A short time ago I mentioned a new trend that I see developing, and growing, with 3PL outsourcing relationships; true two-way partnerships based on mutually beneficial objectives and opportunities. I believe that this trend will flourish when more relationships develop into these mutually beneficial types of partnerships. This trend will expand and build momentum as 3PL clients begin to understand the potential benefits that can be gained by developing a mutually beneficial relationship based on the open, and two way, sharing of strategic plans and forecasts that benefit both sides of the relationship.
The window of opportunity for this type of partnership has developed, and is expanding, to support the B2C types of fulfillment along with an expansion of the vendor managed inventory methods to take into account the 3PL actually managing the retail presentation and product replenishment and management in the individual retail stores. This provides the opportunity for the 3PL clients to take advantage of the ‘best practices’ and enhanced capabilities of their 3PL partner, while the client focuses on their strengths in product development and marketing! The natural outgrowth of this type of relationship is the opportunity for the 3PL clients to treat their supply chain and fulfillment that is supported by the 3PL partner as a ‘black box’ capability, I also refer to this as a ‘FMO Box’ capability (where the “‘f’ing miracle occurs”). I see this trend as a progression and extension of the software capabilities that the major software vendors like Manhattan Associates or Red Prairie have been developing. The 3PL will develop and perfect services as their clients demand these services. This does require a strong trust between the partners in order to be successful and extend, and build, the relationship. This can be a challenge for many organizations and I see this as a differentiating factor with the leaders in this market, and trend. It is also more likely to occur with the newer organizations, and that coincides with the potential of 3PL’s to support new B2C clients in search of a partner to support their supply chain requirements!
This allows the 3PL to extend their capabilities and cost effectively utilize software and operational capabilities to increase performance and reduce operational costs, while it allows their clients to utilize the latest capabilities and cost efficiencies that can be realized through the shared volume savings that can be obtained through combined client volumes available to the 3PL. The 3PL client can treat this as a managed service (‘Supply Chain as a Service’ if you will), similar to the way that payroll services are now supported in most large and small organizations! An additional benefit to the 3PL client is the immediate ability to provide world class services to their customers via their 3PL partner!
The leading 3PL’s have been extending their services to support clients in supply chain fulfillment and improved operational capabilities. They have been developing these new relationships with their clients as the client extends their business into the B2C market place. This market has been growing dramatically but many organizations have not been able to support the market with their internal supply chain that used to be able to support their retail, or B2B requirements. This opens the market for the leading 3PL’s and they will continue to extend their services to support their client’s needs. This is really a similar direction as the early days of the supply chain software vendors! I think this will also provide the same type of growth opportunity for the leading 3PL’s.
Now for the audience participation portion of this program……
How would you define your relationship with the Third Party Logistics Provider? Is it a traditional customer / vendor relationship that focuses on one-sided benefits and short term objectives? Or, is it based on a partnership that provides mutually beneficial benefits and long term objectives?
Have you extended your relationship with your 3PL to develop these types of extended services? Are you open to sharing your forecasts and strategy with your 3PL provider?
Do you see an advantage to extending your relationship into a mutually beneficial partnership?
Do you see organizational benefits and opportunities to improve based on the partnership relationships that I describe above?
If you see the benefits to this type of relationship, will you be taking steps to implement this type of relationship?