This blog post is the fourth in a series that discusses what to look for in a Third-Party Logistics Provider (3PL). The blog series explores mission-critical topics about outsourcing logistics and selecting a 3PL, all the way from strategy to pricing to implementation and beyond. Today’s blog post is about Technology capabilities — from WMS to TMS and Integrations — of your 3PL candidates. It suggests a series of pitfalls you should avoid during the evaluation process, and helps you shape the Technology section of your RFP accordingly.
- Meet your own customers’ requirements. In the dynamic markets we live in today, your customers are constantly evolving — that means you are also adjusting to offer them new and different services, meet new reporting, tracking and delivery requirements they have, and so on. This has huge implications for the supply chain and the operations your technology platforms facilitate.
For example, a LeSaint client and CPG manufacturer sells their goods to most major retailers. Delivery windows to retailer stores and DC’s are constantly changing; what’s more, failure to meet those windows means big retail compliance fines for our client. So, the technology systems they use must be able to communicate the delivery window requirements (shipment-by-shipment) in advance, and track the achievement (or failure thereof) of deliveries within the window, keeping in mind that the delivery windows change week-by-week, and even day-by-day.
- Find efficiencies. How are your 3PL candidates using technologies to find efficiencies, reduce costs and reduce errors? Beyond the basic capabilities of facilitating day-to-day operations (ie. fulfilling an order), it is absolutely critical that the systems you are using allow you to find efficiencies in those day-to-day operations over time. This often means finding opportunities for continuous improvements that add up to cost savings.
A 3PL candidate should be able to:
- illustrate how aggregated, cumulative data from the technology system (WMS, TMS, etc.) is loaded into reports or dashboards
- how the data, trends, etc. are analyzed to derive new knowledge or identify areas for improvement
- Enact action items based on what the data shows
That brings us to the first pitfall:
Pitfall #2: Your provider does not have the flexibility to implement future business requirements (ie. beyond your immediate needs today). As you envision where your business is heading, your long-term 3PL partner needs to be prepared to help you get there. To be more specific, order processing and inventory management needs should be assessed not only based on today’s volumes, but also 3-5 years out. Keep in mind that as volumes grow and expand, the technology tactics used for fulfilling outbound orders must be improved to accommodate a different strategy. Sharing volume and other inventory projections, however high-level they may be today, means together you and your 3PL partner will get out far ahead of future business requirements for today’s technology solution.
- Orders by phone or email are the only channels in place
- Automated flat file transfer (ie. CSV delimited) is how orders are sent/received
- EDI is needed to transfer orders
- API transactions are becoming more and more mainstream. They help remove ‘middleware’ providers and can allow for both flexibility and cost savings in some technology infrastructures
Here’s a recommendation: Start by ranking your immediate technology needs vs. your longer term goals. Collaborate with your new 3PL on the longer term goals to build a roadmap towards them. If you can’t communicate both current and longer-term goals upfront to your 3PL, scope creep will ensue, causing you to become reactive with escalating costs.
Pitfall #3: Assuming that because your 3PL has WMS or TMS capabilities, they will be able to integrate with other systems. Keep in mind that the integration of systems is a totally separate capability from the basics of what a TMS or WMS can do as a stand-alone tool. So often, we find that a 3PL has a WMS or TMS platform, but they lack the internal IT expertise and third-party support necessary to integrate those systems into the client’s business. Be sure to uncover this during your 3PL RFP selection process.
Pitfall #4: Development is not handled in-house by your 3PL candidate(s). This folds in closely with Pitfall #3; Internal Development expertise for integrations is but one of many IT Development activities that you’re likely to require. If your 3PL does not have employees dedicated to handling IT Development in house, there are several implications. First, it could dramatically slow down your impending IT implementation as you transition to that new partner. Also, resource availability (ie. who and how the implementation work will get done) likely played a major role in the 3PL’s cost structure. If those resources are not sustainable or something changes, that could have a major implication to the cost you were quoted. For these reasons, LeSaint has an in-house development staff supporting both EDI and API; this offers customers a range of flexible options that helps supplement our client’s own staff needs.
Pitfall #5: Short-changing the technology implementation timeline as a result of other milestones being delayed. Most of our clients tell us that speed of implementation once they’ve selected a 3PL is a high priority for them. Implementations (ie. changeover from current state to the new state) are typically governed by tight timelines and clear milestones, that often get delayed by unexpected events, approval delays, and other unforeseen factors that come up. This can cause a cascading effect to milestones downstream in the implementation plan, not the least of which are IT/Technology-related. The reality, though, is the final change-over deadline is typically non-negotiable; the client must move out of their current facility or provider by a certain deadline that absolutely cannot change. As a result, we see companies often short change their Technology implementation timelines. Here are some examples of repercussions from doing this:
- Necessary integrations are built with band-aids and work-arounds, that have to be corrected later
- Configurations focus on only the most critical/basic requirements, and re-work is required later to achieve what was the original desired end state
- Testing & auditing to ensure configurations and integrations are set up successfully is cancelled, or done in a cursory way at best, resulting in operational issues later
- IT costs creep up and out of scope as re-work and fixes are made that were not originally required
Recognize that it will take time to migrate to new systems; you may not understand the intricate details and the implications of shortchanging the right time allocations for the IT/Technology implementation until they’re unfolding.
Pitfall #6: Trying to make major enhancements and improvements to the Technology methods at the same time you are changing 3PL’s. Be cautious of making too many major improvements to Technology processes and requirements at the same time you’re changing over to a new provider. Chances are your 3PL candidates have submitted their proposals based on what they know about your current state; and are usually flexible to build in new improvements if you’re able to articulate your future needs. If you’re layering in enhancements or updates that you’ve never done before in the midst of also changing providers, then you are definitely introducing a whole new layer of complexity. Therefore, carefully prioritize the most impactful improvements; focus on low hanging fruit and easiest to implement changes first. Communicate them to your 3PL candidates as thoroughly as possible.
Pitfall #7: There are one or more third-parties who are not included in early stage / pre-RFP discussions about your project. In today’s data-driven world, we find companies work with multiple technology service providers in a complicated supply chain technology infrastructure — from VAN’s to Middleware and beyond. Understanding who all of those Technology partners are and giving them visibility to your impending RFP for 3PL services early on can head off a lot of headaches later. For example, different technology service providers may want their own project managers involved in the eventual 3PL implementation. Ensuring everyone understands their roles, the timeline and are brought together for careful upfront planning together will make the implementation go much smoother. Finally, we recommend that you assess your 3PL’s experience in working with other technology service providers during an implementation; if they haven’t done it very often, that is reason for concern.
Pitfall #8: The 3PL’s Business Continuity & Back-Up Plan is not as robust as your company’s internal standards. Your 3PL is an extension of your company, fundamentally speaking. The 3PL should protect your data and systems at the same or a higher level than you would do in your own company. At a minimum, your 3PL partner should have:
- A detailed explanation of what they will do if any system goes down, so your orders can still be fulfilled and revenue realized
- A back-up solution and recovery time objective in the event of a service disruption
- Have a plan and method for combating cybersecurity, including preventative measures
Pitfall #9: Not seeing the 3PL’s technology in action when you visit the 3PL’s facility onsite. I’m closing on this note, because we’ve already shared some perspectives on what to ‘poke around’ for when scouting a 3PL candidate’s site. During those visits, be sure to observe how employees in the operation are using technology in their day-to-day work. It could be everything from picking orders, loading shipments, guiding their work with dashboards, adjusting productivity and so on. Are employees taking action based on the technology enablers on the floor? If not, re-think just how effective the 3PL’s technology systems really are.
