Different from Supply Chain Management which typically focuses solely on controlling supply chain operations to reduce costs, Supply Chain Strategy is much more broad.

Supply chain strategy is leveraging the internal operations of your company as well as your extended supply chain to meet a specific supply chain objective.

So with SCM you are trying to reduce costs, where as with supply chain strategies you are looking at every aspect of your operations and the cost benefit tradeoffs in order to backup the objectives of strategic business decisions.

Another aspect is understanding the difference between supply chain management and logistics.

I recently came across another great article on third party logistics in Materials Handling World magazine.

It gives a window into the rapid growth and global expansion that companies providing outsourced 3PL services are beginning to see.

Its no mystery that logistics and fulfillment services are rapidly becoming the most sought after outsourcing opportunities available in business. Outsourcing logistics to a high quality 3pl provider is a proven way to create a competitive advantage in the marketplace.

And as the article mentions, even in periods of slow economic growth like we are seeing in the United States, use of third party logistics services increases as companies turn to 3PL’s to lower logistics costs and create effieciences.

Measurement. While some will argue that it is a waste of time or unrealistic given the enormous amount of responsibilities given to employees; Its hard not go out there and find that the best of corporations are rigorously measuring their logistics metrics. Some of these measurements can be conducted with help from your third party logistics provider (3pl), but in order to get a full picture of your supply chain it is important to take a look at your whole operation.

Here is a list of common logistics metrics.

• Fill Rates
• Inventory Turns
• Cycle Times
• On Time Delivery
• DPMO
• Order Fulfillment by order or line item
• Order Fulfillment lead time
• Total supply chain management costs
• Order Management Costs
• Productivity per employee
• Forecast Accuracy
• Expenses (SG&A;) as % of Revenue

When receiving bids from multiple third party logistics providers for your company’s warehousing and distribution program always beware of the company with the lowest bid.

There that RFP response is sitting on your desk from XYZ logistics. Its got to be bugging you. 3 dollars a pallet less than anyone else that bid on the program? On first thought you’d think that is clearly the best deal, but chances are that outsourcing your program to the company with the lowest bid could have the potential to be a problematic business relationship.

3PL’s sell time, talent, and space. To get a 110% effort out of your logistics company you need to enter into a truly mutually beneficial partnership. You are looking for them to create efficiencies in your supply chain and generate cost saving opportunities, they are looking for solid relationships with companies that are looking to grow their business that will in turn make them successful.

The lowest bid can sometimes be a result of the company improperly pricing your program based on the inventory characteristics and volumes you provide. This can cause substantial problems with the 3PL/Customer relationship.

Also alot of times you will find that third party logistics companies will take on clients just to cover large amounts of empty space at a loss. This can sometimes work out in your favor and sometimes also in theirs if they are in a particular stage with their business. But many times this can be a problematic situation because you can usually guarantee that if they are operating your account at a loss you are probably not going to get the best service and some may even terminate the relationship once they find a profitable customer to take your place. Now by no means am I saying this always happens but it is something you should be aware of.

As I said before the most successful 3PL relationships are mutially beneficial. Be sure to keep that in mind when selecting a provider. A high quality logistics provider is typically going to have excellent service, more enhanced technology offerings, and some of the best talent in the industry. In additional to the big players in the logistics industry, there are also alot of mid-market 3PLs that provide great value for companies of all sizes and budgets. When reviewing bids on your distribution program be sure to use diligence researching companies. You definitely can afford the 3PL with the lowest rates, but can you afford the headaches if it turns out you selected the wrong provider?

For many logistics directors the question that arises throughout your career is do you keep your logistics program in-house or do you outsource to a third party provider?

If your company already has the equipment, facilities, and talent at your disposal than keeping most of your company’s logistics in-house is probably the most effective route to go. But if you are a company that doesn’t have a strong competency in logistics, or your company really doesn’t make logistics and supply chain management a priority and it is starting to show, then it may be time to investigate whether or not it makes sense to use a 3PL.

Logistics is the process of moving goods from a manufacturer to a customer in the most timely and cost-efficient manner possible.

Are you regularly getting your products to customers on time?

Are orders being properly picked for shipment on a consistent basis?

Do you have the processes in place to support supply chain efficiency?

Do you have access to inventory management technologies that enable you to have visibility of your supply chain?

Are you shipping product in high enough volumes to have strong purchasing power in the market?

These are some of the questions you have to ask yourself before coming to a decision.

Tags: Third Party Logistics, 3PL, Logistics, Warehousing

Finding the right logistics provider can be a challenging and sometimes overwhelming process. That is one of the major reasons why I started Logistics List. By searching through our 3PL directory and reading features on logistics trends and selection criteria, I sincerely hope you are helped in the process of finding the right third party logistics provider for your company.

The internet is a great resource for finding relevant logistics directories and you will find great information to aid in 3PL selection, but by all means you should consider exploring another avenues as well.

You will continue to hear about the death of print and trade magazines but I still feel it is very worthwhile getting a hold of a few free Logistics Buyers guides to supplement your online research. A few buyers guides that I would highly recommend are:

American Public Warehouse Register (APWR): published annually and can be obtained for free with a subscription to Logistics Management. I personally find this to be the best organized and easy to navigate of the logistics directories.

Inbound Logistics Planner : Another annually published 3^rd party logistics directory which typically comes out in January is usually included free with a subscription to Inbound Logistics Magazine.

Logistics Today Buyers Guide: This is the official buyers guide/directory for Logistics Today magazine which typically is published in Aug/Sept. The guide is also included with a subscription.

Also, I know this is obvious but get out there and talk to people! Ask your colleagues and friends about logistics companies they’ve had experiences with. Go to logistics conferences held by organizations like WERC and CSCMP. Find out what others in your industry actually think about the companies that you’ve been researching or about outsourcing logistics in general. This is crucial not just for selecting a logistics provider but for just about anything in business.