As you scale your business, it can become necessary to start outsourcing tasks to experts. When you’re a startup or small business, you may be hesitant to hire helping hands. No one knows your business like you do, right?
Well, outsourcing tasks to subject matter experts is a great way to take onerous tasks off your plate so you can focus on growing your business. According to one Pinsent Masons study, 88% of retail companies that outsourced their services said it was successful.
One of the major tasks some retailers outsource is their shipping and logistics to outside vendors. Working with a third-party logistics (3PL) provider can ease the burden that fulfillment can sometimes place on your shoulders. 3PL providers can take over the enormous task of fulfilling orders and processing returns so that you can focus on the big picture.
But finding (and keeping) the right 3PL provider can be its own challenge. Because 3PL providers can be your biggest allies in ensuring your customers get their products as quickly and efficiently as possible, we’ve compiled a few tips to help you manage that relationship.
3 Tips to Build a Great Relationship With Your 3PL Provider
1. Lay a Strong Foundation of Communication
When you’re first building your relationship with your chosen 3PL provider, it’s wise to set clear expectations on both sides. The key to accomplishing crystal-clear goals is communication — and you’ll need to do a lot of it with your logistics provider.
To keep things transparent from the outset, we recommend a few tactics, including:
- Spell out expectations. Leave nothing in your relationship undefined. What precise services will they provide, and how will you facilitate? What are their deadlines or milestones? Discuss all the facets of your shared goals and expectations and put them down on paper in the form of a thorough contract.
- Establish success metrics. Through the lens of your business, what does success look like for your 3PL provider? What are their key performance indicators (KPIs) and how can you work with them to achieve those benchmarks? Whether that’s a 100% customer satisfaction rate on fulfilled orders or processing a certain number of orders per day, outline how you’ll define success in this relationship. Communicate those KPIs to your logistics partner, then regularly check in to ensure they’re meeting them (and adjust metrics as needed).
- Set up escalation procedures. Mistakes happen, and they’ll happen with a 3PL provider. But you can prevent a mistake from turning into a full-blown by establishing an escalation procedure. When a customer doesn’t receive a package or their product is damaged, who handles the query? Clarify the procedure and set it up before any issues occur.
- Appoint one contact person. If your 3PL provider has to contact multiple people with your business, then they’re more likely to get mixed messages. Appoint a single contact person on both sides to avoid any confusion or miscommunications.
2. Incentivize Success
Remember those success metrics we talked about? While outlining those are a solid first step in building your relationship with your 3PL provider, you can take it a step further.
To further ensure that your 3PL provider meets their deadlines and/or milestones, incentivize their success. There are a couple of potential ways for retailers to do this:
- Schedule regular check-ins. While you outsource logistics to get the experts to handle your fulfillment, that doesn’t mean you should wash your hands of the process altogether. To address challenges and examine how well both you and your logistics partner are living up to your commitments, pencil in regular meetings. That could be a monthly call or a quarterly on-site meeting — whatever the form or frequency, put it in your calendars well in advance to ensure you check in with one another.
- Work with your logistics partner to overcome challenges. Is your 3PL provider running into a recurring issue? Work with them to overcome it. Remember: This is a partnership, and should be treated as such.
- Set up a bonus structure. How can you incentivize your 3PL partner to go above and beyond? Consider offering bonuses for meeting success metrics (or blowing them out of the water). That may mean lowering a flat rate for their service but creating a pricing structure with built-in performance bonuses at regular intervals. The better results your logistics partner delivers, the more they can make. And when your 3PL provider meets their goals, that directly boosts your business. This scenario creates a true win-win for both companies — you’re truly invested in each other’s success.
3. Get an Understanding of Their Business (and Help Them Understand Yours)
To collaborate successfully, it helps if both you and your logistics partner have a deeper understanding of how each business is run.
While a superficial understanding of each business model, and your respective strengths, may get the relationship off the ground, you’ll both benefit if you take that relationship to the next level.
To help you get there, we’ve got a few suggestions to encourage a deeper understanding on both sides:
- Learn their strengths (and show them yours). You differentiate your company based on certain strengths — your logistics partner is the same. Learn about each other’s niche, your competitive differentiator, and what you both do well in general.
- Share your company’s goals. Although you don’t need to share your full business strategy, give your 3PL provider an overview of your business objectives. Highlight short- and long-term goals, especially in cases where they can directly help you reach them.
- Consider them in your planning. Keep each other in the loop, especially when it comes to long-term planning. Major changes in your business (i.e. acquisitions, rebrands, recalls, product changes) can affect how they do their job, and vice a versa. Keep them in mind and the lines of communication open.
- Get a feel for company culture. Is your brand whimsical and quirky? Does your logistics partner have a similar feel? Get to know what makes them tick and it can inform how you both communicate with one another.
Improving Your Rapport With Your Third-Party Logistics Provider
When it comes to managing third-party logistics, it can be a challenge at first to build those relationships. But when you work collaboratively with your 3PL provider and work to maintain that relationship, the upfront investment of time and effort becomes easier to bear.
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