I see many clients of 3PLs who are very keen to ‘go to the market’ to find what they believe will be a better 3PL solution for their organisation.
Usually, these 3PL clients are dissatisfied with their 3PL’s performance in one of more of these areas of the contract:
1. Costs are higher than expected.
2. Service is lower than expected.
3. The 3PL seems to ‘passive’ and not pro-active enough in bringing improvements to the contract.
4. Communication and/or reporting is not timely or accurate.
This fairly common issue came up in discussions at our recent Supply Chain Secrets Seminars in Brisbane, Sydney and Melbourne.
When clients come to me faced with 3PL contract performance, the last thing I suggest is ‘Divorce’.
Yes, I do feel like a marriage Counsellor at times, but the analogy is actually not that strange.
The first thing I point out to dissatisfied 3PL clients, who I’m glad to say are in the minority, is that there are many things to consider first, before terminating the 3PL contract.
Just imagine the disruption that will be caused to your organisation by changing 3PLs. Service impacts, cost impacts, disruption whilst moving, let alone the effort and expense required in sourcing and selecting an alternative 3PL.
Please don’t misunderstand me. Sometimes, on rare occasions, a ‘quickie’ Divorce is the right solution. I’ve helped a couple of clients through that recently. And the 3PLs were just as happy to part I might add! No, I just urge caution and an attempt at ‘reconciliation’ first.
These can often be linked to:
1. Changes in the client organisation’s requirements. Perhaps due to physical changes in product flow and volume.
2. Poor information, analysis and communication prior to establishing the contract.
3. Changes in management in either organisation and changes in expectation.
4. Inappropriate pricing models and KPIs.
When 3PL relationships start to go ‘off the rails’ it’s generally not the fault of just one party. But the good news is, that it’s frequently not too hard to get things back on track.
If you think you might get value from a 3PL Contract Performance Audit, feel free to contact me directly. We’ve seen it all don’t worry. And Yes, we provide this service for 3PLs and clients of 3PLs.
Please feel free to comment below based on your own experiences, or if you have a question just contact me directly for a confidential chat.
P.S. We actually have a really effective 3PL Contract Benchmarking tool. Just in case you are worried about contract performance.