4 Factors to Consider in your Evaluation of 3PL Companies
In this article from Logistics Viewpoints, Adrian Gonzalez, a Logistics Thought Leader, gives his 4 Important Factors for Evaluating 3PL Companies. Although Cerasis is somewhat defined as a 3PL, we also refer to ourselves as a freight logistics service provider who offers 3PL services, technology, and integrated freight management services. Regardless, the following criteria are great factors to consider in your evaluation of potential 3PL companies:
1. Alignment of Continuous Improvement Cultures. Three of our CORE logistics philosophies line up well with this factor:
- Transparent communication and collaboration from the beginning of the relationship to set forth proper expectations of results, making sure to define Key Performance Indicators and what defines success when working with the 3PL company.
- Look for shared goal and initiative alignment in the way the 3PL companies pitch you. Do they care about the RESULTS, do they want to improve PROCESS, and then have a shared goal of driving down your freight and transportation costs over time? Make sure that you hear from the pitch of these 3PL companies the willingness to put together plans which state the what the 3PL will improve over time in order to continue adding value.
2. Modern IT Platform with a Focus on Innovation:
- Look at 3PL companies with a dedicated technology team who built the company’s technology offerings. This will allow you to receive updates in line with common customer feedback and industry changes, such as commodities changes within a Transportation management system.
- 3PL companies should also give you insight into their development road map, where they have been, and also how they are going to address upcoming trends such as eCommerce and the volatility of freight rates.
3. Invest in Talent Development and Retention
- Ask the 3PL companies you are evaluating what is their employee turnover rate when considering hiring one. Tenured employees will lead to legacy knowledge of your account, meaning that over time, the relationship will continue to add value as there is no time wasted continually on-boarding a new customer service rep to the intimate knowledge for your logistics department.
- Additionally, ask the 3PL companies if they have a development program to keep staff educated on the latest industry news, such as the new Hours of Service update on 7/1/2013 put in place by the Department of Transportation, which directly effected Truckload freight departments and carriers.
- Finally, are these 3PL companies acquiring new talent to move their company forward? You should see investments in building out integrated services departments and adding new talent in the technology side to keep up with the latest changes in available technology to decrease inefficiencies in process.
4. Provide Business Intelligence and Insights
- How many times in the last 12 months have you heard the phrase “Big Data?” There is a reason for this! With modern technology platforms and transportation management systems, 3PL companies can no longer get away with not providing to the c-suite and leadership business intelligence which allow you as the company to make smart business decisions around process improvement, what carriers to choose, what inventory to stock, and more. Ask 3PL companies to provide sample reports from their systems to show you the good stuff!
- Also, 3PL companies should also conduct pre-engagement analysis such as looking at historical freight invoices and showing you where you can save money by creating custom programs to drive bottom line savings.
Our opinion is that you SHOULD choose 3PL companies or logistics service providers that match solutions with current needs and who is also proactive in building long lasting relationships that see no diminishing value return over time. What factors would you include that we missed?