Outsourcing to Third Party Logistics Companies & Increase Your Ability To Focus
You might worry about outsourcing your company’s entire supply chain—not enough control, too many unknowns, not worth the risk, to select third party logistics companies.
But you can focus 100 percent of your attention on your core business functions and still keep a close connection with your supply chain through outsourcing logistics to one or several third party logistics companies, who can then collaborate and co-source with you, to create a custom-tailored system designed to provide the logistics and supply chain services your company needs.
Niche Third Party Logistics Companies to Manage the Entire Supply Chain
The decision to keep these functions in-house or contract with one or many third-party logistics companies is entirely strategic and can dramatically impact any organization’s bottom line. In fact, according to consulting firm Armstrong & Associates 86% of Domestic Fortune 500 companies use 3PLs for logistics and supply chain functions. Consumer packaged goods giant Procter & Gamble Co. doesn’t have to be sold on the benefits of using a third-party logistics companies; P&G uses 53 of them. Nestlé (42), Unilever (36) and PepsiCo (35) are also prolific buyers of services from third party logistics companies. The same can be said for automotive OEMS (GM uses 51 3PLs, Volkswagen 42, Ford 41), industrial conglomerates (Philips uses 32, Siemens 30, General Electric 29) and high-tech companies (Hewlett-Packard, to cite but one example, uses 39).
Types of Third Party Logistics Companies
Trucking companies that have expanded into warehousing
Warehousing focused companies that also own their own private fleet
Warehousing companies who have strong relationships with LTL and Full Truckload Carriers
Trucking companies focused on intermodal logistics solutions and Ocean Freight
Warehousing companies that specialize in partnering with Rail Freight Companies
Freight Forwarders contract with carriers to move cargo ranging from raw agricultural products to manufactured goods usually involving import and export
Freight Brokers usually are working on spot, volume, and spot quotes to broker Full Truckload
A logistics software company who only offers software such as Warehouse Management Systems (WMS) or Transportation Management Systems; can work with companies directory, or work with other 3PLs to offer software which is white labeled
A logistics company who offers transportation management software/systems while also providing integrated management services for administrative functions such as accounting, claims, and customer service
Do they have partners or trusted suppliers for services they don’t supply but you will need?
Overtime when necessary, and cost of overtime
Ability to add staff – labor pool
Ability to handle rush or emergency orders – what is the lead time necessary?
Who provides what information to whom – both ways?
What is the time frame for the information provided?
What is the method of transferring information? (Should always be in written/email form)
In what format is the information being passed along?
What information does the 3PL require from you?
What information will they provide you?
Review and define jargon and terms to be used.
Conflict resolution: the chain of command to solve problems
How long in business?
Warehouse: Asset or non-asset based 3PL?
Customer comments about the 3PL?
Core business/commodity specialty
Can they provide customer and other references?
Do they have experience shipping the same product as your company ships?
Do they have experience shipping to the same customers/consignees as your company?
What size customers do they handle?
What kind (corporate types) of customers do they handle?
Expectations of performance
Customer service: Use of VOC=Voice of the Customer techniques to satisfy your customers: on tome delivery to your customers
Transportation: asset/non-asset? How to handle the FSC (Fuel Surcharge?);increases
Timetables and deadlines for receiving and providing information
Timetables for receiving new merchandise
Timetables for shipping orders
Expected quantities of inbound and outbound merchandise.
Expected number of orders and units picked or shipped daily/weekly/monthly.
What is the division of duties? Review all aspects of information management and flow to determine who is responsible for what (for example: routing, backorders, invoicing, returns, POD tracking, QC inspections)
Who is responsible for routing, packaging, and shipping guidelines?
Who is responsible for charge-backs? Under what circumstances? What is the 3PL legal limit of liability? What does their insurance and your insurance cover and under what circumstances?
Who handles RMA: Returned Materials Authorization
Reverse Logistics Program
Create quantifiable standards and measurements of performance.
Does the 3PL subscribe to the VCF (Value Chain Federation) Clearinghouse (VCF is an organization that advocates trading partner alignment, retailer-supplier operating synchronization, and best practices by facilitating collaborative and educational opportunities and providing technology solutions to eliminate disruptions throughout the retail value chain. RVCF includes North America’s leading retailers, merchandise suppliers, and service providers)…. and do they use it?
CSA (Compliance, Safety, Accountability: US Department of Transportation: Federal Motor Carriers Safety Administration) compliance?
Price structure that is easy to understand and easy to check
Invoices formatted to your specifications with proper backup documentation.
Comprehensive price quote. Include all possible services you may require.
Finding a true partner
Do you feel they are honest, trustworthy and sincere?
Do you feel they have a passion for the business and a commitment to customer service?
Do they have the experience, education, and professionalism you require?
Bottom line: Do you feel you have found third party logistics companies that will truly partner with you? Do they have the right chemistry? Can you trust and collaborate with the chosen 3PL or 3PLs? Choosing the right outsourced third party logistics companies is a serious and large operational change. It is vital to take your time when vetting and choosing the right 3PL for your company’s needs. How many 3PLs does your company use?
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