In my last few posts, I’ve focused quite a lot on what can go wrong when outsourcing, the pitfalls to avoid, things that can drive companies to return to in-sourcing, and similar points which, while I don’t consider them negative (they simply reflect the reality of learning from mistakes), have perhaps taken a glass-half-empty perspective on the outsourcing topic.
Lets’ Raise a Half-full Glass
In this short article, I’ll redress the balance a little by highlighting a few practical guidelines which, if adhered to, will increase the chances of a successful logistics outsourcing alliance.
So … No more preamble … Here come the tips—five of them, in fact.
- Map your processes before you outsource them: Outsourcing logistics is mostly about service, meaning that it’s entirely possible to outsource without being completely sure exactly what you are handing over to a third party. An extensive process mapping exercise, prior to supplier selection, should help to prevent this issue. Successful logistics outsourcing is built on detail—the more, the better.
- Remember change management and stakeholder buy-in: A decision to outsource will typically involve some fairly significant changes for your management team, workforce, customers and perhaps even suppliers too. Just like a process mapping exercise, providing for some change management in your outsourcing project might not be cheap, but the expense is well worthwhile. By engaging all stakeholders in the process and attaining their buy-in, you will reap the rewards during and after implementation.
- The cheapest option could turn out to be the costliest: At one time, it was common for the primary outsourcing driver to have cost reduction and companies often looked for the cheapest provider. This has turned out to be the undoing of many a partnership. If outsourcing is the right solution for your company, look for a provider that will give you high-quality service at a reasonable price and can keep your risks to a minimum.
- Outsourcing should not be considered as a customer/supplier relationship: For a truly successful outsourcing solution, your company should be prepared to work with a 3PL provider on a real partnership basis. This will garner far more success than a relationship in which your company sees itself as the master/customer and the 3PL partner as the servant/supplier.
- Be careful about the length of any contract you enter into with a 3PL company: Things change fast in the supply chain enterprise. It might be hard to maintain satisfaction over the full term of a lengthy contract. Consider a shorter-term initially, with a written-in option to extend … and don’t forget to include an opt-out clause too.
- Don’t invite too many 3PLs to tender: Six or seven 3PL providers are more than enough to evaluate by way of RFT. Any more than this and you run the risk that some of your chosen candidates will decline your request. There are a number of reasons why this might be the case, but the two primary ones are as follows:
1) Inviting too many 3PLs to tender creates the impression that your company has not done its homework properly.
2) Many 3PLs will not commit to the effort of responding if they know they are up against a lot of competition.
Remember, it takes a lot of man-hours for a 3PL to prepare and draft an RFT response, so it’s not a task that will be taken lightly. If a service-provider thinks it’s dealing with an unprofessional client or that it stands little chance of winning the contract, it’s unlikely to respond.
To save your company from falling into this predicament, start the selection process by sending out an expression of interest, rather than an RFT. Then you can shortlist five or six preferred 3PLs from those that respond to the EOI, and take them through the full tendering process.
Here’s To Successful Logistics Outsourcing
Outsourcing can add great value to your enterprise if you make the effort to build a solid alliance with the right provider. By keeping the six tips from this article in mind, you can ensure your business against some of the more common mistakes—and smooth the path to successful logistics outsourcing.
Editor’s Note: This post was originally published in June 2015 under the title, “5 Quick Tips to Successful Logistics Outsourcing.” It has now been revamped and updated with more comprehensive information.