Category Archives: Supply Chain

A supply chain is a system of organisations, people, technology, activities, information and resources involved in moving a product or service from supplier to customer. Supply chain activities transform natural resources, raw materials and components into a finished product that is delivered to the end customer. In the 1980s, the term Supply Chain Management (SCM) was developed to express the need to integrate the key business processes, from end user through original suppliers.
The “Supply Chain” typically over-arches business functions such as Inventory, purchasing/procurement, logistics, customer service, warehousing, distribution, etc.

Can 3PLs Provide Customer Service?

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My third article in the series “What do you want from your 3PL” and following on from my previous article on how a 3PLs IT systems effect you (their Client), this publication highlights what to look for and be aware of regards what Customer Care/Service your 3PL should be providing.

1.     Customer Care

Costs pressures are often blamed for Clients abandoning their 3PL, but this is often a symptom of the problem, not the first major issue. This scenario usually begins through lack of service, which strange as it may seem, is not raised as strongly as it should (either Clients feel awkward bringing it up or the 3PL “always has a reason” for it not working) so the Client starts looking for faults and at pricing, and as we all know, there is always someone out there who has a better price. It now becomes so easy for a Client to say, “drop your costs” or “I can get a better deal elsewhere”. Thus the endemic race to the bottom begins.

Good customer care is not just about the 3PL having a good relationship with the Client. The 3PL must also provide the service at a reasonable price, in a timely manner, be dependable, provide a quality service, use the latest technology, consistently innovate and maintain a high standard of corporate responsibility.

1.1.    Benefits

You select a 3PL to use their skills, expertise and experience so you can focus on what you a good at – your own core expertise. Your chosen 3PL therefore knows and anticipates what you require and will make suggestions to improve your service offering and returns, even before you ask. Your 3PL values you as a Client, knowing your success is their success, so will have a focus on:

a.      Continuous measurement and improvement – they provide more than the minimum DIFOT (Delivery on Time in Full) measurements and generic KPIs, they provide real-time, accurate Business Information covering a matrix of data, via your portal.

b.      Staff morale and skill levels – Your 3PL will have a skilled and stable workforce, for they know it is the quality, morale and loyalty of their staff that will ultimately affect the way your customers see how you perform (your 3PL’s performance is YOUR performance).

c.       Service innovation and quality – they keep up with trends in processes, technology and equipment to enable you to compete in your market, they will also have robust processes, such as a Non-Conformance Management system. They will be measuring AND adapting to minor and major environmental, social, regulatory and competitor changes.

d.      Delivery speed and agility – your 3PL knows the bar is being set by others who may not even be in your industry e.g. Amazon (B2C), setting new same day delivery standards that B2B customers now expect. Plus, they will have an IT system that can scale and morph with your business requirements.

e.      Lean and green – To be considered a progressive company today, you need to surpass the basic requirements, your 3PL also knows this and will be conscious of how they use power and fuel (there is also a financial gain for them, and you, to do it right).

f.        Proactive ‘alert’ and ‘exception’ management – your 3PL will have the “right” technology on board which they leverage to respond quickly and effectively to critical supply chain activities, exceptions or events, as supply chain complexity has increased significantly in recent years and they know good old “experience” will not cut it. Things move and change too fast, customers expect immediate results, irrespective of whose fault or where in the world it happened.

1.2.    Risks.

By entering into an agreement with a 3PL where the focus is solely on a transactional basis, the first risk is a conflict of interest – why would your 3PL innovate and improve service, reduce touch points and use cheaper transport when this would reduce their revenue.

a.      Continuous measurement and improvement – Your 3PL may not want to invest in improvement as to them, it already works, they are making a profit. By providing no more than the minimum of performance measurements, many problems can be hidden, hence just the standard DIFOT and maybe one or two more measurements are provided.

b.      Staff morale and skill levels – As a reflection of how your 3PL values your custom, so too may they value their employees. A high turnover of staff (>10-15%) is a very good indicator the lowest paid staff are being targeted who in all likelihood do not receive the correct training to perform or enhance the service being provided.

c.       Service innovation and quality – Innovation and quality generally come with a cost that does not benefit your 3PL so there is no incentive – or they just do not have the skills and expertise to manage innovation and quality appropriately.

d.      Delivery speed and agility – Your 3PL mat not have the systems, the skills nor the desire to provide a service that keeps pace with the industry – your customers will be affected by this this before you know of it.

e.      Lean and green – This may not even be on your 3PL’s radar, they are recovering all their costs including fuel and lighting by on-charging you (with a mark-up), so they see no real need to change or “go green”.

f.        Proactive ‘alert’ and ‘exception’ management – This could be an anathema to your 3PL. They may balk at informing you of issues or exceptions as they may see this as a reflection of their performance in general and so hide anything and everything that “looks bad” until they have no option, only then do they advise you. This in all probability will have put you in a compromising position with your customers – as the saying goes, if only you knew earlier.

Outsourcing to a 3PL who is not reputable could also, potentially, lead to a breach of confidentiality by exposure of your data, your customer data or the sharing of commercially sensitive information. Remember, your 3PL will need to have and maintain detailed records of your customers, locations, order volumes and new products – the question is, who now owns this data.

1.3.    Take-away

To ensure you are comfortable and can trust your 3PL to provide the service and care you are expecting, ask them to answer these basic questions (as well as the standard commercial and pricing questions):

a.      “What is your staff morale like” – turnover should be 5-15%, over 30% is VERY bad for Clients

b.      “As logistics and distribution experts, how will you help my business go from where it is now to where I want it to be and what is your time line” – what can they do to improve service to YOUR customers, how can they help reduce your overall costs.

c.       “What is your plan to improve your services and service outcomes” – make sure this is not a wish list or a proposal. Ask for evidence of continuous improvement, if they are not recording improvements, there are likely no improvements to record.

Preferably BEFORE signing and in collaboration with your 3PL, determine the right metrics and KPIs to ensure continual improvement in the following (which is what your customers are demanding):

  1. Service Quality
  2. Service innovation
  3. Service Delivery
  4. Service cost
  5. Company Culture
  6. Order cycle times (think from Order to Cash)
  7. Corporate citizenship (Social, environmental, etc)
  8. COR (Chain of Responsibility) – if your goods are delivered by a carrier/courier, you  MUST be aware of this; in Australia you cannot contract out of your responsibilities.

Ask your 3PL to provide at least three Referees, then ask them the same questions of your 3PL.

Regularly carry out customer surveys of your 3PL – find out what YOUR customers and your own staff think of the service. Ask some basic questions about packaging, labeling, timeliness, interaction with driver, problem resolution, etc. Your Sales Rep or Customer Service team could do this with every call (Voice of the Customer).

2.     Your story

If you have an example of a good or bad customer service experience from a 3PL please share them and bring them to the attention of both potential clients and 3PLs Providers. Helping everyone this way raises the bar.

My next article in this Series will be on 3PL Staff Training

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3PL – IT Risks and Benefits to 3PL Clients

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Continuing my articles on “What do you want from your 3PL” and following on from my previous article regards “3PL Expertise”, this publication highlights what to look for and be aware of regards your 3PL’s IT System.

The Benefits and the Risks

When going into a relationship with a 3PL, potential clients have a tendency to ask for the Information Technology (IT) attributes they are comfortable with or already have. They are unaware of many opportunities made available utilising current systems and the inherent power in their data.

Today, the supply chain utilises acronyms such as EDI (Electronic Data Interchange), SCV (Supply Chain Visibility), IoT (Internet of Things), WMS (Warehouse Management Systems), TMS (Transport Management Systems), RFID (Radio Frequency Identification), GSM (Global System for Mobile communication), plus more. Most 3PL warehouses have tried to keep up with this technology to keep themselves current and competitive, no longer using paper based instructions, moving back and forwards around the warehouse assembling orders to be collected by transport companies at the end of the day, to be delivered without notification at the drop off address entered on the manual consignment note.

While the above acronyms may not be saying too much to you at the moment it, the IT systems used by 3PLs will be using many of these – or should be. You have power in the data about your products, your customers and your suppliers and the power is not in the generation of data, it is in the ability to capture, analyse and inform using the data already there.

1.1. Benefits

The real service provided by the 3PL is not storing stock, then picking, packing and shipping orders. It is in the availability of accurate, real-time information.

You will be able to advise your 3PL – using your own digital or manual system – of inbound deliveries, with the 3P importing the data into their system within minutes using technology such as OCR or EDI. The 3PL will already have set up their IT system with your product/customer/supplier information, so by ensuring the minimum manual touch points there is less risk of human error.

On arrival of the stock, you will be informed of the inbound status, you can also view the information by logging into your portal at any time, 24/7. Once the stock has been received and using a good WMS the stock will be placed in the most appropriate stock location to ensure storage and picking efficiencies (saving time and money), you will now be able to see exactly how much stock you have; in total, how much is still due in, how much has been allocated to outbound orders and how much is in “quarantine” (problem stock).

Technology now means you have a multitude of ways to advise the 3PL of outbound orders, not only can you advise the 3PL using OCR (faxed/emailed orders), but the 3PL’s system can also be informed directly from your own IT software, or even your eCommerce website using EDI and APIs (Application Programming Interface) – again less human interaction the better. Outbound orders can now be picked, packed and assembled in the most efficient manner and shipped in the most effective way. Consignment notes will be generated automatically at this time providing you with a tracking number enabling you, plus the consignee (your customer) the ability to “Trace” the outbound order during its travels to the consignee, right up to and including a copy of the consignee’s signature and date/time of the delivery (all within minutes of the delivery happening).

By using technology such as rugged smart phones, which can be used as data loggers, pick and pack scanners, GPS and sign-on-glass for the delivery drivers, all warehouse and transport components are coordinated, visibility of the order is continuous throughout the process. These systems “capture”’ data, for example by scanning product codes, quantities, bin locations, etc and match these with the order information automatically thereby checking the validity of every pick. There is no need to “generate” (input) data.

Technology will improve the ability of the 3PL to manage their costs and reduce the costs they want to pass on to you. But the data that is captured across the process is a goldmine of information waiting for you to use. An example is to identify and improve “delivery cost per customer” as some customers may not currently be profitable regards shipping costs, is this reflected in your pricing structure?

1.2. Risks

1. With the continuous, sometimes radical but none the less, unrelenting advancements in IT systems some 3PLs will be left behind. Now more than ever, information technology plays a crucial role in third-party logistics and indeed the whole supply chain, from source to consumption.

Risks will vary depending on the level of assimilation into “Technology”:

  • Manual systems, typically paper based with spreadsheets controlling/manipulating data – a high number of touch points thus maximum number of opportunities for errors in all processes from entering data to picking and packing incorrectly, all the way through to delivering to wrong customer (if at all).
  • Semi-manual, can be because systems have not been upgraded or installed a system that has gaps in processes or even are “building” a system in-house. Any problems here can, in fact, be more insidious. Manual systems often have checks and balances in place because the risks are known, semi-manual systems are often assumed to not have as many ‘problems’ and as such may go unnoticed until it requires a major review or even a system overhaul. A total audit of all transactions may be required as the depth of the problem may not be known. Not all systems built “in-house” are robust, easily audit-able and simple to use. This is the worst type of semi-manual system as they are using their clients as guinea pigs and problems will not always be identified to the client – the 3PL will attempt to fix before it becomes public. Symptoms can include ‘system is down for update’ or ‘sorry you can’t login into your portal, we will advise once fixed’ or you get complaints from YOUR customer.
  • Fully automated systems. Although theoretically these should have the least errors, if your 3PL has not kelp up with updates, errors may creep into the process. They may not have the in-house resources to fix system errors so bring in contractors, the question then is, are they reputable contractors or just based on price.

1.3. Take-away

With any IT system used by your 3PL, you should have accurate, real-time, 24/7 visibility. You should also have access to a range of automated and self-customisable reports with invoices being clear and easy to follow.

Prior to contract

  • Ask whether the IT system is a self-build, proprietary on-site or cloud-based, etc – then search the reviews on the internet.
  • Ask what limitations there are to their IT system. Can their IT system “connect” to yours e.g. via API, are they able to do the work and will they charge for the interface?
  • Request a presentation of the IT system and use it to follow a number of scenarios throughout the process from receipt to delivery. They will show you the ‘front-end’ (what you will see via your portal) it may also be of benefit for you to follow through using the ‘back-end’, this will give you a better picture of the abilities of the system.
  •  Carefully consider the in-house IT capabilities of your 3PL.
  •  Obtain examples of ALL the available reports, ask if you can request customised reports (and is there a cost). Are the reports configured as a PDF or provided in MS-Excel format, there is limited value to a PDF report.
  • If possible – ask the 3PL floor staff what is good about the IT system AND what is not so good.
  • Ensure to ask the Referees provided by the 3PL what they think of the IT system: the reports, including financial reporting e.g. invoicing and credits; is the portal open 24/7; have they encountered any System failures/downtime; System accuracy; the 3PL’s response to requests for new reports/report editing; have they had their system interfaced with the 3PL’s IT system and the difficulty achieving this, does it work.
  • Finally – some 3PLs charge for each part of the IT system used, e.g. a fee for the portal, a fee for different reports, a fee for generating a new report, etc.

Current Contract

If already in a contract with a 3PL it is very hard to change your IT requirements. That said, you should still talk to your 3PL provider to ascertain what they do have available, you may be surprised what they can do for you (especially if they do keep their IT System up-to-date).

So it may still be advantageous to review the above, you might be able to identify an opportunity that helps your business (and them?) in some way, with either the outcomes or financial impacts.

Your story

If you have an example of a good or bad 3PL experience please share them and bring them to the attention of both potential clients and 3PLs Providers. Helping everyone this way raises the bar.

My next article in this Series will be on 3PL Customer Care