One thing is to find a third-party logistic provider but another is to be partnering up to realise the business’ mission. A step has been taken but a larger step is to be made… is the provider the best match after all?
(picture credit: Ian Schneider)
We have earlier covered what the benefits are to utilise 3PL providers: “The top 2020 reasons to outsource to a 3PL” and “Why e-commerce businesses should outsource their warehouse to a 3PL provider”. However, all 3PL providers are different from each other and the same can be said about the service level agreements that they offer. We have now more than 20 years of e-commerce experience that gives us the advantage to see the longterm aspects from partnering up with 3PL providers. There doesn’t exist bad or wrong 3PL providers as such in our humble opinion but surely unbeneficial relationships with no future. Through an open and honest dialogue with our 3PL partnerships, we have identified how a good match is made.
In our process, we use a model named ARBAR-steps as a tool for communication and step-pointer. Eventually, the process will continue to be repeated and therefore it is fundamental to understand the steps. When repeating the process then the level (depth) of each step might vary from time to time, nevertheless, it is essential to check if all aspects are covered.
Below is a walkthrough of the steps from the ARBAR-steps model with the 3PL provider match-making objectives included. It is based on the bonding between parties and without a fixed timeframe.
Step 1: Alteration
Before starting the 3PL search or reviewing current it is Alpha & Omega to convert all the business’ hard and soft information into numbers, figures and statements. It adds value to the whole process and supports the objectives. However, a business’ needs and wishes might change depending on inner and outer factors but this is also a learning affair. While looking at the supply chain then the warehouse, freight logistic costs and the sub-contributor assets must be identified. Time also needs to be considered and what resources it releases when partnering up with a 3PL provider. It can make sense to team up with a consulting business early in the process to utilise their resource-network. Or for extra support for negotiating price, terms and conditions on a later stage. There is no clear procedure when it comes to contacting a 3PL provider. In many cases, different kinds of RFP (request for proposal) documents are used based on a general search. This creates somehow a cold relation from the beginning receiving a RFP. A RFP typically limits only to functional costs. Therefore this doesn’t give an accurate picture if this is truly beneficial for both parties. It can unfortunately easily result in wasting valuable time and making awkward exits. To avoid this then a business presentation is a great approach that allows the potential 3PL provider to connect with the business’ foundation.
Step 2: Reach-out
Having a business presentation that rests on current numbers & figures and the business foundation eases up a conversation with a potential 3PL provider. There are several ways to get in contact with potential 3PL providers that don’t consist of a quick search on the internet. The best suitable providers are necessarily not the loudest nor the one’s on the top in the search engine since this might be due to marketing qualities. Picking up relationships is a valuable part of the process. This should weigh as much as the rest and it reflects one’s brand as well. Even if a partnership isn’t the outcome then an impression of each other is the result. The global market is big, wide and deep but due to networks then all businesses are more connected than ever before. Word-of-mouth and recommendations are highly valued and turning for advice in our network is a natural habit. Therefore the brand reputation needs to be taken good care of. Normally well-functioning businesses have no needs to speak badly about others. Reading business case studies from potential 3PL providers gives an indication eventually if there are similarities and can be used to reinforce a dialogue. These can normally be found on the 3PL providers own websites and blogs. It is also possible to make one’s company case identified/unidentified and upload either on own channels or via an external company: news media, forums, blogs, advisor and consultant bureau. During the whole process, it makes great sense to minimise any doubts by teaming up with business insiders. The rule of 3 applies is recommended when scouting on your own. When a presentation of both or all parties have been done then it is essential to gain hard data. A 3PL provider should be able to indicate the specific ways on how to save money using their services.
Step 3: Balance-in
During the process, the internal team can contribute to the overall outcome and also since they need to adapt to the changes coming as well. When including the team many more aspects will rise to the surface and this adds to the dialogue with the 3PL providers. A task is to compare both parties values and culture since this will have a huge impact on the partnership. Values and cultures are not something that suddenly can be changed compared to other elements. When dating a potential 3PL provider it makes sense to look at the network-family behind. To get a more accurate picture of what it will say to continue with a relationship. A relationship should be stable and as evidence, a proven record of other long term-relationships is a good indicator. The reputation counts as well as an indicator and would normally be measured in volumes. Each partnership should be handled uniquely but all relationships should rest on the same principles. The quality and quantitative proposition delivered by the 3PL provider should impact positively on one’s sales. A general RFP document only based on the lowest service costs can limit one’s business and harm the customer service and sales. It is worth looking into the future and thinking about scalability opportunities. However, it is never without costs changing a 3PL provider. Therefore an investment in the possibility for the relationship to evolve is something that should be considered. Will the whole package contribute positively to the overall mission and vision is important to evaluate.
Step 4: Agreement
There will always be an agreement between both parties either it is to agree to continue or say thank you but no thank you. If proceeding then it is time for the negotiation. All businesses are different, nevertheless, it should be mutually beneficial. An agreement that secures the needs and wishes of the 3PL provider’s client will be covered through a service level agreement. An offer will be made and it shouldn’t contain by now any shocking details. Again it could make sense to team up with industry insiders to negotiate reasonable prices, terms and conditions. An outer perspective gives valuable inputs to the process. All in a good tone taking future elements as e.g. discounts into account that can be used for the next update of the service level agreement. Common KPIs for the partnership are valuable for the continuous dialogue and not only when the service level agreement is to be discussed. There should be a clearly defined timetable for meetings to discuss the status quo and the partnerships’ progress. There might occur a situation somehow sometimes that will eventually have negative consequences. However, then it is important to be transparent. If it is the fault of the 3PL provider include them in the goodwill or compensation process. Involvement is an underestimated tool to empower and give responsibility. The outcome might not only solve the situation but strengthen the partnership. Even when something is considered as resolved then it should be investigated so the cause of the problem is solved and not only the symptoms. It is indeed valuable to learn from mistakes but it is costly to make them twice. Clear communication avoids the majority of any issues.
Step 5: Repeat
The process is to be repeated and at different levels of depth of each step to secure that the partnerships contribute to a shared success. It is a never-ending loop and it is important to gather data and information that comes up during the process. To act on the data and information there needs to be an acknowledgement. When this is done it supports the communication with the 3PL providers. Therefore insist on regularly scheduled meetings and kindly request to speak with people from various departments. The delegated business contact person is very valuable but it is useful to include staff from other departments when possible e.g. the warehouse. In cultures where senior management attends from time to time is reinforcing the general tone to deliver results. When that is said then partners should give each other time and space to focus on what brought them together. When time is then successes should be celebrated to create unity.
Our biggest takeaway from the process is that it repeats itself on different levels going deeper into details of the partnership’s DNA. If the foundation of the partnership is built on solid principles then our experience is that it will never fail. Everything has its time but long-term relationships should not be underestimated. The perfect match-making exists since we have experienced it ourselves. Mutual respect is the finest wine out there. Utilise the strength in a vast network and team up with industrial insiders. We invite you to join our growing network and share the advantages and symbiotic relationships.
Stay up-to-date and connect with us on LinkedIn. We are friendly Vikings both when it comes to formally and informally meetings. Hit the “Lets talk” button so we can start our journey together. Glory and honour await us! Friendly regards, the Viking Consulting team