If your supply chain is going to involve a logistics company, properly vetting that company will determine whether or not your supply chain adds value or just hobbles along.
By Jamie Wyatt
May 19, 2013
An efficient, uninterrupted supply chain is the bedrock of creating a successful company. It permits every other operation to press ahead at full steam without concern for being held back by stuttering operations.
If your supply chain is going to involve a logistics company, properly vetting that company will determine whether or not your supply chain adds value or hobbles along. The tips below will give you a solid benchmark of what you should be looking for from a 3PL.
First and foremost, can the 3PL efficiently scale their operations to fit your changing needs?
Bi-directional scalability directly influences how efficient your supply chain will be. You’re doubtlessly striving to grow your company, but the fact remains that there will be ups and downs to business. Demand might contract for any number of reasons. You need a 3PL that can rapidly scale down the processes within your supply chain.
Conversely, you also need a logistics provider that can handle sudden spikes in demand without skipping a beat. Growing pains happen for everyone, but if you find a 3PL that has already experienced them with another company, you’ll spare yourself the brunt of the problems.
Find a 3PL that already has clients both larger and smaller than your organization. A 3PL that can scale will constantly be making small adjustments, e.g. aggregating or multiplying shipments, as your requirements move in one direction.
Technology Platform Innovation
Shipping and procurement might seem like low-tech pieces of your operations, but logistics providers live and die by the efficiency that they deliver. Having a state of the art technology platform backing up their business gives them the best chance for optimization.
Cloud integrated platforms have recently come to prominence and are affording logistics companies radical new capabilities and capacities for control. A solid 3PL will have cutting edge system that allows them to give you real-time feedback on your freight and supply chain operations.
Comprehensive Transportation and Warehousing Options
Whether you’re working with an asset-based or nonasset-based logistics provider, there should be a plethora of shipping and warehousing options available to your operations.
Options create opportunity within your supply chain. The more options that a logistics provider can deliver, the greater the chance that they will be able to select the lowest cost provision. In line with the last point, an effective technology platform is essential to managing a large number of options, teasing out the most efficient, and implementing it quickly.
Payment History & Financial Stability
Having your 3PL suddenly fall apart could be one of the most devastating challenges your company faces. Finding a partner that has proven their financial stability will at least keep your operations from being brought to a screeching halt as you attempt to recover from someone else’s mismanagement.
While evaluating your top logistics candidates, ask for a list of partners and enquire about their history with the provider. Have they consistently made payments? Has their ever been disagreement or lack of follow through from the company?
How a logistics provider handles their partners will be a good indication of how they will handle your business and talking to their partners might give you a clearer picture than talking to their hand picked list of references.
Proven Track Record
Going beyond the finances of a potential logistics provider, what is their overall track record like? Are they known for being a state of the art company? Do they have multiple long-term clients?
As a service oriented business, the reputation of a logistics provider will speak volumes as to the efficiency and reliability that you can expect.
Excellent Industry References
The references you have for a logistics provider should not be good or passable; they should be adulatory. For a logistics provider to be worth your time, their clients should hesitate to speak volumes on their security, reliability, and flexibility. Clients should rave about the results they have delivered.
Furthermore, references should be able to speak to the character and culture of the provider. Whether good or service oriented, companies should be delivering a higher value proposition than simple efficiency.
Efficient companies might get the job done, but it’s questionable how far they will go on the final mile. Look for a logistics provider that is known for their character, for why they operate rather than how.
The due diligence you go through in evaluating a logistics company should be some of the most stringent you apply to any service provider. They will control a crucial piece of your operations: will they use it to contribute to your success or hamper your progress?
Jamie Wyatt is Chief Operating Officer at Linkex logistics (a non-asset based logistics and transportation management company).