Saturday, June 21, 2008

More on 3PL

In India, almost every other fleet operators calls themselves a 3PL service provider. This has led to lot of confusion and poor customer satisfaction. 3PL service provider other than providing the standard transportation services also provides necessary supporting services like cross-docking, reverse transportation, warehousing, inventory management, packaging etc. The clients benefits from the extensive experience & knowledge base of 3PL service provider.

The factors that should be considered before outsourcing to 3PL are:
1) Price of 3PL services.
2) Depth of knowledge & experience.
3) Range of available value added services.
4) cultural & strategic fit with 3PL provider.
5) Available information technologies and compatibilities.

Some of the problems being faced by the companies using the services of 3PL's are:
1) Service Level commitments not realized.
2) Lack of continuous, ongoing improvements and achievements in offerings.
3) Cost reduction has not been realized
4) Information technologies capabilities not sufficient.
5) Lack of project management skills.
6) Unsatisfactory transition during implementation stage.
7) Ineffective management of key Performance Indicators (KPI)
8) Lack of global capabilities.
For successful implementation of 3PL services it is imperative to:
1) understnad the goals & objectives.
2) Clear communication between the parties involved.
3) Trust & commitment of top mangement
4) Have shared decision making & ability o reach consensus on matters of importance.
5) Have effective process meassurement & management (KPI)
The contract or agreement with the 3PL provider generally addresses the following issues:
1) Rates & compensation details.
2) Service standards and performance requirement.
3) Process of termination
4) Terms for renewal of agreement
5) Penalties for non-performance.
6) KPI's (like on time delivery, order picking accuracy, on time shippring, loss or damange during in the process etc.) to determine compensation and penalties.
7) Information technologies mandates.

KPI's establish customer's expectations in terms of performance, provide an incentive for the service provider, offers an objective way to assess performance, helps compare peformance vis-a-vis other service provider, identify cause of failure and avoid disputes.

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