Succeeding Beyond the RFP – How Shippers and Logistics Providers Can Drive Performance in Their Business Relationship
By: Frank McGuigan, Chief Executive Officer, Transplace
The relationship between a shipper and a logistics provider often starts as a transactional process – the shipper has an immediate need, which leads to a Request for Proposal (RFP) or Request for Quote (RFQ) process, then ultimately selects a third-party logistics (3PL) supplier to execute on that need. This routine industry practice can yield immediate and significant results – however, if the relationship does not evolve into something more than this, even within the first contract cycle, there is a chance that the relationship will ultimately be suboptimal.
To thrive in today’s dynamic supply chain environment, it’s critical to continue challenging the status quo beyond the RFP and to proactively find new ways to drive innovation and optimization. Therefore, a joint commitment to nurture and evolve the shipper-3PL relationship is key.
Commit to Continuous Improvement, Not Just Short-term Savings
Transportation optimization is more than moving freight for the lowest cost or finding a short-term boost in performance; it’s also about continuous improvement delivered through smart, data-driven planning and efficient execution. To achieve – and maintain – this, it requires two equally-engaged parties committed to cultivating the partnership, and a shared desire to look beyond the current approach and ask, “What are the gaps that are preventing the shipper from being world class, and how can we work together to drive performance?”
Both the shipper and the 3PL must be committed to the relationship and contribute to keeping it healthy and fresh. And while there’s no magic formula for creating and sustaining a successful relationship between a shipper and 3PL, there are steps that each can take to put themselves in the best position to promote a long-term, mutually-beneficial relationship:
- Seek a Deeper Understanding of Your Customer’s Business: Shippers want their 3PL to proactively come to them with operational improvement and cost savings opportunities that will positively impact their business. But they also want thoughtful ideas that demonstrate a thorough understanding of their business and their needs – which means that 3PLs need to make it a point to never stop trying to understand what’s important to their customers.
- Communication is Key: Developing a true strategic partnership that doesn’t become stagnant requires open and honest communication from both parties. Candid conversation about the customer’s expectations, anticipated challenges and opportunities within the supply chain is a critical aspect of the relationship.
- Formalize Your Engagement: To help encourage a strong, collaborative relationship, there needs to be established processes for engagement. Whether it’s a daily or weekly operations meeting, monthly meetings to discuss metrics, or quarterly business reviews; it’s important to examine performance, identify any gaps that require immediate attention, and discuss both anticipated challenges and areas of opportunity.
- Don’t Forget About Your Own Continuous Improvement: The commitment to continuous improvement shouldn’t just apply to the shipper’s operations. It’s important for the 3PL to invest in their own business and look for ways to continually drive improvement – both internally and in the services and solutions they’re delivering to customers.
- Implement a Continuous Improvement Methodology: To help support the pursuit of optimizing performance in both the short-term and long-term, the 3PL should employ a continuous improvement approach, such as Lean Six Sigma (LSS). A proven strategy and toolset such as LSS will further promote process excellence by challenging the current way of working, and will enable more data-driven decisions to identify and eliminate waste.
While the 3PL-shipper partnership may begin as a RFP for a defined service, the business relationship can evolve to a higher and mutually-beneficially level – if, and only if, both parties are willing to break away from conventional outsourcing practices and work together upon a foundation of trust and mutual accountability.
What best practices help you keep your business partnerships fresh?