opinion third party logistics
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Measuring up
According to figures from the Chartered Institute of Logistics and Transport (CILT)*, UK businesses are now getting a better deal from their third party logistics (3PL) providers than at any time. But not all companies know how to measure performance effectively, according to Bob Gill, partner at the specialist supply chain
consultancy Total Logistics.
n this article, Bob Gill provides businesses with a guide on how to ‘run the ruler’ over their 3PL. “While it’s true that most businesses resist the temptation to buy their transport services as a mere commodity, there are still some that don’t spend enough time procuring and measuring 3PL performance. “Sometimes the choice of 3PL is relegated to a purely paper or IT-based exercise, where cost is the prime factor. What needs to be considered is the fact that the 3PL delivering goods to your customers effectively becomes your brand ‘ambassador’, which has the power to build or destroy a company’s reputation. In many ways the choice of 3PL will have a big influence on a customers’ perception of a business. Most 3PLs in the UK provide world-class levels of service, but it is important to invest time to ensure you are getting the service that best suits your ethos and your pocket.
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To prevent the possibility of the relationship between a business and its 3PL becoming stale, it is important to review it on a regular basis.
“In our experience of running 3PL evaluations and contract negotiations for clients, here are our five ‘golden rules’ when seeking to appoint or evaluate a logistics partner.
What gets measured, gets done
“The number of on-time, in-full deliveries is an obvious and key measure for your 3PL. Used as an industry standard, this yardstick provides a simple gauge on the
40 ShD April 2010 www.PressOnShD.com
performance of a logistics provider, which in most markets should be above 98 per cent. One word of caution though, don’t always rely on your 3PL’s word for it when it comes to performance measurement; ensure the customer signs and dates receipts; don’t be afraid to call the customer directly to check on service levels.
Return of proof of deliveries
“Obtaining proof of delivery is vital for confirmation that the customer has the goods and it can also help in assessing a 3PL’s back office processes. Monitoring this relatively simple audit process provides insights into the attention to detail, network-wide performance and a 3PL’s ability to deliver on actions that are not mission critical. Additionally it can be used to focus greater attention of poorly performing depots or carriers.
Real time reporting?
“Knowing where goods are at any one time is an important part of the reporting process that good 3PLs will provide and helps businesses to manage their own supply chains and inventories effectively. Equally as important is the ability to exception report and warn customers of any deliveries that may be late. A prior warning enables you as the supplier to be proactive and manage the situation rather than dealing with a letter of complaint.
Keep it going
“Have you jointly set up relevant and workable lines of management reporting that suit your business? While one customer will need weekly or
monthly management meetings, with regular reports, another may require an in-plant team on site to ensure consistency of service. Both businesses need to work together to achieve an ongoing partnership.
The ‘X’ factor
“ ‘Chemistry’ between two teams can make or break a relationship. Ensuring the key manager from the 3PL is working for ‘you’ as much as for ‘them’ is an important consideration. Often it’s about the cultural fit between you and your 3PL – is communication open and honest? A good 3PL will be careful to get the balance right when it comes to ensuring the contract is profitable for them, while putting the investment into your business as a long-term partnership.
“Equally, if a customer takes too combative an approach to contract negotiation and nails down the 3PL too much, it won’t be able to make a profit and won’t want to go that extra mile that can often make the difference to a commercial relationship. “To prevent the possibility of the relationship between a business and its 3PL becoming stale it is important to revisit and review on a regular basis. It may be that your current 3PL is offering world-class service, but unless you measure them against like-for-like competitors, you will never know.”●
www.total-logistics.eu.com
* Third party logistics feature – Daily Telegraph, May 2007 / Client satisfaction with third party logistics (3PL) Suppliers by Gwynne Richards, direc- tor, Apprise Consulting Ltd and Chairman of the CILT Supply Chain Faculty Outsourcing and Procurement Forum.
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