All Third Party Logistics Providers Are Not Created Equal

ALL 3PL Not Equal
My initial involvement in the Third Party Logistics business was early in 1993 when I became the first Director of Development for Tibbett & Britten Group in North America. Over the next several years the TBG business grew from 20,000 square feet of facilities in Canada to more than 20 million square feet across North America with annual revenues of over $2 Billion.

More than 20 years later the Third Party Logistics or 3PL business continues to grow around the world and therefore logistics professionals at almost all firms? are quite often tasked with selecting the best partner from a growing number of 3PL providers.

Over the same time period the use of centralized procurement has also grown dramatically, driven by increasing financial and code of conduct ?controls especially in publicly traded organizations.

As a supply chain professional I’m a b?ig fan of procurement when used prudently and for the appropriate commodities and services. However having been witness to numerous Third Party Logistics procurement trainwrecks, I have to say that ‘When it Comes to Third Party Logistics Procurement Should Take Back Seat.’ (watch out for this upcoming post if you want to learn more and see some instructive examples that go beyond the scope and intent of today’s post)

My goal today is to highlight some of the important factors and differences to look for when selecting and then comparing retail 3PL providers and how you can best identify and measure these key traits in potential 3PL partners.

Support All Business Relevant 3PL Services
High Systems & Interface Capabilities
Real Continuous Improvement
Wide Scope of Retail Services
Provide True Business Value Add

To assist those tasked with the retail and consumer products 3PL selection process I’ll now review each of these factors briefly for greater clarity.

Support All Business Relevant 3PL Services

When selecting potential retail or consumer products 3PL providers this is one of the first factors you will want to ensure all providers that you ask to bid on your business can meet. First off if you’re a retailer you need to ensure that the providers selected are currently serving other retailers. Can’t emphasize this point more strongly as retail logistics is a different world and you don’t want to have a provider learn the retail business at the expense of your stores and customers.

And for consumer products manufacturers with growing e-commerce and drop ship requirements, demonstrated e-commerce fulfillment capability is a must.

In addition to veryifying all potential provider’s retail pedigree another key capability to ensure is their e-commerce capability, especially when it comes to high volume e-commerce operations.

High Systems & Interface Capabilities

Systems are mission critical in retail/CPG logistics and becoming even more so with the advent of omni-channel commerce in support of growing demands for distributed order management across multiple channels and locations.

But even before digging into these advanced capabilities, it’s important to ensure all potential bidders have solid systems in place to support both B2B store distribution as well as B2C e-commerce.

Systems and operational processes are different for both these requirements and just because a provider can support one of these needs doesn’t mean they can do them both well. And even if you’re not already doing e-commerce yet, this reality is in almost all retail & CPG company futures for firms that intend to grow and prosper in the consumer omni-channel world.

Real Continuous Improvement

Once a 3PL provider has won your business and successfully completed the start up and on-boarding process it’s important to have a provider that is always attempting to improve your logistics from a service perspective and prevent cost increases.

Unfortunately there are a number of providers out there that the only thing you’ll see from them before the next renewal timeframe is your monthly bill and you should definitely expect more from your 3PL provider.

Early in the RFI/RFP process you need to get specific with your group of potential providers and ask them for key statistics from their Continuous Improvement programs.

Key numbers you can ask for are how many Continuous Improvement ideas have their people submitted, how many of these were implemented and what magnitude of benefits resulted from their Continuous Improvement program?

For example, at SCI Logistics since January 2013 our people have submitted 3,121 improvement ideas from which 1,431 projects were implemented resulting in significant improvements.

Wide Scope of Retail Services

In addition to the B2B store distribution and B2C e-commerce fulfillment services described in the first point above, there are a number of other logistics related services retailers need across their organizations.

Marketing/POP Materials – Signage, brochures, kitting, promotional material, POP, end aisle and product pallet displays assembly, storage, loading, pick/pack, fulfillment and delivery.

Store Fixtures – Receipt, preparation, storage and delivery of all types of store fixtures for new stores. Pick up, transfer, storage and delivery of retail store fixtures on a ongoing basis to support seasonal and store operations’ needs

POS – Point of Sale sytems and hardware receipt, commissioning and installation into retail stores and reverse logistics for used equipment. Ongoing technician support for all POS related equipment and supporting devices such as PCs, printers, weigh scales and debit payment devices.

Call Centres – Effective e-commerce programs require professional call center support in both official languages to ensure customers get the service they need whether just a question of completing transactions or to resolve product issues and/or returns.

Many retail firms don’t syngergize these services by working with one provider that can provide all but by doing so retailer and consumer products companies can reduce transportation costs, damages, mis-directs and store deliveries by consolidating all of these required services with one provider.

In addition, simplified billing, payments and procurement activities can also reduce the costs of managing the logistics aspects of the business. Last but not least working with one provider (such as SCI Logistics) who can provide all of these services gives retailers and consumer products companies a true partner relationship ensuring that their logistics performs at or even beyond required levels.”

Provide True Business Value Add

There are many ways the right Third Party Logistics provider can add value to your business throughout your relationship, not just during the inital sales process and in advance of renewal. Here are just a few value added features and activities proactive professionals should look for:

Process Driven Start Up Methodology
Ongoing Productivity Improvements
Wide Range of all Required Services
Ongoing Continuous Improvement (proof-based)
Brings Innovation, Ideas & Opportunities
Drive Synergies Across Clients and Industries

The next time you’re tasked with selecting a third party logistics provider I hope you will give consideration to including all of the factors highlighted in this post during the selection process.

By utilizing such a rigorous and complete criteria in support of finding your best potential 3PL partner, as you start to analyze the responses it should become rapidly apparent that all third party logistics providers are not created equal!

Jeff Ashcroft

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