How to go about selecting a 3PL?

Tompkins Inc has a great web presentation that outlines some of the key steps that any firm undertaking the journey of selecting a 3PL must consider before taking that step.
Jim Tompkins outlines the following warning not too far into the presentation:

“Taking the plunge into outsourcing strategic non-core functions without a robust process will not only prevent an organization from achieving the benefits from outsourcing, but will also result in a major setback to the organization.”

The 3PL Outsourcing life cycle consists of 6 major segments under the following classifications:
Understanding the 3PL providers

• Requirements/RFP


• Selection

Creating the partnership

• Forging the Legal Relationship


• Implementation

Transition into Operations

• Establishing the Relationship


• Managing the Outsourcing Relationship

Each of the segments are explained in a concise manner that I won't bother to repeat except to glean some important takeaways from the presentation. They are:

• The better the two parties are at forming the legal relationship, the less likely it is needed later


• Involve key players from company and provider from the start


• Develop a detailed document and then put it away!

I take this point to mean that even though everything about how the relationship might be detailed on paper but when it comes to running the whole shebang focus on execution rather than playing it by the book.

The legal relationship should outline the pricing model, payment terms, desired service levels and measurement criteria, a schedule for transition and last but not the least a dispute resolution process
There will be problems at Go-live.

The above is also known as Murphy's law.

Be aware that there will be people who complain and don't like the new way of doing things

The above is indefatigable human behavior and if you're not planning on how to work through something as predictable, then you've got a real problem on your hands.

Jointly develop continuous improvement solutions
Consider a shared incentive program

Also known as gain sharing - a number of 3PL contracts are structured this way.

Client must be willing to accept the 3PL as part of their own company

If its a client process that is being handled by a different firm, there will be a desire at least initially to keep control of the process as much as possible - also called human behavior.
Tellingly, the presentation includes a tip for client managers of 3PL relationships:

Managers of 3PL relationships need to be collaborative problem solvers who can address performance issues and results, and discuss corrective action and the need for improvement, rather than telling the 3PL how to run the business.

Categorized as: 3PL_, Supply Chain Management_
Tags: 3PL, Outsourcing, Outsourcing Relationship

posted by AJ @ 4:50 PM