If you are looking for a 3PL to manage your warehousing, I believe you should be looking for a 3PL committed to continuous improvement. Your partner should be looking for ways to improve not just your warehouse operations, but your overall supply chain, including how you manufacture and deliver products to your customers.
But how can you know if the 3PL has a robust continuous improvement culture? After all, there is a high probability almost every 3PL a company talks to will claim to have these capabilities. I asked Andrew Lahy, the Global Head of Business Improvement Logistics at, about this. Andrew’s full time role at Panalpina is continuous improvement. Panalpina is working hard to make operational excellence (OpX) a core differentiator. Andrew’s advice is that a potential customer should go to the warehouse floor and speak not to managers, but the floor level workers, and ask them if they have been involved in continuous improvement projects. If the answer is yes, then of course it makes sense to have them describe the project and results.
At Panalpina, not every floor level worker will be able to answer that they have been involved in such projects…yet. But management is working hard to install this culture and get to a place where more and more floor level workers will be able to answer “yes” when they are asked that question.
To get to broader involvement in operational excellence, Panalpina is not setting annual quantitative objectives, for example that every warehouse will work on six continuous improvement projects per year. Andrew believes artificial targets driven from the top down lead to game playing and projects that don’t actually lead to much in the way of improvements. Instead, each Panalpina facility is asked to set its own targets (Panalpina refer to their warehouses as facilities to promote their use to customers as value adding locations, and not just sheds for storage). Projects should be driven by the operations and supported by management. And the primary focus should be on employee engagement.
I also asked, does it matter if the 3PL has committed to Lean versus 6 Sigma? Not so much according to Andrew, but the methodology should be simple enough for everyone to understand it. Panalpina has found Lean easier to understand and use than 6 Sigma. So while they use elements of both, they “lean toward Lean.” They call their Lean initiative LogEx.
Does it matter whether the continuous improvement is internal (focused on improving operations in some area of Panalpina) or external (focused on improving a customer’s operations)?
Andrew described a pyramid. At the bottom of the pyramid it is important to put the basics in place. Before a continuous improvement project is kicked off with customers, it is important that workers have been involved in internal projects.
The second level of the pyramid, once the basic competencies are in place, involves OpX projects with customers.
Finally, the highest level of the pyramid really goes beyond the incremental improvements driven by OpX, but coming up with new innovations that reshape the 3PL industry. Andrew gave the example of a recent innovation developed in Brazil, called LMS (Logistics Manufacturing Services), which transformed not just the warehousing operations, but the customer’s entire manufacturing strategy too.
To introduce new ideas and innovation into the industry, Panalpina are working closely with leading Universities around the world, such as Cardiff Business School, Buckingham University and Cambridge University. They have even developed a partnership model with Cardiff University, where their employees can gain training and accreditation direct from the University.
In conclusion, one of the selection criteria a company should have when outsourcing warehouse operations is to pick a 3PL with a robust continuous improvement culture. However, PowerPoint presentations by senior management won’t tell a company anything. The company’s supply chain team really needs to make some site visits and talk to workers on the floor.