Can 3PLs Provide Customer Service?

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