Logistics outsourcing can be difficult. However, a 3PL partnership can alleviate most of your logistics bottlenecks. Being aware of the potential pitfalls is a first step in avoiding them. To make a 3PL partnership work, watch out for, and avoid, the following pitfalls.
1. Expecting Too Much
Outsourcing is not a panacea to all your supply chain problems. Rarely will you get 100% efficiency in terms of projected savings. However, a 70% improvement in efficiency and cost saving is still a good reason to outsource to 3PL logistics. If your only aim is to save costs, outsourcing logistics may not be the solution. However, in cases where your internal supply chain operations are grossly inefficient, outsourcing can result in enhanced efficiencies. It might cost you a little more, but the resulting efficiencies are likely to reflect in better profits.
2. Making Assumptions
When transitioning from in-house logistics to outsourcing 3PL logistics, make sure everything is clearly articulated. Document the services you expect your outsourcing partner to provide. Don’t assume anything or rely on a gentleman’s agreement. Instead, enter into a contractual obligation with the supplier and document what their responsibilities are.
3. Outsourcing Too Much, Too Quickly
Avoid offloading all your supply chain processes to your new 3PL logistics partner. Begin by outsourcing carefully selected processes and only offload more as the partnership begins to work.
4. Not Having an Exit Plan
Don’t get into a 3PL outsourcing arrangement without an exit plan. Your contract should have an exit strategy should your outsourcing logistics partner fail to meet set targets.
5. Surrendering Responsibility
Outsourcing logistics processes do not mean you are no longer responsible. Although it’s a bad idea to micromanage your partner, measuring results and constant monitoring of their progress is key to a successful 3PL logistics relationship.
6. Treating the Process like a One-off Purchase
Entering into a partnership with a 3PL logistics company is a long-term engagement, not a one-off purchase. You are in essence entering into a long-term partnership. Although your aim should be to hire the best logistics outsourcing company at an affordable cost, the main emphasis should be on who can provide the best services at the most competitive rate, not the cheapest.
7. Lack of Internal Buy-In
If staff within your company are yet to appreciate and own the partnership, implementation of the same can be very difficult. Take time to secure stakeholder buy-in and invest in change management.
8. Hurrying the Tender Process
Don’t rush a 3PL logistics partnership. To get the right partner, take your time. You have survived this far with your sluggish internal supply chain operations. Surely, four to six more months won’t cripple your operations. Be sure to get into a contractual obligation with a company that will deliver beyond expectation.
9. Outsourcing for the Sake of Outsourcing
Not every company should outsource its supply chain operations. Only outsource when you are clear what your objectives are. Outsourcing should not be a business strategy, but a strategic enabler. Treat it as such and nothing more. If you have good reasons to outsource, go ahead; but if you just want to outsource for the sake of outsourcing, bad idea!
10. Neglecting Communication
Effectively communicating with your 3PL provider is a prerequisite for an effective partnership. Let them know what your long- and short-term goals are. Provide them with key business data to help them align their services with your most important goals.
Mistakes in outsourcing 3PL logistics have landed many companies into an operational ditch. Like any relationship, a 3PL logistics partnership should be nurtured to produce the desired results, that is; enhanced and cost-effective logistics efficiency.