Managing a Third Party Logistics Partnership

When you have chosen a 3PL partner, insure that you have an effective Service Level Agreement (SLA) with accompanying Key Performance Indicators (KPIs) to manage the Service Level of the 3PL.

This SLA/KPI has to be negotiated and agreed upon by you and your 3PL partner.This negotiation time can take three (3) to Six (6) months.

If you do not want to start at the 3PL as a contact customer with a SLA/KPIs, you can ship your goods and become a public account. Later, as you grow and gain experience, you can become a contract account. Both public and contract accounts have to negotiate prices and contracts. There are many pricing levels: unit rate pricing, hourly pricing and eventially cost-plus amd management fee pricing. All have accessorial pricing for pallets, wrapping, labeling and other miscellaneous charges to be negotiated. As a contract customer, upfront costs will be a subject of discussion and negotiation.

Yes, I stress partnership and collaboration. The relationship will not work without trust and Continuous Improvements through constant communication in your relationship.

Some KPIs (to be stated in percentages or numbers) that should be part of your SLA are:Customer Service, Inventory Integrity via Cycle Counting, Continuos Improvement (using LEAN initiatives, Process Improvements, etc), Shipment time from the 3PL to your customers, VOC (Voice of the Customer) feedback to insure that your customers are happy with the 3PLs delivery service,Transportation management: Less Tan Truckload (LTL)/Truckload (TL) requirements, Cost Reduction, Inventory Reduction (joint venture), Return Goods Authorization (RGA) and Procedures, Damaged Goods Procedure, Turn Around Time: Order Entry to Shipment, LeadTime Definition to your Customers,Quality LeveL (Six Sigma, Acceptable Quality Level (AQL), Internal Processing Times, Order Processing time, and many other KPI considerations.

Do not sign a SLA or contract with accompanying KPIs, without a professional review (3PL Consultant) and Legal Review.Insure that you stress a Cancellation clause. You should also have a Modification Clause wherein you can modify the SLA/KPI/ Contract and Prices in 30-60-90 days.

Always visit the 3PL of your chose to review the operation and get to know their people, especially those who will be your contacts at the 3PL. Never sign a contract without visitation to the 3PL.

Chuck Intrieri is the owner of Charles M. Intrieri Consulting in Orange County, CA. Chuck specializes in Supply Chain Optimization, Third Party Logistics (3PL) and International Purchasing and Importing Consulting. He also writes for THE GOOD WORD, LinkedIn and other Supply Chain Blogs. He is a guest speaker at the Purchasing Management Association and the University of Wisconsin-Madison. He is certified as a C.P.M.,CPIM, and Value Engineer.

By | 2015-10-20T13:46:35+00:00 October 8th, 2012|Logistics Management, Transportation, Warehousing|Comments Off on Managing a Third Party Logistics Partnership

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