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For a third-party logistics engagement to realize its full potential, both the provider and the user need to bring something to the table.
Famous last words: "We thought we had a very well-defined contract."
Those words are from a top manager at a major third-party logistics provider (3PL) brought on to run a consumer-product company's distribution center not long ago. The 3PL had indeed spent time up front detailing both the contract and the terms of the relationship. But they were blind-sided by how different things turned out to be in practice. The distribution center's order volumes were far higher than the company had indicated. Its SKU count and order makeup were very different, necessitating much more labor and steeper learning curves-and incurring higher costs all around.
This particular story ends well: Senior managers at the client saw the problem and stepped in with remedies that allowed the 3PL to stabilize and subsequently improve operations at the distribution center. But not every third-party engagement has a happy ending. There are many situations where a customers unfamiliarity with logistics best practices or a reluctance to share demand data causes pain and prevents the relationship from yielding the results both partiers had expected.
In short, shippers and other customers of 3PLs have an obligation to collaborate with those from whom they expect full collaboration. It really does take two to tango.
By all accounts, there is still plenty of stepping on toes. More than 70 percent of companies still view their 3PLs as "tactical service providers," according to the "2005 Third-Party Logistics" study by The Logistics Institute (TLI) at Georgia Institute of Technology. "The key to a successful relationship between providers and users is whether customer expectations are properly aligned with the appropriate 3PL business model and relationship structure... yet users expect their 3PL provider's capabilities and advanced services to continually expand, says the report.
Brooks Bentz, an associate partner with Accenture's supply chain management practice, confirms that true collaboration all too often remains an elusive concept: "There isn't nearly as much collaboration up and down the supply chain as people would like to see. Most people on the shipper side still think that if they can get the 3PL at the right price, they can...