Are you struggling to manage your supply chain operations in-house due to rapid growth? Are you unsure how to outsource your warehousing and transport logistics functions? What is a 3PL and what can it do for me? We will guide you through the options and provide a Roadmap to your best solution.
How to outsource successfully to a 3PL – click here to download the whitepaper.
Are you looking to gain insights into how to start with WMS, how to increase your warehouse storage capacity, or what strategies are needed for effective logistics distribution? Download these operational guides for FREE from our Logistics Knowledge Centre.
See the links to our whitepapers:
- How WMS can solve your warehouse challenges.
- Understand the importance of warehouse storage capacity and how to optimise your storage.
- How to optimise your distribution network strategy and design.
What is involved in outsourcing to a 3PL?
Third-party logistics (3PL) companies allow you to outsource all or part of your supply chain operations. Their services can include some or all activities, from inbound transport to customer deliveries. You may need services to support all your warehousing and distribution operations or you may just need ad-hoc packaging and labelling services. Companies should invest time and effort in selecting the right type of 3PL partner: there is a 3PL service available for every requirement.
What you will learn from the whitepaper:
Why do companies outsource?
Many manufacturers and distributors choose to outsource all or part of their logistics operations to benefit from shared facilities and the expertise of specialists. As your business expands, you may need support and advice about expanding into new markets where you have limited or no experience. You can take advantage of the latest state-of-the-art logistics software solutions that provide flexibility and scalability. There are clear benefits to accessing shared facilities and the potential to save costs. Companies outsource to 3PLs to avoid large capital expenditures.
What types of 3PLs are out there?
There are many different types of 3PL operators, large and small. Global and major national distributors provide a full menu of services, often using sophisticated technology and providing value-added facilities such as freight forwarding and customs clearing. Others may focus on only one or two industry sectors or by type of service, e.g. parcel courier or e-commerce-specific operations.
What types of commercial arrangements are available?
Commercial agreements and contracts with 3PLs vary a lot. Most use an overarching legal Master Services Agreement (MSA), often supported by a Service Level Agreement (SLA) that details day-to-day activities and obligations. Financial arrangements also vary: some contracts are closed-book where pricing is activity-based and the management cost is embedded in the price. Other 3PLs may offer more transparent open-book pricing where management fees are declared, and gains and losses may be shared. A hybrid option may also be available. Careful consideration is required when negotiating fees, as there could be hidden items.
Are there any possible pitfalls?
Unfortunately, yes. Partnership agreements require some planning, research and attention to detail. Hastily written specifications lead to poor contracts. Consideration needs to be given to structuring communication channels and how the 3PL’s performance will be measured. Not holding 3PL accountable for meeting their SLA terms can lead to complacency, deteriorating service quality and customer dissatisfaction. Over-reliance on a single 3PL provider without contingency plans or alternative options can create risks.
What does a good 3PL partnership look like?
A successful 3PL relationship will be a partnership with mutual benefits and incentives for both parties; cultural fit is important. Misalignment in values, priorities and work culture can lead to conflicts and difficulties in collaboration. The best and most enduring relationships can last through contract renewals and market disruptions. Having contingency plans, diversifying partnerships and maintaining open lines of communication helps navigate the challenges.
Managing the tender process
There are tried-and-tested steps in the sourcing of 3PL services. There are also areas where it can go wrong. Firstly, your specification of the services required must be clearly defined and complete. It is often advisable to use a two-stage process using a Request for Information to select pre-approved bidders. Best practices in issuing a Request for Proposal (RFP) include providing the approved bidders with data and templates to complete to ensure fairness in the adjudication process. A fair and reasonable time should be allowed for responses. The bidders should be shortlisted by assessing their bids against pre-set criteria. Constant communication throughout the sourcing process is recommended.
Discover how to outsource successfully to a 3PL and learn how our logistics outsourcing consultancy can help you.
The Supply Chain Consulting Group (SCCG) has a track record of success in helping organisations outsource their supply chain functions to many different 3PLs.
Why SCCG?
With over 700 completed projects in more than 50 countries, our experienced consultants are constantly hands-on with every project, ensuring operational efficiency to innovative technological integrations.
Are you interested in warehouse management systems or how to manage your storage capacity? Glance at our range of logistics whitepapers – free to download.
The Supply Chain Consulting Group Ltd is one of the leading supply chain and logistics consultancies, synonymous with high standards and a strong reputation for building sustainable partnerships and providing detailed yet pragmatic solutions and implementable strategies to any aspect of a company’s logistics and supply chain perations, with clients around the world.
PR and company contact:
Andreea Boicu
Marketing Executive
The Supply Chain Consulting Group
01926 430 883
andreea.boicu@sccgltd.com
Twitter: @sccgltd
Facebook: @The Supply Chain Consulting Group
LinkedIn: @The Supply Chain Consulting Group
