Executive Briefings

Best Practices for Choosing and Using a 3PL

Frank McGuigan, president of transportation management with Transplace, details the benefits of a "synchronized" 3PL-customer relationship, and provides guidance on how shippers can go about selecting the right partner.

Best Practices for Choosing and Using a 3PL

By “synchronizing” the relationship between a third-party logistics provider and its customer, the two parties can reduce direct costs, improve service and achieve better visibility of the metrics that drive a supply chain, McGuigan says.

Some shippers might be nervous about turning over key supply-chain or logistics responsibilities to a 3PL. Yet the outsourcing business continues to grow, driven by the desire of companies to achieve new efficiencies in their operations. True process change, says McGuigan, requires “complete stakeholder alignment all the way through.”

Technology has altered the definition of what a 3PL does. Ten years ago, companies might have outsourced access to technology they didn’t want to buy, or utilized a third-party warehouse simply because they couldn’t justify the purchase of certain applications within their own organizations. Today, however, technology is far more integrated into the operations of successful 3PLs – and more integral to the success of client engagements.

Selecting the right 3PL is a critically important decision, said McGuigan. First, a shipper must ensure that it has achieved alignment within its own organization. Second, it needs to examine the demonstrated capabilities of providers in the market or industry in which it does business. “If a company does chemicals and nothing else, then it can’t support your CPG [consumer packaged goods] needs,” he said.

Companies looking for a 3PL partner also must determine whether the latter maintains a culture of continuous improvement, McGuigan said.

He believes the parties should meet on a quarterly basis to talk about the client’s business, and how it’s being impacted by changing market conditions. “It’s a two-way street, investing human energy into the business relationship,” he said.

Continuous improvement requires the use of benchmarking by mode, to determine where the parties might rationalize networks or shift carriers. In addition, shippers need to ensure that they are “carrier-friendly,” especially at a time of constricting capacity.

To view the video in its entirety, click here

By “synchronizing” the relationship between a third-party logistics provider and its customer, the two parties can reduce direct costs, improve service and achieve better visibility of the metrics that drive a supply chain, McGuigan says.

Some shippers might be nervous about turning over key supply-chain or logistics responsibilities to a 3PL. Yet the outsourcing business continues to grow, driven by the desire of companies to achieve new efficiencies in their operations. True process change, says McGuigan, requires “complete stakeholder alignment all the way through.”

Technology has altered the definition of what a 3PL does. Ten years ago, companies might have outsourced access to technology they didn’t want to buy, or utilized a third-party warehouse simply because they couldn’t justify the purchase of certain applications within their own organizations. Today, however, technology is far more integrated into the operations of successful 3PLs – and more integral to the success of client engagements.

Selecting the right 3PL is a critically important decision, said McGuigan. First, a shipper must ensure that it has achieved alignment within its own organization. Second, it needs to examine the demonstrated capabilities of providers in the market or industry in which it does business. “If a company does chemicals and nothing else, then it can’t support your CPG [consumer packaged goods] needs,” he said.

Companies looking for a 3PL partner also must determine whether the latter maintains a culture of continuous improvement, McGuigan said.

He believes the parties should meet on a quarterly basis to talk about the client’s business, and how it’s being impacted by changing market conditions. “It’s a two-way street, investing human energy into the business relationship,” he said.

Continuous improvement requires the use of benchmarking by mode, to determine where the parties might rationalize networks or shift carriers. In addition, shippers need to ensure that they are “carrier-friendly,” especially at a time of constricting capacity.

To view the video in its entirety, click here

Best Practices for Choosing and Using a 3PL