You hear me talk about business relationships pretty frequently.

Well, I’m no “Dear Abby,” but I certainly don’t mind giving my two cents on relationships with logistics service providers (LSPs). You may know them as third-party logistics providers (3PLs), but the industry is moving toward the term LSPs for a broader definition.

As with any relationship, a solid partnership here requires commitment and effective communication. You also need to look for an ally who is invested in your company’s supply chain goals and initiatives.

Although she doesn’t have an advice column either, Valerie Bonebrake, a senior vice president here at Tompkins, is an expert on LSPs and recently spoke with Inbound Logistics on this topic. She offers 10 tips on Gaining More from 3PL Relationships.

What tips would you add to this list?

Go!Go!Go!

Jim

Resources

Supply Chain Consortium for LSPs

LSP Excellence Center

Book: Logistics & Manufacturing Outsourcing

LSPs Focus on People, Perceptions & Intermodal

For Logistics Service Providers, It’s All About Quality of the Customer Relationship

Customer satisfaction can turn on a dime, whether you’re talking about a meal you just had in a restaurant or a logistics service provider’s (LSP’s) relationship with its clients.

The LSP marketplace is highly competitive these days. In the past year, shippers have become more focused on growth, and therefore, more focused on how well their LSPs are performing and what value they bring to the relationship.

The retail, consumer products and manufacturing companies (shippers) that I have spoken with recently are asking some thoughtful questions about their service providers. Questions such as:

• Beyond the basic services contracted, what value-added benefits does my LSP bring?  
• Do they fully understand my supply chain and the expectations of my customers?
• Are they well versed in global trade regulations and their impact?
• What is their plan for continuous improvement as my business needs evolve?

That’s why boosting customer satisfaction and loyalty should be at the top of every LSP’s priority list.

As the new article, LSP Relationships: Satisfying Customers & Building Loyalty, stresses “… expectations for customer service in the LSP arena are high in today’s marketplace, and there is no shortage of options.” The article also explores how to build a better foundation for customer satisfaction and loyalty.

If you are an LSP, how do you stand out in service? How do you ensure customer loyalty? For shippers, do you see a gap between what you expect from your LSP and actual performance?

More Resources

Staking a Claim on Growth: New Opportunities for 3PLs, LSPs

Supply Chain Consortium for LSPs

LSPs Focus on People, Perceptions & Intermodal

Global operations and strategies for companies in industries like retail, consumer products, and food & beverage are becoming more and more important to profitable growth. These emerging markets, particularly in China, provide major opportunities.

Having a China strategy is more important than ever in 2012, as “China for China” production by Western companies is creating great opportunities for companies to grow worldwide.

While there is a lot of buzz for various industries, logistics service providers should also make emerging global markets like that in China a priority this year. A newly published 3PL report showed that both shippers and LSPs see China, India, Brazil and Mexico as the biggest emerging markets for the industry.

Tompkins’ experts agreed in this article on the top priorities for LSPs in 2012 that success in these markets will hinge on having “the right strategy, the right structure, and the right partners” in place.

Though it is a challenge, the rewards for moving into these markets are great for LSPs, even if there isn’t as much buzz in the industry as compared to others out there. Expanded global capabilities are good for both LSPs and shippers to reduce costs while gaining competitive advantage.

See more on other priorities for LSPs in 2012 in this article.

GoGoGo!

Jim Tompkins

Photo Credit: FlyingSinger 

At this very moment in your supply chain, what is the current demand for any given product?

It seems like you would need a magic wand to answer this question. I mean, how is it possible to know what customers in your market are buying right this moment, so that the information is signaled back through the entire supply chain?

This is the kind of information that would allow suppliers to provide even better orders and deliveries that respond to real-time information versus fallible demand forecasting. With this kind of information, you could avoid pitfalls like late shipments, overstocking, and unnecessary transportation costs.

It is possible through Supply Chain Transformation –  and it’s not a magic wand. By using sales and operations planning, aligned organizational structures, and the right technology, it’s possible.

For example, let’s say you are in the dog food business. Right now, a customer in the grocery store is walking down the pet food aisle with a coupon that she intends to use to buy four bags of puppy chow. After she makes the purchase, a signal goes down your entire supply chain that drives back to the distribution center (DC).

As more customers come into the store with the same coupon, real-time data is sent back to the DC. In an operational process that is as close to custom as you can get, this data “tells” the dog food supplier to re-stock that particular store’s puppy chow inventory to make up for the increased demand.

True, the DC may have to deliver more often to the store, but it’s not deliveries based on forecasting of what might happen in the market. It’s deliveries based on what is happening with customers on the demand side.

Supply Chain Transformation means supply management and demand planning that leads to excellent customer service and reduced costs for suppliers. As a nice bonus, supply chain transformation also makes forecasting errors a thing of the past.

What moves is your company making to transform supply chains?

More Resources

See a case study on supply chain transformation here: http://www.tompkinsinc.com/about_us/case_studies/supply-chain-transformation.asp

In this recovering economy, third-party logistics providers (a.k.a. 3PLs, logistics service providers, or LSPs) are jockeying for position to claim their share of new and increased business. Why? Because shippers across a wide variety of industries are once again focused on growth.

Whether it’s concern about freight capacity and rates, requirements for additional distribution points, entry into new markets, or a strategic direction to outsource logistics functions, shippers are increasingly turning to LSPs. As such, the outlook for growth in the 3PL industry, short and long term, is good.

But this evolution in the 3PL industry certainly hasn’t made it easier for shippers to navigate through the myriad of service options that exist.  Many LSPs have difficulty presenting their portfolios in a way that promotes their services, and even those who offer “integrated services” struggle with how to organize – and sell – for maximum effectiveness and client satisfaction.

Basic terms such as contract logistics, transportation management and global freight forwarding seem easy to understand on the surface; however, each of these terms covers a host of potential services.  Then there’s the positioning of asset, non-asset, asset light, asset right …. and the list goes on. These claims can be very confusing, especially as LSPs add to their capabilities in an array of different scenarios through organic expansion, strategic relationships, internal reorganizations, and M&A activities.

So, a very important question for you LSPs out there: How do you ensure that your customers a) know who you are? and; b) know how to find you?

Five Basic Questions that 3PLs Often Miss

 When you read my tips below, you may dismiss them as stating the obvious. But trust me, based on the 3PL marketing materials and presentations we have reviewed, as well as LSP site visits and marketing assessments we’ve completed, a large number of LSPs – big and small – still don’t have this right.  Consider these five simple questions:

1. Do you have an elevator speech that even your parents could understand?
2. Does your website clearly identify who you are, what you do, and who you serve?
3. Have your clearly identified your target market?
4. Have you clearly differentiated your market position?
5. Have you clearly communicated your Value Proposition and market differentiators?

Never assume that if it’s clear to you, it’s clear to the marketplace. Gaining external perspectives to test and fine tune messaging, researching specific needs by market segment, and thoroughly analyzing your findings for correct positioning are all really important. 

Once these basics are in place, it will be much easier to ensure that your marketing and sales tactics align. Then you will be executing on all cylinders – reaping the benefits through improvements in renewal, expansion and new contracts.  And of course we know your work does not stop there.  You must be sure to continuously deliver on promises through excellent service, year-over-year innovation, and continuous improvement in value delivered. 

And let’s not forget the power of implementing best practices and of networking with shippers and others in your industry. You may have already heard about the successful Tompkins Supply Chain Consortium. What you may now have heard is that now 3PLs also have the opportunity to actively participate in this vibrant community through a special LSP Supply Chain Consortium.

As an LSP, do you have the five basic questions down pat? Do you want to expand your knowledge base via supply chain benchmarking and best practices?

Feel free to respond in this post, or contact me directly at vbonebrake@tompkinsinc.com. As Jim says, Go!Go!Go!

Valerie

More Resources

LSP Top 11: Market Forces Drive Freight Costs Up

Tompkins Supply Chain Consortium for Logistics Service Providers (LSPs)

Logistics and Manufacturing Outsourcing: Harness Your Core Competencies

After many years of working with Logistics Service Providers (LSPs) and many years of supply chain benchmarking, I recently had one of those “duh” moments. It came to me, “Why don’t we help LSPs build stronger performance and stronger relationships though our Supply Chain Consortium?” 

And that leads us to where we are today.

In general, LSPs do a great job of benchmarking their internal operations, and they know how their own operations compare to others. They also have good, if not great, internal measurement systems. But they haven’t placed much emphasis on evaluating external benchmarks to supply chains at other organizations, which can have a huge impact on their clients.

For an LSP, external supply chain benchmarks and best practices data can be compared against other LSPs or against shippers with similar operations.

The goal of this external perspective is to really understand the competition and to know where your performance stands compared to your peers. This external benchmarking provides a basis for evaluating practices and processes to learn what improvement opportunities exist throughout the end-to-end supply chain.

Metric comparison will also help you understand areas of relative strength in your supply chain practices. Your focus and energy should be placed with those initiatives that offer the greatest improvement potential.

Through our Supply Chain Consortium, we now have the databases and tools to help LSPs successfully compare operations performance metrics and identify improvement opportunities.

The challenge is to take the first step into benchmarking with the expectation that you will find meaningful results that are worthy of the time you invested. Our experience has shown tremendous opportunities for LSPs that fully embrace benchmarking and best practices.

Go!Go!Go!

Jim

Additional Resources:

LSP Consortium Overview Presentation (PDF)

Podcast: New Features for LSPs in the Supply Chain Consortium

LSP Consortium Membership Benefits

Photo Credit: Horia Varlan

There have been some alarming news stories recently about counterfeit markets and theft of consumer goods.

For example, in Los Angeles County, California, a task force uncovered a counterfeiting ring with $305 million in consumer goods, including fake name-brand purses and cell phones.

How can this be prevented? A good place to target in order to reduce theft and counterfeiting is the supply chain and third-party logistics service providers (LSPs). Companies shipping goods using an LSP should look for the “halo effect” as a part of that provider’s services, meaning: They construct a halo around the shipper's goods so they are protected from theft, counterfeiting, and other forms of loss.

By extension, protecting a shipper's goods also protects the shipper's brand from becoming tarnished if these risks were to become reality. LSPs that provide a halo around their customers' goods make sure that their clients’ brand identity isn't compromised by lost goods due to theft, counterfeiting, or other hazards.

With theft and similar security issues, shipping goods through global supply chains demands strong security and visibility. These issues are shared between LSPs and shippers and can create high costs for both parties.

And achieving the halo effect is becoming more important every year, as reducing costs by reducing risk is a major priority in 2011 for LSPs and their customers.

For more priorities that should be getting the attention of LSPs and they companies they serve, visit the Top 11 in 2011 web site.

GoGoGo!

Jim


More Resources

Top 11 Priorities in 2011 for Logistics Service Providers

Executive Briefing: Uncertainty is Certain - Perceptions of Future Risk on the Rise

Photo Credit: SarahG

In a recent blog post for Supply Chain Network, Tompkins Associates’ own Logistics Service Provider (LSP) expert Valerie Bonebrake asks the question: Have you fired any customers lately?

She’s not looking to create controversy with her post; she’s suggesting that LSPs make sure that they have quality relationships in place and avoid focusing too much attention on one particular client.

Many client demands throughout the end-to-end supply chain are reasonable, and they sometimes help create a competitive advantage. However, if a client is too demanding and requires over-the-top attention, it may be time to let them go.

Depending on your client base, this concept may make a good addition to your recovery strategy. Learn more about what Valerie has the say at the following link: http://www.supplychainnetwork.com/have-you-fired-any-customers-lately/

Jim

More Resources

We Know Putting All Your Eggs In One Basket Is A Bad Idea, But How Many Baskets Should You Have?

Logistics Outsourcing Conference Shows Value of Relationship Building & Technology

Photo Credit: jdnx

Yes, putting all of your eggs in one basket is a bad idea, but putting all your eggs in 60 baskets isn’t exactly a good idea. Seems to me if you have 60 baskets you need to consolidate your baskets and streamline your processes.

Ok, before you think I have gone Easter Bunny with my egg and basket discussion, let me get to the supply chain application. To be blunt, the question many companies need to answer today is: “What is the correct number of Logistics Service Provider (LSP) contracts for your company?”

I know of many large companies that, on a global basis, have well over a hundred LSP contracts. In fact, I know of a few that have more than 1,000 LSP contracts. And, most unfortunately, there are many, many companies that do not know how many LSP contracts they hold globally. Times are a-changing, and with the globalization of LSPs and the existence of several high-quality Lead Logistics Providers (LLP), many companies need to substantially streamline their operations by reducing the number of LSP/LLP contracts they hold.

Since their inception many years ago when they were public warehouses, and through the 3PL evolution, the globe has become speckled with LSPs and LLPs. We all know the size of the logistics outsourcing market has grown tremendously, but what has also grown is the number of global LSPs that can handle a significant amount of your requirements around the world and the capabilities of LLPs to handle any remaining requirements.

Now, it has become clear that many companies, especially those that are global, can – and should – begin consolidating, simplifying and streamlining their LSP relationships. It is not feasible for one or two LSPs to handle your business globally, but rarely have I seen supply chains where the number of LSPs cannot at least be reduced by 50%. Also, it may be feasible for a handful of LSPs to meet 80% of your global requirements and then have the other 20% met by a handful of LLPs. So, it is feasible and advisable to put all of your logistics outsourcing requirements into less than 10 LSPs and LLPs.

For example, think of a large corporation with many different divisions in many different countries. Many times the right hand doesn’t know what the left hand is doing. Separate divisions and/or separate regions of the same company may be independently selecting and managing LSP relationships without any knowledge of what other divisions or regions are doing.

By bridging this gap so that these separate divisions/regions are now selecting-negotiating-contracting-administrating-improving their combined LSP requirements, it is clear that both the provider and the customer will net a stronger relationship and better improved operations. Streamlining and focusing your LSPs will also net reduced cost, reduced overhead and enhanced performance. Then the remainder of the “special” requirements may be handed over to a LLP to address. In this way you significantly reduce your complexity and cost while improving your customer service.

From an LSP perspective, some are concerned that the consolidation of services may hurt their profits. However, this is not the case. The reality is that both the LSP and their clients will see a win-win by having a dedicated, fluent, globally integrated relationship. There is a challenge however for the LSP whose scope is too narrow to play on the bigger global supply chain stage. These LSPs need to either foster positive relationships with LLPs or step up so that they become one of the significant few remaining when their customers consolidate.

The defining characteristics of top global LSPs include:

Broad geographic coverage

IT systems capabilities

Industry-specific experience

Country-specific experience

Top-tier customer service

Truly consistent / integrated global network (not locations) 

With the global economy, it’s time for companies to rethink their logistics outsourcing and consolidate service providers as much as possible across their divisions/regions (reducing the number of baskets among which they spread their eggs). This process is not easy, but it will pay huge dividends over time.

Below are more resources on outsourcing: 

Outsourcing Logistics Cost Reduction Podcast 

 

2008 Third Party Logistics: Results and Finding of the 13th Annual Study (PDF), Georgia Tech Supply Chain & Logistics Institute

 

Executive Summary and Regional Comparisons; 2008 3PL CEO Surveys, by Dr. Robert C. Lieb, Professor of Supply Chain Management at Northeastern University (PDF) 

 

Logistics and Manufacturing Outsourcing: Harness Your Core Competencies, by Tompkins, J.A., Simonson, S.W., Tompkins, B.W. and Upchurch, B.E. 

Go!Go!Go!  Jim