The current list of hot, or popular, phrases in business discussions and articles include ‘innovation’ and ‘pro-active’, among others making the rounds.  There are many variations and flavors of the phrases and you can select the specific phrase, or even combination of phrases, that fit your mood or particular situation.  I think it was an old Dilbert cartoon that made ‘buzz word bingo’ popular and while the phrases may change, the concept has not. 

I suggest that you should do away with these phrases in your supply chain outsourcing discussions because they can be misleading and almost impossible to measure.  While ‘innovation’ and ‘pro-active’ may sound like they are concrete concepts, in the real world they are almost impossible to define after the fact.  While you may be able to identify innovation, or pro-active actions, after the fact, the problem is that these phrases cannot be subjectively measured to support service levels or key performance indicators!  These phrases are great for marketing and presentations but they must be further defined into actionable and measurable activities and expectations to be of any value in your outsource partner management.

The challenge, and reason for requiring actionable clarifications, in utilizing these phrases is that they can mean many things to many people, one person’s innovation is another person’s commonplace practice; and in addition, one person’s pro-active practice is another person’s intrusive and over bearing practice!

The objective to supply chain outsourcing is to develop a sustainable and mutually beneficial partnership with your 3PL partner.  The cornerstones of a successful partnership is clear, open and honest communications along with clearly defined, measureable service levels based on mutually agree upon performance indicators.  So, in order to be successful and encourage innovation and a pro-active relationship you must be able to clearly define and measure your expectations.  You must also define the measurements and the measurement cycles to monitor the performance. 

Your measurement program will provide the vehicle to monitor and adjust the performance indicators and service levels in order to ensure that you are measuring the appropriate activities and metrics.  I would suggest that you start the review cycle at a monthly level in order to provide the appropriate level of visibility and review that will allow you to adjust the service levels and key performance indicators as necessary.  This process should be defined and agreed to by all parties up front, along with the governance program and the improvement program cycle.  This type of review cycle and measurement program will provide the means to develop the pro-active relationship between partners.  This process will also provide the means to develop the features and functions that deliver innovation to the organizations and partnership.  The can be encouraged through previously defined, and mutually agreed, performance goals and bonuses. 

I believe that it is unfair to the partnership and detrimental to the relationship and also the potential mutual benefits if these points and expectations are not defined up front, and monitored and updated on an on-going basis.  You must view this relationship with your 3PL as a partnership, and the foundation for a mutually beneficial partnership is open and honest communications, clear and measurable expectations, and the process to monitor, measure and update the expectations on a regular basis.


Now for the audience participation portion of this program……


What expectations, or objectives, have you defined as prerequisites for your 3PL partnership?


How do you define ‘innovation’ and ‘pro-active’?