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When you consider how popular logistics outsourcing has become over the last few years, you could be forgiven for thinking that success is a foregone conclusion. However, as some companies have found out the hard way, there are certain pitfalls to avoid in logistics outsourcing if your partnership with a 3PL provider is to be successful.
By being aware of these, your supply chain can certainly achieve cost, labor, and efficiency benefits:
Pitfall #1 – To expect too much
Rarely does an outsourcing initiative deliver 100% of the savings projected? Don’t be too dismayed by this revelation though. If you achieve 70% of what’s projected, that’s still a big plus for your organization. In fact, you should be very careful about outsourcing logistics with the sole intention of saving costs, period. Unless your current internal operation is truly inefficient, outsourcing may even end up increasing your logistics cost.
Here are nine more pitfalls to be aware of and avoid when planning and executing a transition from in-house to outsourced logistics.
Pitfall #2: Assuming that anything should go without saying
Everything you expect from your outsourcing partner should be provided to them in the form of detailed written procedures and actionable form.
Pitfall #3: Outsourcing too much, too soon
Make provision for a honeymoon period and start by outsourcing a share of your chosen process. Increase the scale if all goes well.
Pitfall #4: Going in without an exit plan
Ensure the contract with your provider includes a procedure for disengagement if the partnership doesn’t deliver on expectations.
Pitfall #5: Abdicating responsibility
Remember that your outsourced processes are still your processes. While micromanagement is a bad idea, monitoring and measuring activities are essential.
Pitfall #6: Treating the process like a purchase
Remember that you’re entering into a long-term partnership when you outsource logistics processes. Chasing the best price is seldom the wisest way to choose your provider.
Pitfall #7: Absence of internal buy-in
Nothing can derail a partnership faster than finger pointing and negativity within your own operation. Every penny invested in change management and securing stakeholder buy in, is money well spent.
Pitfall #8: Rushing the tender process
If you harbor expectations that you can select a 3PL partner, finalize an agreement, and commence an outsourced logistics operation in a matter of weeks, you’re very likely to come unstuck at some point. A realistic timeline to get an outsourcing partnership underway is about four to six months—as a minimum.
Pitfall #9: Outsourcing as a strategy
An outsourced logistics operation is not suitable for every company. You should be very clear about your objectives for outsourcing; otherwise, you’ll be making the mistake of treating outsourcing itself as a strategy, when it should only ever be considered as a strategic enabler.
Pitfall #10: Overlooking the importance of communication
Once you begin working with a 3PL provider, you must resist the temptation to play your cards close to your chest. Logistics outsourcing simply won’t work if you aren’t prepared to share short-term forecasts, long-term plans, and perhaps most importantly, pertinent business data with your partner. Perhaps the points mentioned above sound like simple common sense and really, they are. However, they are all real traps, which have been fallen into by real organizations, sometimes with seriously painful consequences.
When it’s executed correctly, 3PL outsourcing is a proven enabler for service and efficiency gains in the supply chain. Try to avoid the ten pitfalls outlined above, select your 3PL partner wisely and you’ll be creating the best opportunity for your business to enjoy the gain, without the pain.