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  -May 18, 2008 -  

Logistics News: Rigorous Selection Processes not Really Key to Success in Outsourced Logistics Relationships, Forrester’s Connaughton Says

 
 

Spend More Time on the Softer Side of the Relationship Details, Less on RFP Rigor, in Selecting Distribution and Transportation Service Providers

 
     
 

SCDigest Editorial Staff

SCDigest Says:
Connaughton said his research found no real difference in the level of satisfaction with 3PL relationship between companies that conducted structured and detailed selection processes and those that used more informal methods.

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With the continued growth in logistics outsourcing, many companies, sometimes abetted by consultants, have tended to go through a longer and more complex selection process when looking for new outsourced logistics providers. That also, increasingly, includes use of long and very detailed “Request for Proposal” processes that place a burden on the company and the 3PL.

The question is: does this approach really lead to a better result?

Perhaps not, says Patrick Connaughton, a senior analyst for supply chain research at Forrester.

At a recent conference, Connaughton presented research from Forrester that showed, overall, clients are happy with the outsourced logistics service provider relationships. The one area where companies did express a reasonably high level of dissatisfaction was the ability of the 3PL to manage change during the course of the relationship.

“Very few companies even have a good way to measure that,” Connaughton said.

Interestingly, Connaughton said his research found no real difference in the level of satisfaction with 3PL relationships between companies that conducted structured and detailed selection processes and those that used more informal methods (see illustration below).

(Distribution and Materials Handling Article - Continued Below)

 
 
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Source: Forrester

“We went into the research hypothesizing that there would be a lot more satisfaction by those companies that used a very rigorous selection process, but it turned out there was not much if any delta between those companies and those that used a more ad hoc approach to 3PL selection,” Connaughton said.

He said the research has shown it is not the level of rigor and detail itself that’s important, but what elements of the potential relationship are really evaluated. If potential clients focus only on price, contractual terms, service level agreements, and other operational aspects, the chances of success and satisfaction are much lower, versus those that look for a fit on a number of “softer issues.”

“Alignment in management philosophies, how well the service provider really understands your business and pain points, the relationship structure - these are the areas that really need more evaluation and in the end drive relationship success,” Connaughton said.

Do you agree companies should spend more time evaluating the softer side of potential 3PL relationships? Does too much operational and service level detail actually get in the way of making a smart 3PL selection – or is that really needed to choose the right partner and ensure there are no misunderstandings? Let us know your thoughts at the Feedback button below.

 
     
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