Its about that time of the year again. Inbound Logistics (one of the leading publications serving the warehousing and logistics industry) has announced their annual Top 100 Third Party Logistics providers awards.

I think the best thing about this annual issue is that they don’t only focus on the behemoth’s in the 3PL industry. Of course they have the usual suspects like APL, Kuehne + Nagel, Bax Global etc.. but they also go out of their way to get a full snapshot of the industry and shine light on some of the smaller and medium sized players that are also best in breed.

Click here for IL’s Top 100 3PL List

This week there was a great interview (subscription required) with George Jones CEO of Borders in the Wall Street Journal where he discusses the company’s decision to move their Ecommerce business away from Amazon and strike out on their own.

Regarding the original outsourcing of their e-commerce site to Amazon he said:

“The decision to let Amazon do our e-commerce site was made years ago when there were completely different economics involved. There weren’t the options for third-party fulfillment that there are now.”

That is an interesting point for a lot of organizations that have been postponing an e-commerce play or have completely outsourced their site to another company. Third Party Logistics providers have continued to build up their competencies in e-commerce fulfillment and additional value add services giving companies more options to realize savings and drive revenue. This opens up a lot of new possibilities; especially for business initiatives that didn’t make sense just a few years ago.

Purchasing.com has a good article describing a company’s move to outsourcing their supply chain to a third party logistics provider. Its always important to find a reputable 3PL provider that has a good reputation in the industry and that stands behind their services and commits to providing clients with exceptional support.

The logistics industry is home to many outstanding organizations providing top notch warehousing and transportation services and all it takes is some research and networking with your peers to find out who they are. Whether big or small, there are a variety of logistics providers in different shapes, sizes, and structures to meet the challenges of your supply chain.

Check it out here: Choose Wisely Not All Third Party Logistics Providers are the Same

Are you considering moving to a third party logistics provider?

Here are some questions to ask before you start the 3PL search

1. What are your reasons for outsourcing and are they the right ones?
2. What kind of budget are you working with and is it realistic?
3. What are you looking to accomplish? (ex. optimize a seasonal distribution program, take advantage of a multi-location provider)
4. Where are you now with your current Supply Chain and where do you want to be?
5. Do you have a detailed understanding of your distribution program and inventory to enable you to speak intelligently to competing logistics providers?

These are just a few of the many things you should have sorted out so that you can be in the best position to represent your business and find a warehousing or logistics provider to meet your needs.

Related Posts
Reasons to Outsource Warehousing
Why Outsource to a 3PL?
Selecting a Logistics Provider Without an RFP

I just came across a great article in DC Velocity that details the increasing degree with which 3PL providers are becoming selective of their clients.

Check it out here: Third Party Logistics, Sorry You’re Just Not What We’re Looking For

One of the biggest fears about outsourcing your logistics services to a third party provider is the fear of losing control. This of course doesn’t only apply to third party logistics, but to all outsourced services in general and is one that needs to be overcome before entering into a successful 3PL partnership.

Michael Stolarczyk from Exel had the following to say regarding the control factor in a recent article on 3PL outsourcing:

“Let’s analyze the “control” issue. If you don’t outsource, and it’s a slow time at the warehouse, your employees are drinking coffee on your dime. Not so in a cross-utilized third-party logistics (3PL) environment, where labor can be shifted to other contracts during periods of slower activity.

If a major screw-up occurs, you can do two things with your own warehouse employees: scream at them, and fire them.

In an outsourced environment, however, you can still scream at the 3PL and fire them but you also have the option of building penalty clauses and gainsharing programs into your contract to ensure that the 3PL pays you if anything out of the ordinary happens. That option is not available using your own labor. In fact, most companies that outsource warehousing operations find they gain more control than they ever had.”

That is the control that third party logistics gives you that you can’t get by operating dedicated space; “flexibility and scalability.” In a traditional multi-client public warehouse you can scale your warehousing needs based on demand, but with a dedicated distribution center you have fixed costs that take away from your “control” over the situation.

Inbound Logistics recently released the results to their annual Top 10 3PL excellence awards. These are the top 10 third party logistics providers as voted by nearly 4,000 professionals in the logistics industry. Inbound Logistics also released their annual Top 100 3PL providers list which includes large, medium, and small logistics providers.

Top 10 Third Party Logistics Providers for 2006
1. UPS Supply Chain Solutions
2. Ryder Logistics
3. C.H. Robinson
4. Schneider Logistics
5. DHL and Exel
6. Transplace
7. BAX Global
8. Penske Logistics
9. BNSF Logistics /Menlo Logistics (tie)
10. Landstar Logistics

Every year for it’s July issue Inbound Logistics, one of my favorite trade publications servicing the third party logistics industry publishes its “Top 10 3PL providers” based on feedback from their annual “3PL excellence survey.”

Well now is your chance to have your say in the survey. If you are a professional in the logistics industry or even better a 3PL customer head over to their 2006 3PL Excellence Survey to cast your vote for the logistics company that has put forth top notch supply chain management this year.

3PL wire featured a great article in Global Services magazine entitled What Can Logistics Do For You? which discusses the increased roles that third party logistics providers are taking on in company’s supply chains.

New roles 3PLs have ventured into include:

• asset recovery and recycling management
• field-tech support
• on-site repairs
• preventative maintenance
• returns and repairs management
• service parts logistics
• reverse logistics
• after market services

According to an interview I recently came across with Rob O’ Byrne at the Logistics Bureau, many companies are dissatisfied with their Third Party Logistics (3PL) provider.

Robs mentions that the majority of companies that have used his consulting services over the last ten years, feel that their providers “don’t understand them, and don’t respond to their needs.” Typically when he starts working with them they have had it with their 3PL and are looking for assistance in moving on to a new relationship. While this is an option, it is also worth working to rebuild and re-evaluate the relationship with your existing provider.

Open communication will always be one of the most important things to maintaining a third party logistics contract. This is something that needs to be worked on by both parties.

Rob mentioned that 90% of cases where 3PL contracts are underperforming it is not always solely the logistics providers fault. Many times logistics contracts are awarded without taking the proper steps to understand the details of the logistics program.

One of the biggest problems that typically happen in 3PL relationships is that companies provide inaccurate information regarding their programs and in return the Logistics provider doesn’t budget accurate resources.

Logistics Services are quoted using very strict criteria, and it is essential for 3PL’s to have accurate inventory information to bid on. When data supplied during the RFP process turns out to be inaccurate or understated, this is typically when problems arise, but this is also the time when open communication helps the most.

Logistics companies by their very design exist to provide flexible services. Inventory fluctuates and 3PLs are ready to react. But when the program completely deviates from how it was initially quoted, the contract needs to be revisited or the relationship has a chance of deteriorating very quickly.

According to the Logistics Bureau there are six key areas to focus on when evaluating a failing 3PL contract.

“1. Commercial arrangements – firstly, how is the contract resourced and costed? And secondly, what pricing mechanism is in place to ensure cost visibility as well as incentives for operational improvement.

2. Contractual arrangements – are the expectations of the customer clearly articulated in the contract, along with appropriate Key Performances Indicators (KPIs)? Does the contract term fairly reflect the required investment and commitment? What are the business risks involved in termination?

3. Service and cost performance – what has been the real performance of the contract, when compared to expectation? What has contributed to under performance?

4. 3PL processes – is the 3PL adopting appropriate processes in fulfilling the contract? Can these be jointly improved?

5. IT systems – are there IT issues that impact the performance of the contract and are there some easy fixes that can be employed?

6. The customer/3L relationship – at both the operational and account management level are there issues with the relationship? These might be due to a mismatch of culture, or more often due to individual clashes.”

Links:
Third Party Warehousing Contracts
Logistics Bureau