Collaboration in logistics: Often misunderstood, rarely managed

by Shawn Casemore on 2011-09-12

The term collaboration has become hackneyed, discussed, and applied to everything from team sports to elementary school. Most have little idea of the true value which can be obtained through effectively managed collaboration, and the risks associated with a poorly managed collaborative effort.

Relative to Logistics, the term has become synonymous with the type of relationship which should be struck between organizations and their brokers, 3PLs, or 4PLs, to the extent that most customers shiver at the mention of a “collaborative” partnership. The reality is that even the most trusted relationships can turn sour.

Managing a collaborative relationship requires as much attention and time investment as managing a typical competitive supplier relationship. Several steps must be taken on a consistent basis to ensure that the desired results are obtained. Those steps include the following:

1.Price check:
You wouldn’t be able to purchase goods at the grocery store without a clearly identified price assigned to the UPC code. As loyal of a customer as you might be, the grocery store won’t take your word for it, and you, similarly, don’t take offense to the gesture. Collaborative relationships must be approached in the same manner. Using approaches such as market testing to confirm variations between competitors’ pricing and service offers, versus those of your partner, is an important test to ensure that the relationship is delivering the intended results. Reviewing competitor’s fuel surcharges, cross docking or cross border fees, as well as the competitiveness rates by lane, is an important step to understanding and developing confidence in the financial viability of the relationship.

2.You can’t manage what you don’t measure:
If you clearly understand “why” you ventured into a collaborative relationship with a carrier or 3PL (for example), you will have, or should have, developed some clear success measurements at the outset to ensure that the relationship is providing the desired benefits. These benefits may not be so much financial as they are related to service quality, timeliness and innovation. For me, high school would have been much simpler if there weren’t any report cards involved, but how would the teacher, my parents, or I for that matter, have had an idea of the areas I was successful in, and those that required additional effort or assistance?

A fundamental driver for entering into a 3PL or 4PL collaboration is to drive innovation. Having those most familiar with the industry review and manage your transportation program allows for the identification of weaknesses as well as opportunities to implement innovative solutions. As an example, the concept of outsourcing pick and pack operations to a 3PL is not new, but  continues to increase in popularity for sectors highly engaged in warehousing and distribution activities. Identifying and implementing innovative solutions requires an investment of time and a degree of trust and confidence on the part of both the client and solutions provider.

Quite frankly, too many organizations are entering what they deem to be “collaborative” relationships with brokers, 3PL’s or 4PL’s, however they are paying little attention to the results being generated, the prices being charged, or whether the value of the service is truly worth the investment.

A little diligence and focused effort will go a long way to ensuring these relationships deliver the expected results on an ongoing basis.

© Shawn Casemore 2011. All rights reserved.