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Why 3PL Relationships are Fraught and How to Manage Them

3PL or Third Party Logistics are services that are offered by companies that specialize in various facets of Supply Chain Management. Most businesses these days, operate with some form of Supply Chain in place. 3PLs allow such companies to outsource these processes and their management to companies that specialize in logistics, warehousing, inventory management etc. However, what happens in reality, is that 3PL companies find it hard to always please their customers, and the relationships tend to break down.

Many companies are not the best at conveying what they want and expect from their 3PL partners. Oftentimes, the partner company is left with the homework to try and figure out the business by themselves. Sometimes the instructions are lost in translation and can be seen as the partner company’s fault. So let’s understand some of the common reasons and how to avoid them for a better 3PL Client relationship.

1. Communication Failure

The basic philosophy to understand here is this; Information is different to communication. These two terms are often used interchangeably, but shouldn’t since they mean very different things. Information is about delivering facts and data, whereas communication demands the need to be understood. You must be very clear about your service expectations with a 3PL. During the RFT/RFP process, you should make sure you put out your requirements with precision. Spare no details and be very communicative.

It is important to inform the 3PL well. Arm them with the right information about your products, your customer base, your past experience etc. But the communication part means the bidders properly understand how to fulfil the duty you require. Make sure you clearly explain…

  • All elements of the outsourcing operation

  • Expectations of quality and deadlines

  • Contract measurement plans

  • The KPIs to use

A good way to communicate expectations is to include a draft contract document during the bidding process. The draft contract can include the following details…

  • How do you want to co-operate and manage the relationship contractually

  • All the expected measurements of KPIs

  • Targets to achieve

Another thing you can add to the draft contract is the possibility of a bonus if certain KPIs are better than the target. This kind of initiative could motivate better deals and smoother relationships.

2. Failure in Data Sharing

A big reason that 3PL relationships fall flat is that not enough or the right data is shared. Important data like dimensions of products, accurate product masters which specifies the dimensions of cartons and pallets, how many pallets and weight etc. is crucial data that must be shared. When such important data is shared at the onset of the bidding, the winning bidder can start resourcing and preparing the operations accordingly. This includes storage spaces and picks slots too. Precision and accuracy of data exchange is the key to a good 3PL relationship.

3. Missing Details of the Operation

When it comes to disclosing details of their operation, they tend to miss out on the negative aspects of it. For example, the rate of returns can be disclosed from the 3PL with the thinking behind it being that this could be irrelevant information. But it takes labour and other resources to sort reverse logistics and the business will be hit with not only extra charges but a ripple in the professional relationship.

This is why, it is important to convey all details of the operation very clearly, including all processes with the intricacies, and especially, a heads up for what could go wrong. It is important to provide transaction files along with all the relevant data. Without accurate transaction data, processes like designing a warehouse layout plan can become really difficult.

If you are looking for a reliable 3PL partner for your Supply Chain Management needs, ARK India would be the right fit for you. Our team of industry experts has been servicing the industry for decades and has long-standing relationships with most of our clients. To get in touch, drop a mail at [email protected].