Outsourcing logistics and supply chain services to a 3PL is a major decision, not to be taken lightly by any business. In this article, we’ll provide insights into the main processes, so that you have a better idea of what to expect, from making the decision through to services implementation.
If you’ve been considering outsourcing your supply chain services to a 3PL partner, your likely already aware of the benefits, including:
- Increased reliability and/or scalability
- Access to expert supply chain strategies & planning
- Access to value-added logistics services (VAS)
- Cost savings & continuous improvement
When you are selecting a 3PL partner for your company, it is important to do extensive research. A few things to consider while evaluating potential service providers is who their current customers are, their expertise in servicing your business segment, and whether they are highly recommended by former/ or current clients or not. Explore their websites; ask your peers for opinions and recommendations to better evaluate your options.
Prepare to share information about the type of product, the number of SKUs, order volumes, the speed of delivery required, and other vital details. Explaining your business requirements in a comprehensive way will ensure that the supply chain providers will develop the best solution.
After contacting the narrowed list of 3PL companies, or issuing an RFP, allow adequate time for internal reviews of the proposals, including meeting with their business development and solutions teams, and touring the facilities.
Never make a decision based on price alone. There are multiple factors that make or break your supply chain, and sometimes the less expensive solution can wind up costing you much more in the medium to long run, such as not being able to support the growth of the business. The wrong decision can also impact customer experience, and even damage the reputation of your brand on the market – so be sure to look at all the aspects that will be directly and indirectly impacted.
Once you have chosen your 3PL partner, the first thing to be prepared for is a realistic timeline for the solution implementation. After holding the discovery sessions, defining the business requirements, and validating assumptions, the LOI and MSA’s are signed. Allow enough time for the 3PL company to lay out the facility design, install racking, automation, if any, find, hire and train talent, organize transportation, launch IT systems, establish processes, validate and test the IT systems and all the other elements that will be involved based on the project requirements.
Depending on the size of the logistics project, the solution implementation timeline can vary; however, it generally takes around 4 to 6 months to launch a new supply chain solution. During this time, it will be important to allocate plenty of time for on and offsite communications between your team and the 3PL partner. It helps to deal with a Canadian 3PL that has an agile and responsive team and can dedicate time for their executives to meet with your team in person. Frequent meetings in the beginning of the process are important to address any potential issues and mitigate any possible confusion along the way. During these initial meetings, the project team can also decide how they want to steer the project moving forward after all the critical points have been discussed.
While your 3PL partner will take care of project management and provide experienced PM’s, expect your internal teams to be extensively engaged in the solution implementation. The 3PL company’s functional leads will work in close alliance with your internal teams, such as executive leadership or steering committees, the IT department, operations, and others as required. For the project success, it is vital to engage an internal executive sponsor who will have the ability to re-prioritize other projects and get the cross-functional buy-in if any issues arise. This ensures that your internal resources are properly allocated to handle the changes. Changes in your existing supply chain will likely affect many areas of your business, and a proper change management process should be established and executed in order to ensure that all affected functions are fully aware of the changes and are ready and willing to accommodate the switch to outsourcing supply chain services.
Supply chain outsourcing must be thoroughly planned. It’s important not to plan implementation close to sales peaks, so be sure to navigate around key sales promotions and seasonality peaks. For example, if you are a toy or apparel retailer, some of the worst times to make the switch with your supply chain services would be: Black Friday, Cyber Monday, Christmas, and Boxing Week. If your company deals with school supplies, then the end of August and beginning of September should be avoided.
Ideally, the best time to choose for implementing any supply chain change would be the slowest period for your business. If your company has a steady flow of sales and no seasonality, then planning a strategic time of the year when your company does not have any other major projects going on would be a great choice for supply chain solution implementation.
If your company has planned to outsource the supply chain services to a trusted partner, and have taken into consideration everything in this article, you can expect a smooth integration, with fewer issues in the implementation process. Apply the 80/20 rule – 80% planning, 20% implementation and the outcome will be improved business results and more satisfied customers.
If you’re considering making the switch to outsource all or part of your supply chain, contact the supply chain experts at SCI, and let’s see how you can benefit from partnering with us.