check-Ins
Establish a reasonable reporting schedule
- Just because you hired a 3PL doesn’t mean you should just turn a blind eye to its processes. You also don’t want to be overbearing and micromanaging. Balancing the structure of insight of your partner’s operations and unbearable oversight is tricky. Never underestimate the power of a regular check in. Appoint a single contact to talk with your value-added partner, whether it be an account manager or a production manager. The goal is to not have “too many cooks,” confusing your 3PL partner with differing instructions.
Have clearly defined and measurable outcomes
- Your 3PL partner needs to know where your business is at currently and where you want to grow in a planned timeline. A scorecard created based on the company metrics and expectations can be a great tool to compare and measure their efficiency. This means tracking your KPIs to ensure you’re hitting your projected goals and realizing growth in volume and scale.
3. Working Together
Make sure both you and the 3PL UNDERSTAND each other’s business
- Understanding each other’s strengths and weaknesses will improve and maintain a beneficial relationship with you and your 3PL partner. Learning about niches, differentiators, competitive markets, and what you both do well will push teamwork and cooperation for a smoother partnership.
Set up escalation procedures
- What happens when something goes wrong? Inevitably it will happen; a KPI percentage will drop, or a mistake for process returns will be made. Whatever the case may be, having a backup plan in case something goes wrong is just common sense. Contacting the 3PL provider about their trouble shooting and risk management may prevent a small accident from becoming a full-blown crisis, leaving 3PL costs low.
Inform them of company changes
- A level of transparency needs to occur for a good working 3PL relationship. The 3PL partner needs to know the essentials about your corporation’s goings on in order to perform suitably for your needs. Informing them about staff changes or policy changes will keep them out of the dark and running exactly the way you need.
Don’t pass your products off to just anyone who offers 3PL services. Your products are the representation of your company, and your customers have high expectations. Finding a good 3PL company who is capable of continuous improvement be a tremendous benefit to your growth plan, but only if you are strategic on what is outsourced and how it is going to be measured with. Whether it be for warehouse management or for your order fulfillment process, establishing a good working relationship with your 3PL partner will strengthen your supply chain and KPIs, all while cutting costs. All it takes is the time and effort for it to be done right, the first time, every time.
If you are starting your search for a 3PL provider, or have never worked for one, now is the best time to reach out to a company known for its expertise and customer service to help you with the process. NewStream Enterprises, LLC not only offers 3PL services, but also comprehensive supply chain management solutions. Our experienced team will guide you on figuring out warehousing, distribution, and logistics, all while giving you the ability, tools, and manpower to get your growth needs met.
Contact our 3PL experts today!