How a 3PL Can Help Your Company with Procurement - Feb 2016

How a 3PL can help your company with procurement

Those in charge of purchasing logistics services for companies often face tough choices when deciding between quality and cost. For years, procurement departments focused on only bottom-line costs. As times change and purchasing departments work more directly with vendors and other decision-makers in their companies, the concept of best value becomes acknowledged as more important than cheapest cost. However, not all companies purchasers yet recognize the value in engaging in collaborative and strategic analysis when choosing a logistics provider. Simply put, third-party logistics providers help reduce the stress of those tough choices on a company and the decision-maker involved in signing on vendors.

3PLs manage the end-to-end operations of a companys supply chain, from warehousing, assembly, kitting, packaging, shipping, distribution and transportation, as well as management of imports and exports. Some fulfill companys information technology needs for warehouse managementorder fulfillment and transportation management. The best 3PLs do it all, and do it all well. Value-added products and services can include WMS, OMS, TMS and even B2B software that allows, for example, a manufacturers or suppliers inventory system to speak with a major retailers order system.

Consolidating logistics services into one provider provides two-way street benefits, bolstering the 3PLs business and diversifying the customers decision-making strategy. Rather than focusing on only bottom-line costs, modern companies are evolving procurement into a strategic partnership with other cost and value-concerned decision makers within the organizations.

A Feb. 23, 2016, CSCMPs Supply Chain Quarterly article noted that procurement officers who focus on collaboration within sourcing projects should be seen as trusted advisors who are actively involved in planning and budgeting, and provide market insights in such areas as supply chain risk. They are not simply generators of and depositories for RFPs. Ideally, they are change agents and facilitators. The growing role of procurement in the supply chain industry and the added pressure to work as strategically as possible with all lead decision-makers in the business (including operations, sales, marketing, finance and executive levels) to make the best possible choice for the company, lead to a logical conclusion. Procurement officers should strongly consider third-party logistics providers for their businesses supply chain solutions.

Its important, though, for the ever-thrifty procurement officer to realize that bottom-line costs are not the only factor that should be taken into consideration when choosing a 3PL. Instead, analyzing the total cost of working with one provider over another building in room to evaluate the 3PLs labor costs of benefitted, committed employees over non-benefitted, underpaid workers, for example can prevent major, expensive missteps for a companys supply chain outsourcing projects. Working strategically with others to design a robust selection process, taking into account key areas of criteria, such as customer service, responsiveness, financial stability, and international scope, if applicable, according to a recent Spend Matters article by GEPs Ana Gomez, ultimately can help save a company money.

According to Gomez, The 2014 18th Annual Third-Party Logistics Study indicates that both the users and the providers agree that the top factors to evaluate a 3PL are continuous improvement, experience in the users industry, and established and ongoing relationships.

Considering 3PLs negate the need for a company to invest in expensive warehousing, the hiring and training of specialized employees, technology, and transportation, as well as eliminate paperwork and billing, the potential for cost savings realized are enormous.

Third party logistics is the future of procurement. Explore what WSI can do for your company here.

Rob Kriewaldt
Director of Client Solutions



Twitter @WSI_Logistics