“The customer relationship starts during the negotiating period and it really is based on the culture fit,” says McWilliams, who advises shippers not to focus too heavily on costs and economic terms during the contracting period, but to concentrate on the culture fit. Culture fit? “The best 3PL relationships are the ones that have close ties at multiple levels of both companies, starting at the executive level and down through execution,” he says. “Typically in these partnerships, each side has five or six employees who work very collaboratively together over a long period of time.” The challenge is when there are personnel changes on either side, he says. “Those changes have to be managed carefully.”
It also is important for shippers to enter negotiations with a clear understanding of the service offering they want to purchase, relative to what the 3PL has to offer, he says. “For example, does the 3PL have experience with your industry or with the products you distribute?”
Having a good understanding of your current and future technology needs also is an important consideration, says McWilliams. “These all have to be a good fit,” he says.
Even with the best fit, there will undoubtedly be rocky patches during a long-term partnership, says McWilliams. There can be a number of reasons for occasional difficulties, but one of the most common is a change of management personnel on either side. “Any time there is a management change, both parties need to quickly discuss the change and its implications. New players coming into a relationship know its history only second-hand and may form positive or negative opinion about what has gone on before. There needs to be a base-lining of the relationship with these new people,” McWilliams says.
One way to ensure that a relationship stays on track is the application of effective metrics, he says. He explains three metrics that OHL uses to keep its pulse on a relationship’s health. “One of our key metrics is our Net promoter Score,” he says. “We survey our largest customers every year and ask them to answer a simple question: how likely are you to recommend OHL to others? If they answer with a 9 or 10, they are a promoter. If they answer with a 1 or 2, they are a detractor. Scores in the middle are agnostics. Our goal is to have a really high net promoter score and we have improved our score significantly over the past 12 months.” A second important metric is the customer satisfaction index, which rates customers’ satisfaction with management, personnel, systems, and performance relative to service level agreements.
“The third key metric we look at is churn,” says McWilliams. “Are we churning customers and, if so, why? We do a deep dive if a customer leaves to understand why that happened and how to prevent those circumstances from repeating.”
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