April 13, 2011

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10 Key 3PL Services

Jim Butts C.H. Robinson Worldwide Inc. Shippers today are presented a vast array of choices when it comes to service providers. The lines between asset-based carriers, brokers, 3PLs, 4PLs and LLPs are becoming more blurred. Further, their service offerings appear remarkably similar, and they all seem to sing the same song. There are, however, some useful -- and practical -- distinctions to take into consideration when doing business with established 3PLs. We encourage you to make an informed decision and look for a 3PL who can provide services and value beyond traditional definitions. 1. Provide strategic capacity. Demand for capacity is not always predictable, because it is largely driven by consumer behavior and forces or sources over which few have control. This unpredictability will often lead to excess cost, inefficiencies, and lost sales, unless you approach capacity strategically. Carriers often enter and exit the market randomly, for various reasons. Large asset-based carriers have to place first priority on their own asset utilization, leading to a loss of flexibility for the shipper. Your 3PL should be able to provide capacity strategically, using a large and diverse carrier network to finetune your needs based on service and price. Even surges, peaks, and unexpected demands can be handled effectively and efficiently when approached with proper analysis, due diligence, discipline, and skillful execution. 2. Provide logistics expertise. Time and again customers cite the lack of personnel with adequate supply chain training as one of their most critical needs. Logistics expertise -- developed under practical situations while meeting or exceeding actual customer expectations -- is the premium offering from the best 3PLs. Customers can benefit from this expertise during daily interaction with their service providers, or can more strategically engage these resources through whiteboard sessions, quarterly industry updates, or annual planning. 3. Provide network analysis. With changes in the global economy, fluctuations in the value of the dollar and volatile fuel prices, the trade-offs between off-shoring and producing close to customers need to be reviewed regularly. Further, distribution strategies and inventory levels need to be continually recalibrated. Many shippers cite a lack of both the tools as well as the trained personnel to conduct such analysis themselves, as a result, many benefit by making this a selection criterion for their significant 3PL relationships. 4. Provide mode and load optimization. Your transportation spend is optimized when your shipments arrive as desired, using the most efficient way of transporting your goods. You should be able to provide your 3PL with ready times, requested arrival dates, shipping details including weights and dimensional information, and it should be able to optimize your shipments with a minimum amount of effort on your part. Further, it should be able to provide you with timely and accurate information on the amount of money it was able to save you through load/mode optimization, and point to greater savings opportunities in your supply chain. 5. Provide cost-containment strategies. All shippers have inefficiencies within their supply chains. Some of these are vendor-produced, and some of them are self-induced. Your 3PL should be able to document these practices, behaviors or idiosyncrasies, and report them to you regularly. Many shippers empower their 3PLs to act on their behalf and take corrective action, so long as the activity falls within pre-established thresholds of responsibility and accountability. 6. Manage vendor compliance. Vendor compliance is a pillar of successful supply chain management. Your 3PL should be able to establish an effective reporting platform to provide timely, accurate, and objective feedback to all of your designated supply chain partners. Your 3PL will often be able to do so more effectively than others in the supply chain because of their close involvement in the operations details, and inherent third-party neutrality. You may also be able to delegate many of the mundane corrective and, more importantly, preventive measures to your 3PL, saving you time, trouble, talent, and money. 7. Provide systems support. Even in robust economic times, companies are not quick to fund IT and systems spending for supply chain initiatives. Companies continue to turn to their 3PLs for systems

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support -- and increasingly, business intelligence. As technology improves and 3PLs become more practiced at aligning results with customer expectations, their ability to contribute in this way can lead to significant competitive advantages. 8. Provide actionable business intelligence. More than just providing systems support and relevant information, your 3PL should work to leverage its ability to gather and assimilate relevant information with its logistics expertise to benefit your organization in specific ways. That is, through account management with qualified, talented logistics personnel, armed with industry knowledge and supply chain acumen, your 3PL can function as your strategic business resource. 9. Share proven best practices. The world-class 3PLs do business with thousands of shippers and carriers. This exposure allows them to see many different problems, and forces them to provide solutions that are effective, competitively priced, flexible, scalable, and replicable. Some of these solutions are so unique that they cannot be used on a widespread basis, and some of the solutions are so effective that companies require confidentiality and non-disclosure. However, many of these practical, working solutions are based upon principles and approaches that can be commonly applied to many companies, situations, and supply chains. Under such circumstances, the customers benefit tremendously from the learning curve. 10. Reduce your risk profile. Each company faces a multitude of risks in daily business. Some of these risks are well-known and managed accordingly; other risks are less than obvious, unanticipated, and can arise from rapidly changing conditions. There are risks of commission, and many more risks of omission. The 3PL you choose to have a significant relationship with should be able to lessen many of your identifiable risks. It should also be able to work with you to develop a more comprehensive understanding of your less-obvious risks, using its industry knowledge, and its unique perspective on supply chain management. Further, its business savvy, management of carrier and vendor relationships, and financial strength can lessen the general risks that the average shipper/customer encounters. Bio Jim Butts is senior vice president at C.H. Robinson Worldwide, Inc., a non-asset based 3PL providing global multimodal transportation services, produce sourcing and logistics solutions based in Eden Prairie, Minn. He can be contacted at Jim.Butts@chrobinson.com.

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