April 23rd, 2021

Why 3PL Relationships are Fraught—And How to Manage Them

Why 3PL Relationships are Fraught—And How to Manage Them

Third-party Logistics (3PL) companies are often accused of providing such poor service that their relationships with clients break down. In reality, though, there’s a host of reasons why 3PL relationships turn sour—and very often the blame can be laid at the door of the client. Let’s take a look at three typical client issues that can easily send a 3PL relationship off the rails. Fix These Issues to Improve Your 3PL Relationship 1.  Failure to Communicate When you go to the market for 3PL services, are you being clear about what your service expectations are? As you’re going through the RFP/RFT process, you need to ensure absolute clarity, so the bidding 3PLs understand the specific outcomes you seek from your logistics outsourcing. First and foremost, communication and clarity of expectations are very important. Make sure that you provide lots of detailed information about your products and customers so that the bidders have a full understanding of the operation to be outsourced. Right from the start, make sure that you state very clearly: The elements of your operation that are to be outsourcedWhat your expectations areHow you plan to measure the contractThe KPIs that you are going to use Be upfront about how you want the relationship to work, and I would suggest that you include a draft contract during the bidding process. What to Include in a Draft Contract The draft contract should set out: How you want to manage the relationship contractually and commercially,All of the KPIs that you expect to be measured,The targets that you want to achieve. Maybe you also want to think about some sort of gain share or bonus mechanism to negotiate into the contract. Perhaps you want to set some minimum targets that you want to be met. If the 3PL drops below those, it has to rectify the situation. If it consistently reaches above those targets or comes up with some improvement programmes to reduce costs, you might want to offer a bit of a bonus or a profit share. 2. Failure to Share Data Another major issue is that people don’t share data enough. When I see 3PL relationships going off the rails, 55% to 65% of the time it is because accurate data wasn’t being shared sufficiently from the outset. As an example, we are currently helping a couple of clients with 3PL issues, and I can tell you that...

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