Today I just got the latest copy hot off the presses of Inbound Logistics’ 2006 Third Party Logistics Planner. This is probably one of the better logistics buyers guides out there, so if you are currently searching out additional information on 3PL providers I would highly recommend picking up a copy.

On another related note congratulations to Inbound Logistics for 25 years in publication! Inbound is one of the leading publications serving the third party logistics industry and one that I frequently read so I thought I’d tip my hat to them for their longevity and their informative magazine.

Nearly all of the big players in the third party logistics industry are featured in the planner so after taking a look at this site, you might want to check that out as well as it is a great resource for finding the right 3PL company.

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