How to engage transport and logistics service providers is vital for small and medium sized firms managing the potential complexity of today’s supply chains and what they can do remain competitive is at the forefront of business decision making.
Moving a company’s products through production, distribution and to the final customer is an essential process. Firms need to manage the cost, efficiency, and volume of goods in their supply chain while still directing other business processes. That’s why supply chain management is one of the best investments small and medium sized organizations can make.
Management texts and training material often suggests that there are four stages to supply chain integration and maturity:
- Baseline: internal functional silos still exist, and logistics is viewed as a cost center.
- Functional integration: Each area undertakes efficiency improvements separately.
- Internal integration: Internal logistics is fully integrated.
- External integration: Inventory is minimized through the supply chain by replacing it with information and forming strategic relationships with extended partners.
While it is true that enhanced collaboration is required for increasing levels of supply chain maturity, it is equally true that many small and mid-capped sized firms can achieve improved customer service and logistics cost reduction with a strategy of better “alignment” with existing industry trends that a singular focus on deeper collaboration. Simply put, firms small and mid-capped sized businesses are not sufficiently big enough to significantly influence the commercial behavior of many of the transport, equipment and infrastructure owners. Whether it is a railway, a steamship line alliance, local parcel delivery service, or the electronic platforms such as Amazon or Alibaba. However, revisions to your business model to better align one’s supply chain and logistics practices have the power to yield more immediate results.
Long term success requires knowing how to engage with transport and logistics service providers. At the heart of every resilient supply chain is a network of relationships where all parties need to interact successfully. Whether, your manufacturing operation just relies on the purchase of outsourced transport services or also contracts with third party logistics service providers (3PL) and other professionals (freight forwarders and customs brokers, etc.) to serve your customers.
A strong supply chain requires effective integration of domestic and international transportation and possibly value-added warehousing and distribution services. Economic and technological forces are dramatically shaping the commercial environment, so both a strategic understanding of the trend shaping the industry along with the correct deployment of a tactical solution is required for success.
Strategic considerations include how the perspective of senior managers and logistics executives and the industry context determines and shapes the type of engagement that is possible. Tactical considerations include an array of options that could be applied to support a small manufacturing company’s supply chain improvement initiatives. While one may be tempted to look for tips and tricks, a healthy engagement approach is characterized by actions that strengthen the business relationship, both at the start and throughout the duration of the relationship. Essential elements of a constructive engagement mindset include:
- Slowing down and taking the steps to understand market developments in transportation and logistics and getting engagement right before you start any outsourcing work.
- Revising your business model but not outsourcing what is core.
- Understanding your baseline and benchmarks before you start to engage.
- Ensuring potential suppliers understand your business.
- Developing clearly defined and measurable desired outcomes.
- Identifying risks before you transition the work.
- Establishing a pricing model with incentives that encourage service providers to put skin in the game.
- Developing a governance structure based on insight versus oversight.
Learn more about how to apply the tips and tricks for how to engage transport and logistics service providers by registering for the APICS Vancouver Chapter – 2017 Supply Chain Summit. The Inginite Your Supply Chain conference will be held on October 19, 2017. For companies on Vancouver Island, register for the Supply Chain Best Management Practices Workshop to be held in Victoria on September 28, 2017.