The key to sustaining healthy 3PL relationships is very much dependent on the person that is given the role to manage the relationship with the 3PL service provider.
One of the biggest mistakes that many organizations make when they move from the DIY to 3PL model is in the selection of the person they choose to manage the relationship.
Selecting the Right Relationship Manager
Quite often the warehouse manager is given the job and in many cases they don’t have all the skills required to make the transition from managing an operation to effectively managing 3PL relationships.
This is not to say that their operational knowledge is not valuable nor that some of the additional skills that they will require can not be learned but it is simply to point out that the selection criteria should not be based on operational knowledge alone.
We should also be considering their communication, negotiation and collaboration skills as part of the selection process.
Understanding the 3PL’s Organization
Understanding the 3PL service providers organizational structure is also a key factor in sustaining healthy 3PL relationships and should be a key focus from the outset of the relationship.
The size of your business and the size of your service provider will probably determine the account management structure but either way it is important to know where you and those you are dealing with fit into the organization as soon as possible.
It is important to clarify the roles, the responsibilities and the reporting lines of the people that you will be dealing with at both the operational level and at the executive level.
At the end of the day we need to have strong rapport with those that are capable of influencing the success of the relationship.
I have also found it useful to develop a set of communication guidelines that both parties can adopt.
For example, both parties should have a common understanding of what is reasonable in relation to email response times and what the escalation process should be when the guidelines are not being met.
Setting these guidelines will lead to a reduction in email traffic and an increase in accountability of all parties.
I firmly believe that establishing and driving the 3PL service provider relationship management process is the responsibility of the customer NOT the service provider.
A Process of Governance
Sustaining healthy 3PL relationships will require the customer to define the reporting format and establish the meeting schedule.
The customer should determine the meeting agenda and have a process for capturing notes and monitoring the completion of action items that arise from the meetings.
The maturity of the relationship and how well the 3PL service provider is performing will dictate the frequency of these meetings.
The schedule might include a daily or weekly operational check-in that is followed up with a more formal monthly meeting that reviews all aspects of the operation including volume, cost, operational performance and the status of any projects and actions that have arisen from previous meetings
In my opinion the monthly meeting schedule is the minimum level of formal interaction that should occur.
From a strategic perspective I also recommended undertaking a quarterly business review as part of the 3PL service provider management process.
The quarterly business review should include a recap of the monthly operational performance but be more focused on allowing both parties to share information about their strategic direction and future business requirements.
The key to a successfully sustaining healthy 3PL relationships is to establish a consistent rhythm of meetings that will allow you to diligently monitor performance and to create an environment that allows both parties to share information and develop a longer-term relationship.
Abdication vs. Delegation
And finally, understanding the subtlety between abdication and delegation will certainly increase the chances of developing a healthy 3PL service provider relationship.
The abdicator believes that that they will require limited effort to monitor the operation and to manage the relationship.
The delegator expects that day to day operational interaction will be reduced but understands that an increased focus on monitoring and managing the relationship will be the key to successfully establishing and sustaining healthy 3PL relationships.