1. Think it through. Surprisingly, even the most sophisticated
clients often fail to think the outsourcing decision through very carefully.
All too often, theyíre simply trying to outsource a problem that theyíve
been unable to solve themselves. To avoid becoming just another part of the
problem, third-party logistics service providers (3PLs) should make every
effort to become a part of the process from the beginning.
2. Itís due diligence, not due drudgery. For a client choosing a
3PL, itís important not to skimp on the investigation phase: check
industry sources, talk to existing clients and investigate financial health.
Providers should prepare for this scrutiny and be ready to demonstrate their
financial stability. The savvy ones wonít stop there but will go on to
make sure their internal management depth, strategic direction, IT
capabilities, security and labor relations will stand up to scrutiny.
3. Be clear about expectation. A number of outsourcing relationships
have failed because of unrealistic expectations. To often, clients ask
providers to submit bids based on inadequate or inaccurate information on
the size and frequency of their shipments. By the same token, itís all too
easy for providers to underestimate the cost of providing the service. Such
inaccuracies put providers in danger of developing costing for and
committing to arrangements that donít reflect reality.
4. Spell it out. When drawing up the contract, both parties should
focus on the specifics. Include incentives for improvements in operations
and productivity with both parties sharing the benefits. Be sure to spell
out all benchmarks, obligations, expectations and remedies.
5. Go by the book. An operating manual can be an invaluable aid.
Ideally, the client and the provider will develop the manual jointly. But
regardless of how itís created, the manual should contain all policies,
procedures and other information necessary for the efficient operation of
the outsourcing arrangement.
6. Anticipate problems. Both parties are usually aware of friction
points that may arise during the relationship. Identify them in advance and
develop a procedure for dealing with them should they arise.
7. Communicate. Poor communication is second only to poor planning as
a cause of outsourcing relationship failure. Communications on all aspects
of the operation must be frequent and two-way. Providers should take pains
to report to key clients on a regular basis.
8. Set up a performance measurement program. When drawing up the
initial contract, clearly identify mutually agreeable standards of
performance. Providers should ask for regular performance reports from their
clients. Doing so will ensure they have the opportunity to resolve issues on
a timely basis Ė not when itís too late.
9. Reward outstanding performance. Ideally, this should be done by
the client. But if that doesnít happen, the provider should reward good
performance on the part of its employees. Compliments, recognition, awards,
days off and dinners are all proven motivators. Do whatever works for your
particular circumstances, but do something.
10. Be a good partner. Providers should never forget that their
clientsí ability to serve their own customers will depend on the 3PLís
performance Ė or lack thereof. A high level of integrity and performance
will ensure a high level of satisfaction. And when the relationship comes to
an end, it could get you invited back to the party.