opinion


3PL opinion l Best option?


Philip Edgecombe, managing partner at purchasing and supply chain expert Ryboc, examines the role of third party logistics (3PL) providers and whether or not they would be the right choice for your organisation.


here can be no doubt that the recent dramatic growth of 3PLs is due to businesses wanting to outsource their supply chain to those better equipped to manage, control and report on the movement of product from source to customer (and back again).


T


Quite how well a 3PL can serve your needs is never really known until they are fully ensconced within your business, by which time it can be too late.


Of course, 3PLs can provide other benefits, as I’ll explain in a moment, but the fact that there is now a shift back from the use of 3PLs simply shows that 3PLs are not good enough in delivering value-add to businesses. Service providers are always better resourced and qualified to manage certain parts of your business better than you can, but 3PLs need to be very closely managed or you’ll see the service degrade and the cost increase. The cost of this close management is usually only realised later in the process and is rarely included in the initial cost benefit analysis.


3PLs are never as agile and flexible as you need, so why use them? The answer is simple - they offer benefits to your business that you cannot achieve on your own.


The biggest benefit is usually the one that is overlooked, that of reducing your capital expenditure. Why invest in premises, plant, warehousing and staff when someone else can do it for you? And there are other benefits too, from reducing your transit times, improving your cost controls, getting better operational efficiencies and enhancing your capabilities (3PLs can


often help a very small business look very big) right through to having the confidence in your supply chain and the use of a ‘one-stop shop’ to solve logistics issues.


The only thing guaranteed in business is that organisations, regardless of their management, size, resources or profits, will repeatedly centralise then de-centralise in an effort to find the optimum working environment between control and cost. It is this continual striving for the perfect balance between do-it-yourself and ‘outsourcing to the experts’ that creates churn in the 3PL market. And what a churn it is, with 60% of companies saying that they are reducing or consolidating the 3PLs they use, but the overall percentage spend remains unchanged since last year.


Does this really mean that 3PLs are more expensive than they used to be? That depends on the service you receive and, as long as logistics and supply chain are viewed as ‘non-core’, there will always be a future for 3PL providers.


So, if there is a future for 3PLs, will you be outsourcing to them? That’s for you to answer, but if you honestly believe that parts of your logistics and supply chain solution are ‘non-core’ then you are probably better placed to outsource to a 3PL provider. Once you have decided to outsource, make sure you do it properly and that you fully understand what you receive for every pound you spend. Start by talking about your intentions and understanding your expectations of outsourcing in clear terms; use SMART (Specific,


Measurable, Achievable, Realistic, Time-


bound) objectives and relate them to your customers’ requirements rather than your own supply chain. Decide how you are going to select your 3PL provider and define your selection criteria based upon your SMART objectives. The usual selection criteria will include quality of service, cost, capacity, capability, geographical coverage, experience and case studies in your industry, processes and accreditation, reporting, cycle counting, communication, escalation and the ability to look after your stock as you want it cared for. Size, culture and financial strength of the supplier are also key to finding a good 3PL. Basing your request for pricing on your own defined objectives will help ensure the service you receive is based upon your customers’ needs. Use a formal tender process if you can and be rigid in the format of answers you require but also give the supplier the chance to improve your tender for you. Review the responses you get thoroughly and don’t be afraid to ask


"3PLs need to be very closely managed or you’ll see the service degrade and the cost increase"


question after question until you understand the suppliers’ thought processes. Visit potential suppliers’ central warehouses but also insist upon seeing some smaller depots too. Finally put a robust contract in place and make sure your 3PL solution delivers ROI in the same way as other service providers. Despite my misgivings, 3PL providers really do have a lot to offer. ● www.ryboc.co.uk


www.PressOnShD.com March 2012 ShD 25


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56  |  Page 57  |  Page 58  |  Page 59  |  Page 60