Selecting and Managing a Third Party Logistics Provider

If done correctly, the partnership with your Third Party Logistics, 3PL provider can truly be a source of competitive advantage for your company. By University of Tennessee’s Haslam College of Business Supply Chain Management Faculty

June 6, 2016

In this white paper, we set out to provide a summary of the best practices for selecting and managing a 3PL.

We hope that you can use this material as a checklist when you address these critical areas.

To select a 3PL:

  1. Start with an internal assessment of your current and future needs
  2. Develop a detailed plan for the 3PL selection process
  3. Review the checklist of 3PL capabilities as you develop your RFI/RFP
  4. Evaluate, interview, and select.

To manage a 3PL:

  1. Develop the contract using the approach discussed earlier. Make sure you use the right proposal approach based on the type of 3PL relationship you are trying to create.
  2. Select the appropriate metrics based on the objective of your 3PL relationship and develop a scorecard. More tactical relationships will simply use task-based SLAs, while more strategic relationships will adopt KPIs where the shipper and 3PL are working in a highly collaborative manner to achieve mutually defined desired outcomes.
  3. Establish and implement governance mechanisms to effectively manage the business with your supplier. Remember, the more complex and strategic the relationship the more effort you should put into governance.

For those who have the basic blocking and tackling down, consider shifting to a more sophisticated performance-based outsourcing agreement or Vested agreement.

When done correctly, the partnership with your 3PL can truly be a source of competitive advantage for your firm.

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