We see companies all the time who jump into a contract with a 3PL prematurely without understanding what they are getting into completely and understanding what they are needing or wanting out of the logistics company. We will start by saying that before a company even thinks about signing a contract, they need to slow down and take the proper steps to make sure the company is competent and that they fully understand their business.
If you are wanting to achieve this, we have broken this down to 5 steps that will have you and your company on the road to profit vs. backtracking.
1. You will need to lay the foundation
2. You need to understand your business
3. Aligning interests is crucial
4. Make sure both parties have an established agreement/ contract
5. And last you need to keep track of performance.
I know that a few of these seem obvious, but many just knowing how many SKUs there are total, coming in and out, and shipments palletized and not, is not common knowledge. Ask around and in the production facility. There are resources at your fingertips who are your co-workers.
Too often, we hear that companies just grabbed their existing Statement of Work that they haven’t looked at in months, hurry to get the most competitive bid, and then allow the 3PL three months or less to try and understand the work that the company doesn’t even understand.
The best thing about making sure these 5 steps are taken, is that they can be reused over again for getting other proposals and also with other existing suppliers that you may have.
Skipping steps usually results in a poorly conceived business outsourcing agreement or worse.
The steps above may not work as effectively if they are only completed individually but, if they are used in sequence with each other, it will provide some valuable insight that can potentially increase your bottom line.
Shannon Nute, MBA