Logistics Outsourcing Tips – a Practical Guide Part 3

by Rob O’Byrne on 2012-12-10

Logistics Outsourcing ..............is like Marriage ! ...

Really ? OK, so as I explained in Part One, that in my view logistics outsourcing is like a marriage!  And so I’m providing this three part article to help you with these sometimes challenging relationships.  Outsourcing that is……I’m certainly no marriage counsellor.

In Part One I posed the question “Why Do It?  What are you Expecting”? In Part Two I discussed “Planning the Big Day” (The Wedding). So now, we’ll take a look at Part Three, “After the Honey Moon is Over”….. 

 

I’ve been involved in so many assignments where clients have asked me to ‘fix’ a broken outsourcing relationship, that I truly hope these tips will help you avoid reaching that point. Sadly the 'kids caught in the middle' are often your customers...... My aim is to share these tips with you, to help you find the right partners, who can provide the right services, at the right cost, on a sustainable and long term basis.

 

Part 3 –After the Honey Moon is Over” 

I've seen so many Logistics Outsourcing marriages that 'failed'.  Which is really sad and so unnecessary.  But it's all too common isn't it?  I'm sure you've seen it too. When the 'courtship' went so well and everyone was looking forward to a long lasting and beneficial relationship, why all of a sudden can everything take a nose dive? Well........problems often start to appear in the first 12 months of an Outsourcing contract, and my aim here, is to give you some tips that will help you avoid these issues right up front. It doesn't mater if you are a 3PL or a client of a 3PL, these tips and insights will help you. The secret in avoiding these post Honeymoon 'Blues' is to think and plan ahead right from the start.  Before you even start drafting contracts or selecting potential service providers to talk to.Over the years I've heard all the reasons under the Sun why contracts have gone poorly.  And just as many of the complaints were from 3PLs as from clients.  YES, both parties are equally to blame in my experience.So here are the typical reasons for early issues.  Then we'll talk about how to avoid them.These are typical 'complaints' that clients have about 3PL services:

1.   Poor Service

2.   Lack of Improvement Focus

3.   Lack of Expected Cost Reduction

4.   Poor IT Capability

5.   Poor Project Management Skills

6.   Poor Implementation

7.   Ineffective KPI Management

8.   Too Many HR Issues

9.   Lack of Consultative Skills

10. Lack of Business Process Integration

11. Inability to Form Meaningful Relationships

12. Poor Post Merger Integration.

 

Are you seeing a 'pattern' with all these complaints?  I think it boils down to three key things:Poorly Aligned ExpectationsThis can happen on both sides.  The client is eager to get through the outsourcing process and start reaping the 'benefits' whatever they are deemed to be.  The 3PL is eager to win new business and get started as soon as possible. This 'pace' of change can often result in a poor communication of expectations.  The client may not share vital information or be 100% clear about their cost and service expectations, whilst the 3PL in their 'eagerness' to win new business may not fully appreciate the intricacies of the client's business. Lack of CommunicationThis happens all the time.  And here I don’t just mean the frequency of communication, but the 'quality' of the communication.  Detail is the key.  Right through the tendering and selection process, detail needs to be shared about customers, products, orders, service issues, staffing, costs, IT systems and so on.  Cut corners at this stage and disaster is almost certain in the first 6 months of the contract and information that was not shared, comes to light.

And ongoing communication too.  Regular management meetings and updates to talk about the highs and the lows of the relationship and how best to improve.Poor ResourcingParticularly in the transition phases of a new contract, both parties need to make sure that have experienced and capable people on the team. Tips for Both Sides of the Relationship!Let me set the record straight here.  I have never, ever, having been involved in hundreds of outsourcing relationships, ever, ever, seen a bad relationship that was only the fault of one of the parties.  Get the picture?So here are some tips for both parties that will help you not only find the right partner, but maintain a beneficial lasting relationship.

I'll be expanding on these tips in our seminar series and our book series.  Establish clear outsourcing objectives Not all business is good business! Identify precisely 'what' is being outsourced Ensure requirements match your capabilities Approach suitable / experienced suppliers ONLY Take a holistic view of the customer Provide detailed data and service needs Raise any data concerns with the customer Structure the RFT to support easy comparison of offers Submit a conforming bid first, then other options you might have Adopt a rigorous and objective evaluation Ask what evaluation criteria are being used Undertake careful joint implementation planning Resource the implementation with a solid team Manage the contract in line with agreed KPIs Raise potential issues early and suggest solutions So that covers Part Three.  'After the Honeymoon'.

There is so much more I would love to share with you, but time and space is against us.  So what I’ll do instead; is to share some specific materials from our books to give you more detail on the topic. More Free Information:Just go to this link. http://www.logisticsbureau.com/Free and you can download a great book chapter on Outsourcing.  I hope you find this information of value.    

 

All the Best

Rob O'Byrne

Logistics Bureau

 

P.S. You can grab some other handy information and downloads here: http://www.logisticsbureau.com.au/FreeStuff





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