All About the 3PL

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A quick glance within Wikipedia, searching on the acronym “3PL”, will show you this brief description:

“Third-party logistics (abbreviated 3PL, or sometimes TPL) in logistics and supply chain management is a company’s use of third party businesses to outsource elements of the company’s distribution and fulfillment services.”

Recently I went through the process of identifying and selecting a 3PL partner to become our company’s main conduit for the launch of our first round of products here in the U.S. market.  The process was on a shortened time table, particularly given the imminent timing of our launch and the fact that our products were already well into their initial production cycle.

There are many different criteria that can be used when determining which 3PL to engage for your company’s fulfillment operations.  This is by no means an exhaustive list, but here’s the “stuff” I used to determine our particular selection.  I encourage you to consider the items mentioned below.  Every one of them could be expanded at much greater length, but for the purpose of keeping this article reasonably short, I will be brief.

  1. Start Locally. This works if you happen to be in northern California (definitely options in this part of the world), but hopefully if your business is near any type of metropolitan area, you’ll have some potential choices available to you close at hand.  Why?  Well, for me, with new products, in a new market, with a (relatively) new business venture, I wanted to “hedge the bet a little” for success and keep this part of the operation within reach-literally.  If there’s a problem, I don’t want to necessarily have to jump on a plane for half a day or more to get there “in person” (see my previous post entitled “Face (to Face) Time”.   Start locally if you can- it just makes sense.  Even later on, if the business scales to a point where a global organization is needed (one with multiple sites to service multiple regions), there will still be a need for a local enterprise, just to give you some bandwidth on special projects or segments of your business.  If you can cultivate this first, it can only help you later.
  2. Solicit Input.  Don’t go it alone!  There are lots of smart people around you, lots of opinions and experience that you should draw upon when determining which 3PL to partner with.  I asked for inputs from those around me, and two of my colleagues, both of whom I trust and respect, offered some great working relationships from previous gigs that were helpful in the search process.  Be somewhat selective about where you get your recommendations from- and if you do, this can pay off later on.
  3. State the Obvious.  When speaking with a potential 3PL, you need to be able to articulate exactly what it is you’ll need them to do for you.  They aren’t mind readers, and no two companies have exactly the same needs.  Sit down with them, walk them through your basic business plan, and discuss the particulars around what is needed. If they are sharp, they’ll not only listen, they’ll offer some insights in response that you might be able to benefit from.  Know what it is that needs to happen, and be able to share it with them in a way they can understand.  Also, be prepared to be rejected by the 3PL.  This happened to me as well- I had one company on our short list actually tell me that they weren’t interested in our business until we were closer to an annual revenue of at least a few million in sales.  We’re a start up- with a great product line up- and a large parent company- but not yet in the U.S. market.  Oh well- I guess this particular 3PL just didn’t need the business.
  4. Spend Effort.  Don’t be lazy– this kind of stuff doesn’t just happen on its own.  You’ll have to put forth some effort to really weigh a 3PL’s capabilities, since it isn’t always obvious.  For me, it meant jumping in the car a few times and heading out to various locations throughout the Bay area.  On at least one of those visits, I was able to grab the boss and bring him along for the ride- which can be a good thing- he gets to see the process first hand, and you get a supporter to your efforts.  And when you conduct a site visit, ask yourself if what you are seeing is also how you’d run the place.  If it’s not how you’d do things, that may be a red flag.
  5. Seriously- How Much?  There’s a place for weighing the quoted costs.  It’s okay to be a little price sensitive-after all, it’s not just business, it’s your business- so treat it that way.  Costs are an important component of the decision process.  Don’t pay more than you should, and don’t be so cheap that your customers suffer, either.  There’s a definite balance to be achieved when it comes to costs and “comparison-shopping”.  Be ready to agree to pricing for those things that matter most to your business and your customers.

Hopefully these points can give you some sense of direction when it comes to selecting a 3PL for your business.  In the end, you’ll want to team up with an organization that mirrors your needs with their capabilities, shares your vision, and desires to truly be a part of your success!

 

 

 

Elements of Supplier Quality–Part 1

Screen Shot 2015-11-12 at 4.01.03 PMYou can find a great deal of information available on the topic of supplier quality.  I’ve previously written a short piece on the ownership of quality within an organization (“Who Owns Quality?”, August, 2014), but for this short post I’d like to focus specifically on supplier quality.  However, I will likely not cover the topic in the manner you’d expect for someone with twenty years of experience in Silicon Valley.  Why do the same old thing, right?

For example, I could discuss the need for metrics, for a systematic approach to measuring supplier quality through standards and regular performance reviews, scorecards and corrective actions, etc., but for me, as much as there is certainly a place for such discussion, I’d prefer to approach the topic from a different perspective:  simple, common characteristics.  I want to summarize those characteristics that I believe are often present in a great supplier relationship.  As you read through these, think about your own supply chain, your participants in that supply chain, and whether these on my list are consistently present with your current suppliers.

Let’s dive right in–

  1. Great suppliers have integrity.  You’d think this would be obvious, but it isn’t always the case, and you are foolish to assume it to be true.  Dishonesty still still surfaces from time to time in today’s business world, and it’s always been around, all the way back to when the first business deals were done (whenever that was).  Integrity is one of those necessary qualities if you truly want a high level of quality to be present in your supply chain.  We all need suppliers to not only do what they say they will do, but be careful not to over-commit as well.  And, in the rare instance something doesn’t happen as planned or committed, to take ownership for their part in both the problem and the solution.  True integrity means your supplier has given reasonably careful thought to what they can and cannot do for you and communicates exactly this information in a clear and honest fashion, which brings me to my second characteristic.
  2. Great suppliers are great communicators.  They communicate.  Period.  As a customer, you don’t need to spend time tracking down the story, or the status, because they have communicated exactly what is happening with your parts, your service or your shipments.  Not only is the information accurate, it is timely, it is clear and it is intelligent.  A great supplier goes out of their way to make sure you are informed and will do this generally in a proactive fashion.  This sounds like a basic concept, I know, but it’s still surprising to me that there are businesses out there that simply do not communicate well with their customers.
  3. Great suppliers know their limits and focus on what they do best.  My dad taught me this one firsthand.  He owned a small but extremely successful commercial printing business here in Silicon Valley that lasted more than 30 years (not bad for a kid from North Carolina with a young wife and four kids to raise, and nothing more than a high school education–but more on that story another time).  He was always very careful to only accept jobs that he knew his crew and his expertise could handle well.  If he didn’t have the resources, or the ability, he didn’t take the work.  He would always remind me (I worked for him through part of my college and early adult life) how important it was not to try to do something that you were most likely to fail at.  Having said that, he slowly grew the capabilities of his business proportionately to the growth of his customer base and their demands. But he was always very careful to focus on producing the highest quality printed goods possible, so much so that he took pride in delivering much of the work to the customers himself.  It gave him great satisfaction when his customers loved the work he did for them.  And, as he held a high standard of quality with his business, it flourished and did well financially.
  4. Great suppliers share in your vision.  They “get” what you’re trying to achieve.  To be fair, sometimes we do a lousy job of explaining exactly what we’re trying to do.  But assuming that you’re doing your part in the relationship (I hope so), a great supplier understands and shares in your quest.  They want you to succeed, not only for the business aspect of what it does for them financially, but because they believe in what you’re trying to do.  They become a partner, and take a genuine interest in helping you and your team to succeed.
  5. Great suppliers provide you with constructive feedback.  Let’s face it, we screw up sometimes as a customer.  We don’t always know exactly what we want (or more often, how many we need), but a great supplier learns enough about your business to provide feedback and often will grow your knowledge in a useful fashion by what they share with you.  I’ve had the benefit of this type of relationship for much of my own career, and some of the best supply chain relationships have involved working with experts in their respective fields, who took the time to teach and impart useful information so that I could do a better job both for my company as well as for myself professionally.

I’m going to stop with these five for now- there are no doubt many more elements of supplier quality that could be discussed and I’ll touch on a few more in one of my future posts.  Give some thought to your supply chain through the “lens” of these characteristics and ask yourself if your supply chain reflects these consistently.  If not, it may be time for a change.  If so, continue to cultivate your relationships with those suppliers, and for the longer term, you’ll be glad that you have them on your team.

Housekeeping??

housekeepingI still laugh when I think about that scene from the movie “Tommy Boy” with the late Chris Farley and David Spade. If you don’t know the movie, and want some light, mindless fun, watch it some night, it’ll make you laugh.

Recently we conducted an end of the year physical inventory and while going through our records and reconciling all the data, the word “housekeeping” came to my mind. Housekeeping is an important part of a good operational plan–a very important part. Let me explain further.

Within Operations, and more specifically Supply Chain Management, we often focus on supplier qualification, capacity, lead times and costs. All of these are important ingredients that need our constant attention when it comes to producing a great product. Redundancy within the supply chain is another area of focus that we spend efforts with, to ensure we have adequate capacity in place as well as contingency plans for any changes or disruptions in our supply chain.

But what about housekeeping? Does your supplier (or contract manufacturer, or 3PL distribution partner) keep a clean house? When was the last time you visited them–possibly even unannounced (or perhaps with a short notice)? And I’m not referring to the cleanliness of their conference room or restrooms, but of their operational areas. This is a facet of supply chain management that is sometimes overlooked. Are materials properly inventoried, labeled and stored? Is it evident through looking at the various areas the type of work that is underway? How about documentation? In order and aligned with reality? These are just some of the questions that come to my mind when thinking about housekeeping as it relates to Operations.

I grew up in a household where there was much routine and order. My parents (although not from a military background) instilled in their children at a very early age the importance of keeping your room clean and in order. We had certain days of the week that were earmarked for certain activities, whether it be laundry, vacuuming, trash duty, etc. and we all had our chores assigned. As a teen it was a royal pain in my backside, but later in life I realized the importance of staying organized, both personally and professionally, and I came to appreciate the values I was taught. The concept stuck with me and grew with me, from just my room, to my house, my personal things (such as my vehicles), my office, and my operational responsibilities (suppliers, warehouses, etc.) in my career.

Great housekeeping can help your organization avoid issues such as incomplete or erroneous data, poor or inefficiency in space management and inventory management, slowed or difficult processes (such as inventory counts) and delayed or ineffective distribution of products through your fulfillment activities.

As you begin the new year, give some thought to housekeeping, and you’ll be rewarded immensely!

Know Your Team – Know Your Strengths.

I love working on older trucks and cars.  I’m no mechanic, by anybody’s standards, but over the years, and through lots of trial and error, I’ve picked up a few pieces of information about how carburetors work, troubleshooting small electrical issues with lights, replacing a starter motor, removing skid plates from a Hummer (that’s a fun one) and so on.

I’m currently in the middle of a small restoration, reviving a 1963 Ford F100 pickup truck.  It’s definitely a family effort, primarily involving my wife and my stepson as well as any time I can squeeze out of my own schedule.  It’s slow but coming along and ultimately I will be the beneficiary of a daily driver when finished.

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Thank goodness for the team.  My wife knows upholstery, carpeting and paint and body work pretty well (she’s done her share of projects over the years and started life spending time around race cars with her father who sponsored a few way back in the day).  My stepson is pretty handy with a wrench, can troubleshoot most mechanical issues, and pretty handy to have around for small, tight spaces that even a Russian gymnast might find challenging.  Between the three of us, we make a pretty good team and our strengths can augment and compliment one another.

When building or developing a team in business, it’s always good to step back and look at the overall landscape, rather than focusing too much on individuals.  As managers part of our role is to know the strengths of our team members, and then capitalize on those strengths.  They won’t all be exactly alike one another, but if we do our jobs correctly, they can compliment one another and ultimately enjoy success.  Any solid operational plan will involve this concept along the way.  The same goes for your supply chain, your logistics partners, and your service providers.

I’m looking forward to driving the F100 soon, and will likely brag (as I do) about how talented my team members were with the project.  Now…where did I leave that wrench?