3PLs surviving the Litmus Test

Scalability, financial stability, ownership, and adaptability are some of the key pillars that will help third party logistics companies to stand the test of times. This very intriguing perspective section brings forth the nuances that user companies look upto before deploying the services of 3PL companies. These aspects would aptly enhance the competitiveness quotient of players and would reap immense benefits in the long run if followed in their entirety…

Rohit Batra, Vice President – Supply Chain (India Sub continent), Ferrero India:

A highly efficient, cost effective and undisrupted supply chain represents the foundation of every successful company. Likewise, success of a supply chain network is directly dependent on the efficiency and stability of the 3PL logistics partners. If you are considering addition of a logistics service provider, adequately vetting that 3PL will determine whether your supply chain adds value or becomes a cost drain. Out of various factors, I feel following 3 attributes stand out as most critical;

Scalability: The most crucial capability a 3PL should possess and demonstrate is to scale up their operations and infrastructure faster and bigger than your growth needs. This will have a direct impact on your Supply Chain efficiency. In today’s dynamic and highly competitive market, every company goes through ups and downs. Like we expect the 3PL to be able scale up the operations, it is equally important that the 3PL partner is highly responsible and is able to scale down the operation to minimize costs and overheads when your demand contracts.

Financial stability: Success of a supply chain is highly dependent on the efficiency and stability of 3PL partner. A sudden demise or disappearance of 3PL will have a direct adverse impact on your operations. It is vital for us to check in detail the financial stability and payment records while finalizing the 3PL partner. This will mitigate the potential of a logistics provider causing you harm due to their mismanagement.

High quality industry reference: The reference of a 3PL partner should be beyond good and satisfactory levels. In today’s era, nothing less than an excellent or an outstanding reference should be acceptable. The reference should not only be on operations and deliverable but also cover areas like, working culture, business ethics and social responsibility. A good 3PL can get the job done and deliver as per expectations, however the best 3PL will add value to your operations in terms of cost savings, speed to market and compliances. We are in a fast track zone, where we want the logistics partner to be delivering beyond expectations from the start and we don’t have time to spend on developing and training them. Therefore, high quality industry references play a vital role while selecting the 3PL partner.

Raviraj Rodrigues, SCM Head, Wildcraft India:

According to me, the following 3 imperatives are a must-have for any good 3PL:

• Inherent capability to integrate the latest technology into the work practices to drive efficiencies, for e.g., end-to-end integration order to delivery cycle with near real-time visibility of orders, deployment of IOT in the pick-to-ship process
  
• To provide customised solutions based on the local requirements, for e.g., night operations and delivery of stocks in metros or big cities where transport vehicle are restricted during the day
  
• Continual sharing of industry best practices with the customers in the area of logistics and supply chain management as the 3PLs will have a better understanding in this area.

Sandeep Baxla, Head Supply Chain – India Sub-continent, Henkel Adhesives Technologies:

A 3PL player is essentially the nerve centre of the entire supply chain. If he functions well, the entire value chain functions well and vice-versa. They are the only people who can enhance our market reach, faster delivery and ensure greater market share, which otherwise is extremely difficult for any industry. In the light of this, these companies need to have a very strong discipline to ensure safety of its clients’ goods till they reach their desired destination. In doing so, technology plays an enabling role in offering a transparent view of the entire supply chain and be able to take responsibility of any losses in-transit. Having said that, all these can’t be managed when working in silos. It’s the perfect collaboration of vendor, supplier, technology partners that make it a truly strong bond towards reaching the ultimate goal of a unified supply chain. In short, the three pillars that a 3PL must have to win the race are digitization, enhanced safety & sustainability measures in each of its operations and collaborative spirits that will see them through in the long run.

Sukanta Das, COO, abof.com – all about fashion:

An efficient logistics and supply chain system is one which operates in the most responsive manner possible with an eye for quick implementation of best practices, receptive to ever changing demands and exhibiting the ability to get the show going within given budget constraints. Following are the three main attributes to be looked at in 3PL:

Adaptability: It is the speed at which a company's supply chain adapts and executes new strategies and programs to support changes in the overall company strategies or market place changes. This key attribute is size neutral and is an important aspect for success in any ecommerce logistics and supply chain setup that is run by 3PLs.

Flexibility: It is the ability to respond quickly to demand and opportunities. How fast the 3PL can detect and respond to issues and opportunities in the short term by a collaborative approach is key to note. Issues that could surface here could be delay in trucks, off-load of air cargo, sudden surge in demand, addressing special customer needs in terms of some sort of special packaging or handling, etc. How fast and how effectively can these changes and needs be managed is important.

In today’s fashion space, with customers increasingly aware of season specific fashion trends, there has been a continued reduction in product shelflife, thereby demand for a flexible and responsive 3PL is high to capitalize on this otherwise perishable opportunity. Further, planned and sudden promotions, discounts in festive and lean seasons is norm in e-commerce, leading to a surge in overall industry volume by close to 2x. Only a flexible 3PL can help in materializing the business opportunity.

Ownership: It is a yardstick to gauge ‘improved supply chain visibility’ & ‘supply chain risk’ and therefore, a shipper frequently exhorts 3PLs for enhanced ownership. This is the most difficult one to implement as this requires organizational level strategic alignments and ongoing emphasis for implementations and control from both ends.

A traditional 3PL service provider, more often than not, in case of any issue with import shipment, will only talk about it and probably will not keep any room for an alternate action. Whereas a 3PL that takes ownership, could send periodical updates on progresses made and foreseeable risks for the shipment. This helps the shipper and 3PL to take a joint decision through consultative approach to handle the issues in best possible manner. This approach is very healthy for both short and long-term horizon.

Soumyakant Dwivedy, Head – Supply Chain, Becton Dickinson India:

For me, these 3 three pillars stand out among the rest:

Customer centricity: Customer centric mindset is a necessity where the 3PL should be owning the customers of the brand they serve. Today’s customer expects quick delivery, visibility and a great service experience, which means, 3PLs need to design a supply chain that centers around the end-customer, rather than the business/brand.

Cost management: 3PLs do bring a wealth of experience in managing different companies and hence have strong competencies in creating cost efficiencies for the company/customer. The ability to add value by continuous improvement initiatives will help in cost efficiencies. Often, the focus has been to manage within the budgeted or negotiated rates but now the expectations is to create cost advantage/cost avoidance by analytics, advanced technologies and proactive actions.

Creativity/process innovation: Traditionally companies view 3PL partners as mostly transactional and times are changing where relationships are becoming more collaborative. The need of the hour is to have innovation and creative solutions for customers. Companies expect the 3PL partner to provide inputs for process improvements and ‘out of the box thinking.

Ranjan Sharma, Head – IT & Supply Chain, Bestseller India:

A 3PL is that crucial link that if not performed well can actually make or mar a business proposition. That’s the reason selecting of the right partner with the required skillset is of prudent importance in order to gain an edge. For us, relevant category skill sets, operational acumen, infrastructure, technology, automation, financial stability, depth of warehousing and supply chain know-how, etc., are some of the important aspect that we look for before selecting a 3PL. While these parameters are the key, what a 3PL needs to work on is the speed to market because in today’s fast paced business environ, if you want to take an early mover advantage, you have to be on the shelf first and that can only be achieved if your 3PL partner is truly responsive and agile.

Manu Verma, Head – Logistics, Liberty Shoes Ltd: 

Deciding on selecting a 3PL partner depends upon various factors, may differ organization to organization, upon upcoming objectives, operations expansion, increasing service levels & reduction in delivery lead time, costing, allocated budgets, etc. A right 3PL partner should have the following attributes:

Infrastructure: The service provider should have the required infrastructure i.e., warehouse space, adequate team support, MHEs, safety & security requirements, etc. They should have the enough infrastructure to cater to all increased and ad hoc requirements in case of any changing business scenarios of clients.

Technology support: The service provider should have the technology support that is required to execute and perform daily tasks. IT integration is also the key factor to decide. As in today’s time, the MIS and data are so lively required that any delay can greatly impact overall operational performance. In that case, real time information & reporting holds critical importance.

Flexibility & key account management: The service provider should be flexible in responding to changes & must have a cultural fit. They should also have key account management team (KAM) who is responsible to maintain close coordination and offers a single point contact for customers for day-to-day improvement of operational processes. They can also do gap analyses and share periodic performance reports to assess operational performance.