I interviewed Jason Vag who discussed how to guarantee your success by choosing a 3pl right from planning to implementation. Jason Vag is a Partner at Sonoma Consulting, a firm that specializes in helping organizations transition from in-house warehousing and distribution to working with third-party logistics providers (3PLs). Learn how to select a 3PL, how to set reasonable expectations, the importance of sharing knowledge and information up front, the basics of establishing a comprehensive vendor-management program, how to establish a set of success criteria, and the importance of communicating details of the transition to all players.
Given the economy, costs have become a big concern for most companies, which is compelling many to look at outsourcing non-core functions. One of the areas where companies are looking to gain savings is in the supply chain. That is where Jason Vag and his company, Sonoma Consulting, come into play -- helping organizations transition from in-house warehousing and distribution to working with third-party logistics providers (3PLs)
The first piece of advice Jason provided is to view your logistics provider as a partner, not as a third-party company or run-of-the-mill supplier, because even though you are outsourcing some functions, you still own the supply chain. The relationship goes beyond just being partners, Jason says, it is really an extension of your organization, which is why the selection process is particularly important. "You need to pick a provider that you feel comfortable with, that you have a good rapport with, and that you believe truly wants to invest in your organization as much as you want to partner up and let them become a part of your organization," Jason advised.
Once you have chosen a third-party logistics provider, and you have moved into hammering out all the legal aspects of a contract, always keep in mind that the agreement has to be a win for both sides. Of course, every company is looking for very specific service levels at the best possible price, but Jason cautions companies to be realistic and to make certain that the service provider is comfortable with delivering on your demands.
As you move into the implementation phase, you should plan on being very involved, especially with regard to sharing information upfront, rather than down the road. As a matter of course, Sonoma Consulting recommends involving your 3PL in all internal meetings early on. Invite them to your office, or if that isn't possible, arrange conference calls for critical supply chain meetings specific to those area that the 3PL will be taking over in the future. This, Jason says, is where the 3PL can really begin to understand your business -- where the pain points are, any unique customer requirements, and all intricacies of the operation. 3PLs are very good at what they do, and they bring a lot of knowledge to the table, but too many companies make the assumption that the 3PL will simply be able to hit the ground running. Again, Jason advises companies to be realistic and to understand that a 3PL may know the marketplace and the particular industry vertical, but they can't possibly know how you run your business until they are brought into the loop and integrated into your organization.
As you continue to work with your third-party logistics provider, it is very important to establish a comprehensive vendor-management program, and make certain it is well-executed. It goes without saying that you will have established service level agreements and metrics for which the service provider will be held accountable during the contracting phase. Those metrics are certainly important and necessary, Jason says, but it is also important for everyone to have an understanding of the day-to-day metrics needed to run the business. Jason has seen firsthand how companies will focus on the contractual metrics, while the day-to-day operational metrics are taken for granted or overlooked, leaving them scrambling to extract those metrics from the logistic provider's information systems, compile them and then communicate them in a meaningful way.
Along those same lines, in the early weeks of transition, Jason advises establishing a set of success criteria. In other words, how do you know if your first day of transition was successful? If we sent you a hundred orders, did you receive a hundred orders? Did you ship a hundred orders? If not, where did those fall down? It is all part of the testing phase, which includes what Jason calls, the "golden order," a procedure that involves isolating an order and "handholding" or "walking" it through the entire process with sign-offs at each critical step. In addition to serving as a physical test run, it also provides assurances that information is flowing downstream and upstream as required.
Finally, Jason Vag reminds companies not to neglect any internal or external entities that will be effected by the transition. Salespeople, for example, should be kept apprised of everything that will impact their customers, and customers should be advised of any process changes, from different shipping labels to different carriers showing up at their doors. "You can't over-communicate," Jason said, "if you anticipate a slowdown, or a one or two-day shutdown, during the transition period, it is essential that you not only communicate that information, but also plan around it." The main thing is, you don't want the perception to be that the project isn't going well because you didn't hit 100% throughput on the first day, and that is something that can by mitigated through communication.
About Jason Vag
Meet Jason Vag: Jason Vag is a seasoned business professional with over 12 years of experience in supply chain including ERP, WMS, TMS, RFID, and visibility. He has directly worked for two “Big 5” consulting firms as well as two Fortune 250 companies, with experience in dozens more. Jason’s experience across multiple industries and functional areas allows him to bring a unique understanding of operations and technology to clients. Jason’s expertise is in leading large scale mission critical projects involving both operations and technology. Additionally, Jason has expertise in supply chain strategy, operations management, business process design, 3PL relationships, program management, technology selection and implementation. Jason’s background includes international experience in Europe, Latin America, and Asia.