In today’s highly competitive world, businesses worldwide are increasing their usage of outsourcing. Outsourcing can help businesses through getting them to give attention to their core competencies, providing more flexibility reducing costs. Contract Logistics or warehousing is amongst the main functions which is outsourced to 3PL providers with 73% of global shippers outsourcing their warehousing based on the 2014 18th Annual Third-Party Logistics (3PL) Study.
1) Be open with information and proactively raise potential issues early
In order for any 3PL provider to know your business requirements, it will need very specific data and detailed process information at the start. Some of the questions includes the quantity of SKUs, the average/assumed volume of orders per week/day, what number of SKUs per order, how many inventory turns a year, how replenishment works, along with the list goes on and so on as well as on.
The better the 3PL provider may be open and share information, challenges and ideas, the greater it can develop the best solutions. Further, you have to proactively raise any issues early. You have exposure to your products and customers and know details and intricacies which will help the 3PL provider. By sharing information openly, the 3PL provider can achieve a full perception of your requirements and establish a proposal that operates for both you plus the 3PL provider.
2) Confirm the 3PL provider runs on the Warehouse Management System (WMS) that work well for your small business
A WMS allows monitoring, managing and optimising workflows as well as the storage of merchandise within your warehouse. Systems with radio frequency (RF) are equipped for providing even faster data and that is important when you find yourself working to deliver with a customer service promise. The WMS system should integrate seamlessly using your internal IT system so that you can easily access accurate data, 24/7.
3) Communicate, communicate, communicate
Starting a whole new business relationship using a 3PL provider is the similar in many ways to dating. You meet the very first time, share the lowdown, get on (or don’t) and select if you want to share details. This point ties back into the first point about sharing information. By not communicating core elements or facets of your warehousing operation on the regular basis, small misunderstandings could become big issues, encourage major problems.
More communication is going to be required throughout the planning and implementation phase, but you should keep regular communication going. Recurring performance review meetings should take place throughout the entire contract. This leads strait into the next tip.
4) Operate with key performance indicators (KPIs) to guarantee continuous improvement
Businesses that outsource are searhing for continuous improvement. In order to improve an activity, it should be measured and KPIs are measures which can be used to define and track progress toward a certain goal. KPIs really should be developed by the customer as well as the 3PL provider together so that you can define meaningful target performance levels. These must be discussed and determined at the beginning of the relationship so that you can include in the Service Level Agreement (SLA). By defining KPIs which are meaningful and setting these upfront, both 3PL provider as well as the customer can offer confidence that continuous improvement will likely be achieved.