MHI Solutions Improving Supply Chain Performance
Learn some of the key ingredients needed as companies and their 3PL service providers define and create win-win partnerships, as well as how they measure success.
* By Sara Pearson Specter *
Engaging a third-party logistics (3PL) service provider for outsourced logistics and supply chain services has become a common practice among companies of all sizes. Indeed, research from 3PL consultancy Armstrong & Associates finds that 90% of domestic Fortune 500 companies work with at least one 3PL—a statistic that’s nearly doubled since the firm began tracking this data in 2001.
Further, the 3PL market continues to flourish. Armstrong & Associates’ most recent market size findings from 2018 show the 3PL market collectively grew by 15.8%. Why this exponential increase in 3PL use? The consulting firm points to the ongoing growth of e-commerce retail, as well as a significant increase in domestic inventory of imported products ahead of import tariffs, robust U.S. economic expansion, and tight domestic carrier capacity.
All that growth means more companies are on the hunt for better, more productive contract service partner agreements that yield supply chain optimization and reduce total costs. That’s not to say companies aren’t using short-term public warehousing services too. But when it comes to longer-term contract warehousing—in which the 3PL makes capital investments in automation, software and other technologies to achieve those objectives—companies that strive to establish a collaborative, mutually beneficial relationship will reap the greatest benefits.
Here, MHI Solutions takes a look at some of the key ingredients needed as companies and their 3PL service providers define and create win-win partnerships, as well as how they measure success.
An appropriately sized match
Just as there are a variety of company sizes and needs, there are a variety of 3PL sizes and service scopes as well. It’s important that both be fairly evenly matched, so expectations are met on both sides. That means the company seeking a service provider—most typically through a request for proposal (RFP) process—must adequately define the scope of its needs upfront.
“One of the biggest issues in this discipline is scope. Often, if two parties get in trouble, it’s either because the 3PL perhaps did not understand the scope as well as they should, or because the customer didn’t include all the requirements,” noted Elijah Ray, chief customer officer at Sunland Logistics Solutions, a 3PL focused on warehousing and value-added services.