Any logistics network includes vendors, warehouses, distribution centers, service operations, transportation routes and hubs, carriers, freight forwarders, importers, exporters, and more. The idea of optimizing and managing all of this can feel overwhelming.
The relationship between a company and their 3PL provider should be about the value being provided and the results gained by outsourcing the logistics operation. The goal of optimization is to reduce costs while becoming more efficient.
We often think by simply getting advice or upgrading our systems that our goals will ultimately be accomplished. But so many forget about the role of communication in this relationship.
The 3PL relationship of a company should not just be about the invoices and the cost. You must remember that the company you hired for handling sea freight, air freight and logistics will ultimately affect your bottom line. Communication allows you to avoid issues that cause you to lose trust in each other. Communication is more than about asking the right questions at the right time to clarify any existing doubts. As such, it can be difficult to know how to communicate.
What is Logistics?
Logistics is that part of supply chain management that plans, implements and controls the efficient, effective flow and storage of goods, services and related information from the point of origin to the point of consumption in order to meet customers’ requirements. It is about getting the right product, to the right customer, in the right quantity, in the right condition, at the right place, at the right time, and at the right cost.
There are many elements that play key roles within a logistical structure, for example, prices and volumes are reviewed to make sure they fulfill what it is being required. Quality assurance deals with the precision of what is being acquired and shipping and handling regulates and control the time that takes to move the items from the shipping point to the delivery point.
Logistics play a crucial role to ensure high levels of productivity, since it can reduce the time it takes to get what is being demanded in the hand of those that are manufacturing or delivering the goods and services to the final customers.
What are Third-Party Logistics (3PL) Services?
A third-party logistics service provides various logistic services such as storage, distribution, transportation within the supply chain. In logistics and supply chain management, 3PL refers to an organization’s use of third-party enterprises to outsource distribution, warehousing and fulfillment services.
Companies that provide 3PL services allow various e-commerce business owners to accomplish more with an infrastructure that allows them to finish their retail orders properly and quickly. The organizations that provide 3PL services are a vital part of supply chain management which has helped thousands of businesses worldwide to grow.
The logistics management process begins with raw material accumulation to the final stage of delivering goods to the destination. By adhering to customer needs and industry standards, logistics management facilitates process strategy, planning and implementation.
What do 3PL companies do?
Third-party logistics, or 3PL, is used interchangeably with fulfillment warehouse or fulfillment center. Companies that provide 3PL services offer many of the same services as order fulfillment companies. These services include:
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Storing & Warehousing Services
Almost all of the 3PL companies provide services that include storing and warehousing services. This is one of their principal responsibilities is to supervise the secure storage of items until they are required elsewhere.
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Distribution Services
Another service offered by the 3PL providers is distribution. A 3PL company will transport goods from the provider’s storage to the end customers, other storage facilities or warehouses. As part of distribution services, the 3PL company provides services such as cross-docking, intermodal transport, brokerage, drop deck, and lowboy transport, full container load (FCL), less than container load (LCL), less than truckload (LTL), and truckload (TL). And these are all based on AI mapping and modeling. Therefore, customers have complete transparency about the information of their products.
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Order Fulfillment Services
Order management and fulfillment includes receiving purchasing requests and orders from the customer and managing the inventory and deducting stock levels from the received order. Also picking up the ordered product and packaging and finally distributed to the final receiver. All of these are done by the 3PL providers.
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Freight Forwarding Services
Sometimes some of the 3PL companies offer freight forwarding services that can include renting out space in distribution fleets, managing clients and providing various interactions, creating schedules and tracking successfully. Also, freight forwarding services are operated with a variety of modes of transportation, including land, sea and air.
The Critical Role of Communication in 3PL
Communication is an essential element for successful 3PL management. Establishing proper communication brings transparency between the logistics provider and the company. Communication can also extend in the form of a contract enclosing the expectations of services to be provided, goals to be achieved, targeted milestones, escalation process, and point of contact information. It is advised to have dedicated staff in place to handle the entire communication with the provider. Also, clearly defining the contract’s escalation process helps avoid any confusion in case of missed, late, or damaged delivery.
Communication is key to successfully managing 3PL relationships.
- Choose a 3PL that will assign your team to a single, dedicated point of contact for all questions and concerns, so that you always know who to turn to when issues arise. Do the same for your 3PL provider.
- Promote honest and open communication so team members feel empowered to highlight any issues they foresee, and are never afraid to say when things don’t go to plan.
- When managing 3PL relationships, be sure to praise the team as a whole when goals are met.
Ways in Which Communication Helps in Successful 3PL Relationship:
- Establishment of Expectations
It is essential that you clearly define what your expectations are from the 3PL company. There are numerous factors to be reported and measured. A focused set of KPIs should be the ones that matter most and should be concentrated for objective achievement. The 3PL partner’s vision and focus should always be on improving your company’s profits and not simply creating reports.
KPIs should break down the goals into a granular form. Understand or build ways you can work together with the logistics provider to reach a certain benchmark. Customer satisfaction should always be a primary KPI. It is advised to keep an eye on the KPIs and review them from time to time as per changing needs and real-time issues.
- Examination of Contract
Contract disputes are one of the biggest reasons for a breakdown in relationships. The best way to avoid them would be to examine the contract thoroughly when it is being drafted or sent to you. Check all the details. Then, contact the 3PL company and clarify any and all points that you have doubts on. Make sure that there is no vagueness or uncertainties. Such measures save you from future problems which might arise and affect the 3PL relationship.
- Explanation of Problems
One of the biggest mistakes in 3PL outsourcing is the reluctance to share the necessary data. This results in a partnership that does not work at its best, as bonding and culture matter. Until there is good chemistry between a company and its 3PL partner, operations will not be optimum and seamless. Providing all the necessary data and trusting that your 3PL partner will use it to give you the best service is of utmost importance.
- Discussion of Future Goals
This is a dialogue of sorts between the solutions provider and the company that has outsourced to them. It is not simply reporting metrics. This is where many 3PLs drop the ball. This is where you have ongoing communications about what is going on in the operations on a day to day basis. At a tactical level, there is generally a manager talking to a single point of contact every day about operational issues. Just as important, there is a strategic conversation that must take place, at least monthly, between a senior executive from the 3PL and the executive decision maker. These strategic discussions will ensure alignment between the two entities and it will also ensure expectations are clearly understood and performance is explained.
- Evaluation of Performance
Reviewing the progress made and the current status of the relationship between your company and the 3PL provider is essential. You need to know if the agreed conditions and deliverable have been made. Additionally, changes in the market, laws, and strategies may affect the logistics going forward. Evaluation enables you to update your plans together and eliminate any potential for disputes down the line which can affect the 3PL relationship.
The FLEX Logistics Team is Here to Help!
The primary goal is to deliver any order at any cost. On occasion, this might even be done through individual shipments. Therefore, flexible fulfillment has become a logistics strategy seen more often in firms in sectors as diverse as the consumer goods, food and retail industries. It is time for your distribution centers to work in unison to deliver more orders.
Make fulfillment stress-free for your customers, and win both new and repeat business. This past year saw a number of customer engagement trends accelerate. E-Commerce took off as consumers became comfortable shopping for more, and more types of, goods from their homes. Manufacturers learned how to sell directly to consumers, and many traditional retailers doubled down on their already effective omnichannel approaches.
Our team understands the importance of getting your products to the market. That is why we aim to understand your business and build lasting relationships with you and your team. Whether you are looking to add a new warehouse to your existing operations, growing and need to increase your distribution efforts, or starting a new company, FLEX has the solutions to meet your supply chain needs.
Contact us today to discuss your current and future warehousing and logistics needs. We will work together with you to understand your requirements and develop a solution that will set you up for future success.