Wednesday, 15 July 2015

Managing 3rd Party Logistics Service Providers

Introduction

Theoretically, a company’s decision to outsource is taken by the choice to focus on primary competencies, or in a quest to improve customer support levels, or as the company strives to develop some more efficient processes. But the reality is, it is mostly driven by cost and more specifically, a need in order to reduce the recent cost base. Regardless of the driver, stepping into the world of logistics service providers can be a challenging exercise who has previous experience or those who are well prepared.

Logistics Service Providers


Establishing the relationship - Key Success Factors

The lack of quality information which is provided as a part of the tender is one of the greatest frustrations of logistics service providers. This is important when crossing the line of standard practices. The requirements should include the provision and throughput data and sufficient supplements. This can enable the client to prepare a more cost effective response to the requirements.
The higher the cost, the less data is likely to be and to cover the uncertainty, the supplier will always add a premium. The service level expectations should always be clearly articulated.

The most critical factor which determines the failure or success of an outsourced process is the selection of the person who will be given responsibility to manage the relationship with the service provider. While judging, the person’s facilitation, negotiation and communication should also be carefully considered.

Common Pitfalls

The conventional method to embed the business requirements in the contract needs to restrict the operational flexibility of the relationship. Separating terms and conditions from the business requirements can make it easy to achieve.

The value of assuring the undertaking of adequate training prior to the transition is mostly underestimated. Also, not enough effort and time are invested in the planning of the transition. The plan should not only include the physical aspects, but also items like training and communication tasks. 

Managing and developing the relationship

Developing management techniques can allow monitoring and measurement of costs and the efficiency of the processes which are being employed to meet the expectations of service level. The development of a strong business relationship with the service provider allows effective collaboration, while implementing and developing strong business relationships.

Management techniques

It is a process and should be treated accordingly, which is one of the most important things to remember while managing a supplier relationship. The customer has to take the responsibility for the process and should monitor and measure the performance consistently and diligently.

In the determination of the type of performance measures, required to manage the relationship, differentiation between the operational measures and data is extremely important because the supplier will require to take care of the business and the key measures required to manage the performance.  From the perspective of a supplier, it is virtually impossible to avoid the collection of substantial amounts of data and have various operational measures to run an efficient operation successfully.