“Success does not consist in never making mistakes but in never making the same one a second time.”George Bernard Shaw
Are you a business owner who currently outsources your logistics to 3PLs? You are fortunate if you find the right partner right away, but if you’ve made mistakes in the past, what did you learn from those that you did not do again the second time? For first-time seekers, what are your criteria in choosing a logistics partner and ensuring everything is right? In business, there is no such thing as a perfect strategy, product, or service. However, choosing something that aligns with your values, strengths, and goals can have a significant impact on your success. By focusing on what works for you, you can create a unique approach that sets you apart from the competition and helps you achieve your desired outcomes.
Partnering with a 3PL provider can bring many benefits to a business, including increased efficiency, cost savings, and improved customer service. As per reports, 3PL is utilized by 90% of Fortune 500 companies in the US. However, choosing the wrong provider can hinder your business from achieving success. In this blog post, we will discuss the six common mistakes companies make when partnering with 3PL providers and provide practical tips for avoiding these mistakes.
Common Mistakes When Partnering with 3PL Providers
Mistake #1: Not doing proper research
One of the most common mistakes that companies make when choosing a 3PL provider is not doing proper research. It is essential to conduct due diligence to ensure that the 3PL provider you choose can meet your specific needs and requirements. Some factors to consider when choosing a 3PL provider include their industry experience, reputation, financial stability, and geographical coverage, among others. It is also crucial to assess their capabilities in terms of technology and innovation.
Mistake #2: Ignoring the contract details
Another common mistake is ignoring the contract details when partnering with a 3PL provider. A clear and detailed contract is essential to ensure that both parties are on the same page regarding the services to be provided, pricing, liability, and other important terms and conditions. It is also important to include key clauses in the contract, such as termination clauses, service level agreements (SLAs), and dispute resolution procedures.
Here are quick procedures to ensure you’re contract is good:
- Draft a detailed contract: Work with your legal team to draft a detailed contract that covers all aspects of the agreement, including the scope of services, pricing, service levels, liability, dispute resolution procedures, and termination clauses. Ensure the contract is clear and unambiguous and that both parties understand their obligations and responsibilities.
- Negotiate and review: Once the contract is drafted, negotiate the terms with the logistics partner and review the document thoroughly. Make sure that the contract reflects your requirements, and that it provides sufficient protections for your business.
Mistake #3: Failing to communicate effectively
Effective communication is crucial when partnering with a 3PL provider. According to a recent study conducted by Grammarly and Harris Poll, businesses in the United States suffer an estimated annual loss of $1.2 trillion due to ineffective communication. Remember that your logistics partner is a crucial part of your business success, so it’s important to establish open and honest communication with them and maintain clear lines of communication. This includes providing the provider with accurate and timely information regarding your inventory, orders, and other important data. It is also essential to listen to the provider’s feedback and address any concerns or issues promptly.
Mistake #4: Failure to Define Roles and Responsibilities
Without clearly defined roles and responsibilities, both companies and 3PL providers can become confused about who is responsible for what, leading to inefficiencies and errors. To avoid this mistake, define roles and responsibilities clearly and in writing. Ensure that both parties understand their respective roles and are accountable for their actions.
If you’re doubting about just doing the talking regarding this, there are several tools that can be used to define roles and responsibilities with your logistics providers, including:
- Service Level Agreements (SLAs): These are agreements that outline the specific services that the logistics provider will provide, as well as the performance metrics that will be used to measure their success.
- Key Performance Indicators (KPIs): These are specific metrics that are used to evaluate the performance of the logistics provider, such as on-time delivery, order accuracy, and inventory accuracy.
- Communication Plans: These are plans that outline the frequency and methods of communication between the business and the logistics provider, as well as the specific topics that will be discussed.
- Standard Operating Procedures (SOPs): These are written procedures that outline the steps involved in specific logistics processes, such as order fulfillment or inventory management.
Mistake #5: Not tracking performance metrics
Tracking and analyzing performance metrics is essential to ensuring that the 3PL provider is meeting your expectations and delivering on their promises. Key performance indicators (KPIs) to consider include order accuracy, on-time delivery, inventory accuracy, and customer satisfaction. By tracking these metrics, you can identify areas for improvement and work with the 3PL provider to address any issues that arise.
Here are some important 3PL KPIs (Key Performance Indicators) that can help you track the performance of your logistics partner:
- On-time delivery performance: This measures the percentage of shipments delivered on or before the scheduled delivery date.
- Transit time: This measures the average time it takes for a shipment to move from one point to another.
- Order accuracy: This measures the percentage of orders that are shipped correctly and completed.
- Inventory accuracy: This measures the accuracy of inventory levels as reported by your logistics partner.
- Cost per order: This measures the total cost of logistics per order.
- Capacity utilization: This measures the percentage of a logistics provider’s available capacity that is being used.
- Customer satisfaction: This measures the level of customer satisfaction with the logistics provider’s services.
Mistake #6: Overlooking technology and innovation
The role of technology in logistics has never been more critical, and it is essential to choose a 3PL provider that leverages technology and innovation to streamline and optimize your supply chain. Some examples of technology solutions that a 3PL provider may offer include transportation management systems (TMS), warehouse management systems (WMS), and order management systems (OMS). It is important to choose a 3PL provider that can provide you with technology solutions that align with your specific needs and requirements. According to Shipper-3PL Relationships Benchmark Study, 35.7% of respondents say they always evaluate the innovative ability of a 3pl before they consider it, and only 7.1% say 3pl has high innovation capabilities. These insights from a business that has worked with 3pl can provide valuable information to business owners to review the technology and innovative capability of their logistics partner.
Here are some practical tips to determine if your 3PL has high innovative capability and is equipped with good technology:
- Research and ask for information about the 3PL’s technology infrastructure and capabilities. You can inquire about their use of automation, software, and other advanced tools to streamline and optimize logistics operations.
- Evaluate the 3PL’s track record of implementing new technology. Look for evidence that they have invested in and successfully implemented new technology solutions.
- Assess the 3PL’s approach to innovation. Find out if they have a dedicated team or program focused on developing new solutions or if they partner with technology companies to provide the latest innovations.
- Ask for references and case studies from the 3PL’s current and past clients. This will provide insight into their level of innovation and technological capabilities.
- Visit their facilities to see their technology and innovation capabilities firsthand.
Have these common mistakes helped you make a decision about the right logistics provider to partner with? We at ShipDepot our constantly working our best to be the right one for your business. Email [email protected] or call us at 818-510-1499 and we’d be happy to talk about your business needs and be of great help.