The relationship between a shipper and a logistics provider often begins as a result of a transactional buying process. The shipper often has an immediate business need, which leads to a Request for Proposal (RFP) or Request for Quotation (RFQ) process, then they ultimately select a third-party logistics (3PL) supplier to execute a solution for that need. It’s a standard industry practice that can produce immediate and significant results. However, the focus on executing the terms of the contract can lead to a danger that the relationship never advances to a strategic level.
Like with any relationship, both parties go through the “honeymoon stage” at the beginning. The overall engagement tends to be positive and performance and cost savings results can be achieved as the immediate needs are addressed. However, if both parties continue to only focus on fulfilling that original need and stop innovating, the relationship can become stagnant.
In order to thrive in today’s complex, and evolving market, it’s crucial for shippers and their logistics providers to continue to find new ways to drive innovation and optimization.
It’s a Commitment! Focus on Continuous Improvement, Not Just Short-term Savings
Driving innovation and optimization beyond the short-term, requires a commitment to continuous improvement and is delivered through smart, data-driven planning and efficient execution and active engagement. This approach requires two equally-engaged parties that are committed to nurturing the relationship and a desire to challenge the status quo.
While there’s no perfect formula for creating and sustaining a successful relationship, there are steps that both parties can take to promote a long-term, mutually-beneficial partnership.
- Understand Your Customer’s Business. To effectively move a relationship forward and continue to drive meaningful change, 3PLs must proactively bring operational improvement and cost savings opportunities to their customers. This begins by providing thoughtful ideas that demonstrate an understanding of their business and what’s important to them – not ideas to upsell the 3PL’s services. Logistics providers need to make it a point to never stop trying to understand what’s important to the customer, as well as the end-consumer.
- Establish and Keep an Open line of Communication. Developing a true strategic and dynamic partnership requires open and honest communication. Both parties should engage in direct conversation about expectations, anticipated challenges, improvements that should be made and overall goals. The more transparency and data the shipper can share, the better. The more visibility to a shipper’s supply chain that the 3PL has, the better they will be at identifying and delivering on improvement opportunities.
- Introduce a Continuous Improvement Methodology. To help support the pursuit of optimizing performance in both the short-term and long-term, the 3PL should employ a continuous improvement approach, such as Lean Six Sigma (LSS) or Managing for Daily Improvement (MDI). Utilizing a proven strategies and toolsets will help to consistently challenge the current way of operating, and will enable more data-driven decisions to identify and eliminate waste.
- Formalize Your Processes and Meet Regularly. To help encourage a collaborative relationship, there needs to be a formalized process for engagement. This could include meeting on a daily or weekly basis, to discuss metrics and address immediate needs, or Quarterly Business Reviews (QBRs) to examine performance, identify any process gaps and discuss future initiative to drive further operational improvement.
- Focus on Your Own Internal Continuous Improvement Too. The commitment to continuous improvement shouldn’t just apply to the shipper’s operations. It’s important for the 3PL to continuously drive improvement within their own internal processes and in the services they are delivering to customers. By pursuing evolution and innovation within their own organization – whether it’s enhancing IT infrastructure, the leadership team or expanding geographical reach – the 3PL will better position themselves to enable continuous improvement for their customers.
While the 3PL-shipper partnership might initially begin as a transactional process, it can and should progress and grow to an elevated, mutually-beneficially collaboration if both parties are willing to invest in the relationship and look beyond short-term needs.
Frank McGuigan has more than 25 years of experience in executive, operational and commercial leadership, and has been chief executive officer at Transplace since January 2018. He previously served as Transplace’s president and chief operating officer, where he led sales and operations for the company’s Transportation Management, International, Intermodal and Freight Brokerage business units. During his tenure at Transplace, Mr. McGuigan has helped the company broaden its customer base, expand its geographic presence throughout the United States, Mexico and Canada, and expand by completing several strategic acquisitions, which have helped Transplace evolve into one of North America’s leading providers of logistics technology and services.