Prepare Your Company To Work with a 3PL For Greatest Success and ROI

By Mike Challman, Vice President, North American Operations, ChemLogix, LLC

So, you’ve made the decision to contract a third party logistics provider (3PL) to optimize your logistic operations.  While the resources and market intelligence offered by the 3PL promise to address your transportation challenges and help you better maintain a competitive edge, companies – and their staff – must be prepared to work with the 3PL and commit to the program.  Here are some keys to outsourcing success:

Upper Management Buy-in and Commitment to Program

Getting the funds and approval from executives to implement and/or expand transportation services and systems sometimes takes the assistance of 3PLs who can provide detailed explanations of the long-term benefits of specific supply chain strategies. Executive approval is necessary for supply chain programs to move forward. Experienced in providing transportation solutions to customers in the same industry but with varying scenarios, 3PLs can readily provide informed answers to the questions posed by executives and give examples of the successes and pitfalls associated with certain actions.  3PLs, essentially, become a part of the logistics team when presenting ideas and updates to the board room.

Successfully Managing Internal Rate of Change

Shippers must realize that with the promise of optimized supply chain operations, 3PLs bring with them new processes, techniques and efficiencies that must be deployed in varying departments.  As a result, supply chain solutions affect the way in-house personnel have operated in the past.  Companies must communicate and manage change activity so there is complete “buy in” at every level.   Employees of every level should understand the reasons for change, their role and the corporate implementation schedule.  Lack of visibility of new supply chain strategies throughout the company can result in key players not knowing what to do to affect change.  At the same time, lack of flexibility to change by employees can cause implementation delays and impend the overall success of the new supply chain strategy.  Changing the ways activities have been done in the past may be one of the hardest challenges faced by shippers.  Inability to make changes may results in loss of savings as the hard changes make the most effect in driving out cost.

Cross Functional Commitment

Personnel in varying departments at different management levels must accept the supply chain solutions presented by a 3PL for the company to succeed.  While corporate executives might be all for change, it is actually the department heads that must implement new processes and direct their staff in new activities.  Communication is key for “buy in” as everyone from the warehouse and dispatching to accounting and customer service is critical component in change.   Plants and business units may be upset with loss of control over specific activities that they managed for many years.  Open discussions on the reasons and methodologies for deploying a 3PL to optimize current logistic operations may be warranted with different groups to ensure a smooth transition.

Make Supply Chain Activities a Priority

Most companies are extremely busy and juggle a number of competing projects.  As a result, staffs often “multi-task” to the point that they have too many projects on their plate.  Lack of resources and over activity is often the reason some shippers elect to outsource their logistic functions.

While busy, shippers must make the 3PL and associated supply chain activities a priority to obtain the qualitative and cost improvements promised by contracted managed services.  Companies must fully commit to make appropriate in-house changes according to the implementation schedule.

On-going Commitment – Solution is Never Final, Always Evolving

In addition to satisfying the terms of a contract to manage specific freight activities on a monthly or cost-per-transaction basis, 3PLs should proactively present cost management ideas as part of their services. Rather than wait for problems to arise, a 3PL should lead a periodic review of supply chain processes with appropriate personnel to discuss new transportation solutions, specific cost reduction ideas, service levels, and any issues that the client may have with current operations.

On the client side, shippers must make a commitment to truly partner with a 3PL to inform them of their business strategy and competitive landscape.  Without in-depth information, a 3PL cannot create a well-defined process that meets corporate needs and requirements.  A non-disclosure agreement should be established so a 3PL and client feel comfortable exchanging information.  And as the supply chain evolves, companies must disclose new business strategies, threats and competitive information to 3PLs to constantly re-evaluate current supply chain strategies and make necessary adjustments.

Working together, the 3PL and shipper should continue to assess performance and set new goals that enhance supply chain performance.

Elements of An Effective Continuous Improvement Program For Long-Term Successful Supply Chain Operations

By Mike Challman, VP North American Operations, CLX Logistics

”Excellent firms don’t believe in excellence – only in constant improvement and constant change.”  Tom Peters

“What have you done for me lately?”  Janet Jackson

More often than not, a logistics outsourcing decision is driven by the need to correct a particular pain point or shortcoming that a shipper has recognized in its supply chain.  So,  it’s very common for the shipper and its new logistics provider (3PL) to be well-aligned and focused to address that particular issue.  Assuming a good implementation (a topic for another time), the immediate results can be significant.

While it’s no small task to achieve a good level of initial success, this is only the first step for the shipper-3PL relationship to remain relevant and valuable on a long-term basis.  A well-defined continuous improvement (CI) program will maintain the momentum beyond those early achievements.

A fundamental requirement of a sustainable CI program is strong executive-level support.  Nothing kills any corporate initiative faster than having individuals realize that senior management doesn’t value their work.  Leaders must be both vocal and visible in their support of CI efforts.  They also must ensure cross-functional support within the organization.  Multiple competing priorities invariably pull limited resources in many directions. Only top leadership within the organization can ensure CI programs remain a priority.

The 3PL must also have a ‘seat at the table’ when its client – you, the shipper – discusses upcoming plans, strategies, potential opportunities and so on.  Logistics providers must have a thorough and current understanding of its customer’s business and strategic plans to develop effective ideas and suggestions that support current and future business activities.  In addition to corporate strategic meetings, the shipper and 3PL should meet regularly to specifically review the status of CI projects.  Ideally, meetings should be held monthly to review tactical issues and progress and quarterly to review the broader, more strategic aspect of a CI project as well as to discuss the next round of CI initiatives.

An effective CI program must also have well-defined goals.  Both the shipper and 3PL must understand and agree upon key program outcomes.  Comprehensive goals should include both near-term and longer-term objectives that take into account both quantitative and qualitative improvements.  A 3PL with experience in managing CI programs on behalf of other clients can bring forward best practices from those experiences. But, of course, the aim of the CI program must align with the overall strategic goals of the shipper.

From a commercial perspective, the services agreement between shipper and 3PL should include a description of how the CI program is managed, including guidelines to govern any gain share provisions.  The relationship can be largely self-funding if it delivers measurable economic value over the life of the agreement.  Equally important is for the shipper to reward the value of the 3PLs’ expertise and contributions with a portion of actual savings.  The best 3PLs will be willing to tie a portion of compensation to improvement efforts; the savvy shipper will be willing to share some of the gains in exchange for those improvements.

Throughout the CI process, an essential ingredient is reliable metrics.  Accurate data, including establishing a meaningful baseline, is essential to tracking the progress and results of any specific CI project. Equally important is the need for dependable data to help identify new areas where a CI focus would be valuable.  The old adage that you can’t manage what you can’t measure may not be entirely true, but good data is in enabler that it’s almost impossible to do without.

Finally, it is important to feed an appetite for improvement within both organizations.  Everyone involved in the logistics activity within the shipper and 3PL organization must be dedicated to the pursuit of better results.  Establishing individual, departmental and organizational objectives and incentives that relate explicitly to improvement will assist with this focus, as will frequent and specific recognition of CI successes.  As time goes by, improvements will become increasingly harder to achieve so it is important to establish a culture of seeking and securing on-going gains, both big and small.

Continuous improvement is a journey, not a destination.  And every shipper can rest assured that its toughest competitors are undertaking the same journey.  If the shipper and its 3PL are not actively trying to move forward, it’s the same as deciding to move backward.  A shipper who is committed to constantly improving will be rewarded for those efforts, and will foster a well-deserved reputation for excellence.  A first-rate 3PL is a valuable traveling partner who can help navigate the best path to success.

For more information on how to get started in establishing or refining a continuous improvement program  for your supply chain operations that reaps long-term benefits, contact Mike Challman at mchallman@chemlogix.com or email http://www.chemlogix.com/solutions/managed-services.

Outside Experts Can Assist Shippers with Import Compliance of Goods

By Stephen Hamilton, Managing Director, ChemLogix Global

Importing products can be a daunting task, especially for small- to mid-sized companies with minimal logistic resources and limited internal system processes dedicated to logistic operations.  The same appropriate actions or reasonable care is required of all U.S. companies importing products to ensure correct and safe entry of merchandise into the States.  This involves correct classification of goods, payment of appropriate duties, checking what is received, maintaining required records and other compliance requirements.

In managing reasonable care in meeting compliance, importers should have an experienced in-house employee with knowledge of customs laws and regulations or employ an outside expert who possesses the in-depth knowledge of compliance regulations and processes to efficiently manage compliance requirements, reduce errors and expedite information exchange among trade partners.

Different third party resources are available to shippers:

Licensed customs broker: Contracted to assist with customs documents, rules and regulations associated with reasonable care and fees related to imported goods, customs brokers help ensure goods are cleared through customs in a compliant and timely manner.  While shippers can contract other outside experts to prepare documentation, customs brokers are the only third party that can file entry documentation on behalf of an importing client. As not all brokers can process entries at every U.S. custom ports, importers must ensure they hire the right customs broker to meet their requirements by checking their license, permit to import certain goods and other paperwork.

Law firms offer advice on a variety of custom topics including all aspects of reasonable care, negotiate broker contracts and manage broker activities, conduct training classes and guide shippers in creation of import policy and procedure manuals. Some law firms specialize in providing legal services associated with seizures and forfeitures related to imported products.

Consultancy firms or third party logistic providers (3PLs) offer a range of managed services from assessments of current compliance programs, establishment or update of best practices, broker management, recordkeeping, process systems and internal controls, regular audits as well as import compliance training.   These consultants offer hands-on service in managing specific aspects of compliance for a shipper or can handle an entire compliance program.

A 3PL also can combine compliance expertise with the latest web-based technology to help importers avoid the risk of non-compliance and reduce logistics costs.  A compliance solution, supported by an web- or SaaS-based transportation management system (TMS), can dramatically improve processes, accuracy and efficiency related to import compliance without requiring any software or hardware investments by companies.   In addition to streamlining operations by integrating multiple locations, the TMS can automate communications with trade partners, recordkeeping and other tasks associated with compliance so companies can operate more effectively and efficiently to reduce costs, improve operational methodologies and enhance relationships with Customs.

Large multinational corporations often hire a licensed customs broker or trade compliance consultant as part of their own staff.  Smaller companies with limited budgets often turn to import consultancy firms or third party logistic companies (3PL) to contract managed services.

When using any type of outside expertise, importers should discuss their import program in detail, providing complete and accurate information about import transactions.  It is important to establish what a consultant can do and who is going to manage specific tasks to form a successful partnership.

Even if using an outside consultant, whether a broker, law firm or 3PL to assist with the compliance, the importer of record maintains full responsibility and burden of proof for compliance of imported products.

For assistance in ensuring compliance of goods, contact ChemLogix at information@chemlogix.com or call 215-461-3805.