This is my third post in my series on Third Party Logistics Outsourcing Success and I will try to tie things together with a discussion on Performance Improvement Programs.  By now you would have to have been living under a rock to not have been exposed to Six Sigma, or Lean concepts.  These are engineered programs that have gained great exposure and recommendations and as a result you will also see these requested now as ‘soft’ job requirements.  This has also provided a boon to education and certification programs.



These concepts have also brought dramatic savings to the organizations that have implemented these practices through continuous improvement programs.  These practices and resulting continuous improvement programs will also provide a strong foundation to developing a mutually beneficial partnership with your third party logistics partner.  The key to success and developing a long term relationship is the focus on mutual benefits.


While focusing on mutual benefits is the key to a successful partnership it is also the hardest aspect to deliver!  I think there are two factors that make it hard to deliver on the concept of ‘mutually beneficial’; the first is human nature and the tendency to focus on the importance of me to the detriment of you, and the second is the competition involved in business and the desire to ‘win’.  This is the second concept that you must focus on maintaining until it becomes a natural reaction, you must continuously ask yourself – are these performance measurements mutually beneficial?



The second aspect of a successful, and mutually beneficial, performance improvement program is ‘time’.  There are two dimensions to this measurement and they are both related to frequencies; the first is the frequency of measurement (hourly, daily, weekly, monthly, etc), and the second is the frequency of review (weekly, monthly, quarterly, etc).  The reviews will help to determine if the frequencies are appropriate.  I would suggest that you identify shorter cycles for the reviews initially because there is a strong probability that you will identify immediate improvements and revisions in the initial year that should be adjusted as quickly as possible to ensure that your measurements are meaningful.



The frequency of measurement is an aspect that will help to nurture the partnership and I think it’s critical that you spend the time in the beginning to ensure that you are measuring meaningful indicators in a meaningful, and appropriate, frequency cycle.  It is important to be flexible and fair in these evaluations and you must expect to make frequent adjustments initially.  This is probably the area that is most frequently overlooked and the result is normally that you will find out that your initial performance indicators are too loose, or too tight.  It is important to plan for frequent reviews and adjustments to these measurements to ensure that your reach a high performance program as quickly as possible.



Remember to assume innocence and focus on a mutually beneficial performance improvement program and you will be rewarded with a strong partnership that brings dramatic benefits to your enterprise.  Focus on the long term and you will find that the benefits achieved are much greater and longer lasting.



Now folks please take a moment to provide your feedback.  This will become even more value with robust participation!



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?



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?



Would you say that your focus is long term and strategic, or short term and tactical?