If Operational Excellence is a Given, Then What Else Matters for 3PLs?

If operational excellence is not enough for third party logistics providers (3PLs) to differentiate themselves in the market, then what else matters?

I’ve been thinking about this question a lot lately, as I prepare to participate in two 3PL-related sessions this month:

“Delivering Customer Value Beyond Operational Excellence,” a panel discussion I am moderating with leading logistics service providers at the MercuryGate User Conference on September 10th.

“The Path to Becoming a Successful 3PL,” a presentation I’m giving at the TMW Systems User Conference on September 24th.

I first addressed this question last year in “Operational Excellence is Not Enough–Why 3PLs Must Leverage Their Most Valuable Asset.” Simply put, I argued that 3PLs should set themselves apart from the competition by fully harnessing the power and value of their customer and employee communities. “By investing in customer engagement management, 3PLs can also create a community (a knowledge network) that their customers would highly value and greatly miss if they were to move elsewhere — a community that provides [customers] with valuable insights about industry trends and leading practices, a community that facilitates peer-to-peer learning and knowledge exchange, a community with motivated and engaged members, a community that is diverse, vibrant, and yes, fun.”

I still firmly believe that “customer engagement management” is arguably the biggest missed opportunity for 3PLs to enhance their value proposition for clients.

But what else matters?

I don’t want to steal too much of my thunder before the conferences, but here are some of the other points I plan to make:

A successful 3PL is an operations manager, a consultant, and a technology provider all rolled into one. If you’re not regularly providing customers with new ideas and recommendations as a valued consultant, and also providing them with up-to-date technology to help them make smarter decisions faster, then you’re sitting on a wobbly, one-legged stool.

Don’t just sell your services, but also the knowledge, skills, and experience of your people. There is a “war for talent” going on right now in the supply chain industry. Focus on hiring and retaining people with proven experience and success in the vertical industries you’re serving, and who also have the right mix of technical, analytical, and interpersonal skills.

Continuously invest in customer-facing technologies. There are two types of technology investments you can make: those that help you streamline and automate your internal operations, saving you time and money, and those that provide your customers with the tools and information — such as business intelligence dashboards — to help them save time and money. Don’t shortchange investments in the latter.

Avoid the ailments of typical 3PL-customer contracts and instead take a Vested Outsourcing approach. The building blocks to achieving this goal include focusing on outcomes instead of tasks and creating alignment between the two companies, which involves having ongoing and clear communication on strategic initiatives and continuous improvement opportunities. For related commentary, see “Vested Outsourcing: Gain Sharing in a New Dress?

I plan to share some more ideas in a future posting, after the conferences are done. In the meantime, post a comment and share your viewpoint on this topic.

(Note: MercuryGate is an ARC client and Logistics Viewpoints sponsor).


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