Amazon today is a very different business to the online bookstore founded by CEO Jeff Bezos back in 1994. From that relatively small digital niche, the Washington-based company has grown to dominate online retail.
The company achieved revenue of almost $233 billion in 2018, a significant proportion of which is attributed to more than one million third-party resellers. These entities take advantage of Amazon’s platform to sell and distribute their products more widely than they could on an independent site. (They can also be taken advantage of, as we’ll cover below.) Continue reading Where Do FBM and SFP Fit Into the Amazon Fulfillment Ecosystem?
Logistics professionals work at the real world intersection of simultaneously avoiding disruptions to established plans and making plans for them.
A sound supply chain strategy incorporates not only the most robust, efficient plan to deliver goods and services, but also hires those flexible enough to adjust activities when that plan falls apart.
For business owners, the latter quality can be easy to overlook when choosing a 3PL service. Every provider can tell you what they can offer when everything runs perfectly, but often their answer to what happens when things go wrong is more telling of the relationship your business will have with them.
What to Ask Your 3PL About Operational Bottlenecks
The more specific you get about your own business, the better the answer you’ll receive from a prospective 3PL provider.
Draw up some scenarios that have occurred in the past (or that your managers live in fear of happening in the future!) Present the scenario(s) to your provider, then sit back and let them answer.
While situations specific to your business are best, these are some more general examples you could include in your questions:
A large order needs to be picked and shipped on much shorter notice than our standard agreement (define a time period relevant to your industry); what will you do for us?
A product recall requires us to bring items back into stock from various stages of the fulfillment process. How do you assist us with the planning?
Our product gets rolled from a scheduled shipment at its origin point of manufacture. What alternative arrangements can you suggest to ensure meets the original delivery schedule?
A labor dispute is rumored at a location that is key to our supply chain. How do you help us explore alternative routes and when do we make the decision to implement them?
Pose as many of these situation questions to your 3PL as you require to get a feel for their ability to plan on the fly.
If you struggle with specific situations, try to at least focus on hypothetical scenarios that apply to your industry. The more general the question, the more vague an answer can be, so it pays to put some thought into your interview to give your potential provider an opportunity to deliver a satisfactory answer.
Aim for the Best, Plan for the Worst
If possible, also add a worst case scenario to your interview questions. Make this something extremely unlikely but which will test the hypothetical resources of even the most experienced logistics professional.
What you’re looking for in worst-case scenario planning is the ability to understand and mitigate the risk to your business. Disasters are largely unavoidable and rarely the fault of the 3PL, but they should have an intimate understanding of the threat to your company and a feel for the priority actions that will help minimize the impact to your operations.
Finally, ensure that the level of experience and expertise in those you interview is present in the team that will be handling your business.
In tighter operations this is less of a challenge, as specialist knowledge runs deep and decision makers are more readily accessible. But in more expansive organizations, even with a wealth of resources and experts that answer your interview questions, you’ll need a team that you trust can deliver on those alternative plans.
By getting these specific questions out in the open early on, you give both parties a better idea as to what to expect from the business relationship. Hopefully these worst case challenges never come up, but if they do you’ll feel safer in the hands of a 3PL who knows your industry and has a passion to serve your customers.
The nationwide company will divest its private fleet before the year is out, passing on those key distribution tasks to commercial and contract carriers. As a Kraft spokesperson succinctly put it, the move is designed as “part of our broader integrated supply chain focus on supplier integration.” Even more simply? Some of our logistics partners do this better and more cost-effectively than us.
SMB budgets are obviously smaller and need to be stretched further to compete effectively. While experimentation and improvement is important to every supply chain, SMB owners must be even more certain that the logistics decisions they make are going to reduce costs and/or improve productivity.
If you’re in that position and wondering whether certain portions of your supply chain activities would be better off in the hands of a trusted supplier, ask youself the following questions:
What are the costs? – Consider every element of the operation and what it costs your business to perform. Compare the price and value (note the difference) of what your own internal team would provide versus a third party.
How do those costs vary? – There are more moving parts when you undertake your own logistics. While this gives you individual insight into every detail, it also means that you’ll pay the price for every error, cost increase, or new employee. When you outsource operations, you can often limit your business exposure to such changes, or lock in a fixed price entirely.
Which is more efficient? – Only your own employees can truly know your business inside out, but a third party provider lives and breathes their own industry and will have unique insights to help you improve. If greater efficiency is a key objective, outsourcing might provide not only a supplier but also a consultant for the same price.
What are your key performance indicators? – We’ll make this point again below, but you can only manage what your measure. Having KPIs available to compare performance of internal and external operations will help to make future decisions about who is best suited to the task at hand.
Are you able to apply new technology and methodologies easily? – Your business may be on the cutting edge of technology, but are you able to frequently make large investments to improve your supply chain. For some SMBs these changes need only be minimal and the answer is yes, but often the best way to take advantage of new technology and supply chain methodology is to find a partner whose business it is to stay on top of these things.
The proof is always in the performance, so any outsourcing your business undertakes should be measured from the outset. Hold suppliers to even higher standards than you would expect from your own operation. The best aren’t afraid to report, review and improve (if we do say so ourselves!)
Globalization is a challenge for logistics providers. The growth of the global economy has meant that consumers now expect to access goods and services from around the world, often at a moment’s notice.
The challenge for a 3PL company is to provide outstanding, easy-to-understand service in an increasingly commoditized world. According to a 2013 PWC Global Supply Study of 500 supply chain executives around the globe, the most pressing challenges include profitability, cost management, meeting customer requirements and supply chain flexibility. Continue reading The Logistics of Globalization