The heart of a logistics operation beats. Working with a third-party logistics provider leverages scale and know-how, but if mismanaged, can bring severe customer impacts

With the rise in global supply chains, SKU volume and complexity, and customer expectations for on-demand items, balancing information flows (orders) and physical flows (inventory) in the warehouse has become increasingly challenging. Warehouse management requires deep technical understanding and flexibility to adjust to reality – or else it is easy for small issues to fester until they become major breakdowns, directly impacting customers who suffer from reduced service levels.

Despite their criticality, warehouses are often not given the attention they deserve by organizations, who tend to underrepresent their value on the P&L compared to capabilities like transportation, which have a higher direct cost attached. Getting warehousing right is important – and it can be a sensible strategic move to outsource operations to a third-party logistics provider (3PL), who brings scale and operational skills that might take time to develop internally.

While the potential gains from outsourcing are high, we have seen common challenges among clients in different industries, which can have amplified negative impacts:

• Knowing your operation in detail and being aware of the rationale behind outsourcing, making expectations clear internally and with the potential service provider
• Selecting the right partner, among heterogeneous players, considering the match between your needs and their reality (typically characterized by narrow margins)
• Building a contract which effectively incentivizes the 3PL to deliver against your objectives
• Managing the 3PL on the day-to-day, to ensure targets are met and issues are escalated

We support clients through the entire lifecycle of logistics outsourcing, from strategy conception through to Go-Live

From our experience in different geographies and contexts, we bring expertise to help clients guarantee key success factors in outsourcing:

• Selecting a partner to meet your needs: Undertaking deep Operational Due Diligence to assess players’ capability to deliver against specific business requirements
• Setting contracts that align incentives: Defining clear SLAs linked to relevant bonuses and penalties
• Managing communication: Designing and implementing an active governance model, to foster collaboration and benefit from the combination of different knowledge and skillsets
• Clarifying boundaries between organizations: Building seamless operations based on clear and aligned responsibilities across systems, processes and contact points

Our recommendations are not solely technical but consider your characteristics and teams’ needs to build an implementable and sustainable solution.

Working with a 3PL can increase an organization’s competitiveness in several ways:

• CHANGE FIXED PER VARIABLE COSTS – allowing an organization´s P&L to better react to volume fluctuations
• REDUCE COST – Leverage scale of a 3PL to bring down fixed costs
• IMPROVE SERVICE LEVEL – Gain efficiency through operational know-how
• REDUCE ASSETS – Meet financial and/or strategic guidelines
• FREE UP LEADERSHIP TIME – Delegate operational management and focus on core business issues
• IMPROVE KNOWLEDGE – Gain knowledge on how to operate in a new region, channel, or client

Our approach has been developed through real-life experience of picking the best partner to balance your needs in operational expertise with the total cost of ownership (TCO)

Our methodology is divided into 5 key steps:

Outsourcing Strategy – a critical step, often undervalued:

• We start by understanding the characteristics of your business and your strategic needs to define the scope to be outsourced, considering the size and complexity of operations, processes and systems, and your objectives in each component.
• We translate this vision into 3PL requirements, such as geographic coverage, service offerings, and track record.
• Based on these needs, we scan the market to identify potential partners.

Bidding construction:

• In preparation for the bidding, we ensure your requirements are understood by both sides of the table – setting concrete SLAs, roles and responsibilities, operational and legal requirements, and preparing the RFP and RFQ.
• We pay special attention to the remuneration model at this stage, aligning mutual objectives and incentivizing the 3PL to help reach business objectives.

Operational Due diligence:

• We deep dive into the operations of all potential partners, conducting site visits and assessments based on a detailed scorecard to understand if each 3PL has the capabilities and infrastructure to meet your needs.
• We eliminate any partners that do not fall within the agreed tolerance level, regardless of their commercial proposal.

Quotation equalization:

• Once proposals have been received, we guarantee the comparability of information to enable you to make an informed decision on the final shortlist.
• We support you to prepare for the first round of negotiations, leveraging cross-industry best practices, and providing a technical challenge.
  Short-list:
• For each of the following negotiation rounds ahead of the final decision, we prepare your team to lead and push at critical points.
•  Our experience helps us to support you in generating speed, without compromising quality, ensuring the partnership begins on a strong foundation.

Short-list:

• For each of the following negotiation rounds ahead of the final decision, we prepare your team to lead and push at critical points.
• Our experience helps us to support you in generating speed, without compromising quality, ensuring the partnership begins on a strong foundation.