For many working in the total quality logistics field, it’s necessary to review outsourced providers to evaluate choices and for taking a look at the performance of freight brokers and 3PL’s hired to move shipments. Here are some points for consideration in this review process.
Why is it important to review freight brokers and 3PL’s on a periodic basis? Some shippers, who’s providers appear to be “doing a good job”, may ask why they should formally review them, especially when it can take a great deal of time and money if done thoroughly (as it should). However, according to the 2008 Third Party Logistics survey, roughly $.49 of every dollar spent on logistics in North America is devoted to an outsourced freight broker or 3PL provider and the top most outsourced service is domestic transportation. As most companies today make it a high priority to reduce this spend, the time needed to review these providers is easily justified. Even if it’s not your company’s core competency, total quality logistics is a critical function of every supply chain and it deserves the time needed for evaluating how well it’s working.
What is involved in reviewing and evaluating a freight broker or 3PL? Developing metrics and collecting data for evaluating your freight broker or 3PL provider can easily spiral out of control. As a result, your company many not be able to effectively analyze and understand the information. A basic, but effective approach is to look for measurable areas that can tell you whether the freight broker or 3PL is providing total quality logistics services that are consistently better than what you could do in-house. The key here is measurable.
Primary transportation-based metrics include on-time delivery and pick-up percentages, claims ratios, billing accuracy percentages, cost per shipment versus historic costs, ratios of accepted and covered expedited shipments, and many more. While you should review these metrics at least annually, it may be a good idea to revisit them quarterly, monthly, weekly or even daily. A good freight broker or 3PL should be able to provide a web-based reporting application that would allow you to access this type of data at any time.
While web-reporting is certainly helpful for quick and easy access to data throughout the year, it is a good idea to use an annual review period as a chance for more personal interaction with your freight broker. You can’t really trust a 3PL that you don’t know. At least once a year, take the time to visit them or invite them to visit you. Meet with their staff face-to-face and get to know the management personnel. It will help to strengthen and build the relationship as well as provide opportunities to discuss higher-level strategies or new tools that may get overlooked while dealing with the fast-paced and time-consuming tasks from day-to-day.
Should I review and renew, or seek out new providers? In some companies, it’s corporate policy that new bids are solicited at the end of every outsourcing contract. As a result of the fluctuating economy this year, many companies are going out for new bids (even if it’s not time for renewal) in an effort to drive down operational costs and increase their bottom line. If you do decide to go out for bids, keep in mind that the bidding process can be costly, time consuming and lengthy. Do not fall into the temptation of taking short cuts to save time or money. By doing so, you run the risk of not receiving quality bids in return and on not being able to deliver true total quality logistics services.
Soliciting bids can be broken down in two general steps. First, develop a long list of possible providers and narrow it down based on criteria such as quality of their client list, depth of industry experience, approach to contracting and track record. Then, invite the short list of possible candidates into the bidding process and take the time to work with them. Meet with them face-to-face, get to know their management team and let them tell you their sales pitch convincingly. A good freight broker or 3PL will work hard at learning your business, earning your trust and, in the end; you will feel much more confident that you have chosen the right provider.
Source by John Rudy