By David Frentzel, APL Logistics
Operating a warehousing network has always posed its share of challenges. But it has never been more complicated than it is today, because trends like globalization, reshoring and omnichannel sales have changed the dynamics of how many distribution centers companies need – and where.
As a result, using contract warehouses has become an increasingly attractive and common supply chain practice.
The question is, with so many of these facilities operating throughout the world, how do you find the ones that are truly right for your company?
Here are a few do’s or don’ts that can help.
Don’t “Rate” Facilities And Providers Too Soon
Although it may seem like asking about rates is the most logical place to begin a search, focusing on these particulars right out of the gate may cause your company to lose sight of one of the most important rules of logistics: Much of a DC’s true value lies in its location. (Plus, as a corollary, transportation costs usually exceed warehousing costs many times over).
If you compare providers’ costs too soon, the temptation to sign with a facility simply because it’s “the cheapest” may prove too powerful to resist even if said facility’s transportation access or areas of expertise are a poor fit. And that’s never good news for your overall supply chain efficiency.
Do Conduct A Location Optimization
Whether your company already knows exactly where it wants to look for space or is starting from square one, it’s always wise to incorporate site selection and modeling tools into your search – or to ask potential 3PLs to perform location optimizations for you.
These computer-based engineering practices will tell you which warehousing venues would truly meet your company’s evolving needs with painstaking accuracy – and without being swayed by factors like corporate politics, sweet deals or personal preferences. Just as important they’ll enable you to quickly weed out any 3PL locations that would significantly alter your company’s delivery times, transportation costs or customer satisfaction rates for the worse.
Don’t Stop Thinking About Tomorrow
Wayne Gretzky once said that a good hockey player skates to where the puck is, but a great one skates to where the puck is going to be.
In much the same way, even though your goal may be to find a 3PL facility that offers the space and services in the areas where your company needs them now, it also pays to evaluate each 3PL in light of how it can help you later.
With this in mind, ask providers to share information about things such as: how many other facilities they operate in your country of choice – or how quickly they can access additional facilities there; what kinds of services besides the ones you’re requesting they can provide; and where they have other locations. After all, you don’t want to have to keep changing warehouses and 3PLs – and going through an elaborate search and selection process – every time your supply chain experiences even the subtlest of shifts.
Do Brush Up On Your History
On the opposite end of the spectrum, it also pays to carefully consider the past – namely how much experience both you and your potential providers have in the DC venue you’re considering. This is especially true if you’re looking for a facility outside the United States.
If your company is still fairly new to operating in a particular country, 3PLs that have a proven track record there are practically a “must,” because they’ll already be fully conversant with local laws and regulations – and equally adept at helping your company master the nuances of operating a supply chain there. Plus they’ll already have established many of the regional and international connections you’ll need.
By contrast, if your company has a long and successful history there, you may be able to consider some 3PLs that are newer to that particular corner of the world – provided you’re willing to drive and supervise the start-up more closely.
Don’t Underestimate the Value of Site Visits
It’s not unusual to be highly impressed with how something presents itself online or on paper only to discover that it falls significantly short in reality. For this reason, it’s essential to make site visits to at least one facility operated by each 3PL on your short list.
Among other things, these visits will allow you to examine each 3PL’s approach to cleanliness, maintenance and operational efficiency as well as the way it manages employees and temps up close – and to quickly cut through any layers of hype.
Just as important, they’ll help you measure something you can only find out in person – how compatible your two companies and their key players really are. If the positive corporate chemistry that drives most productive partnerships isn’t there, it’s better to find it out sooner rather than later.
Do Ask About Implementation
All 3PLs can get your account up and running. But some are clearly going to be more experienced and adept at it than others, which is why it behooves you to find out how quickly any potential providers can ramp up in a particular geography long before you sign on the dotted line.
Ask each provider to share detailed information about its implementation process and team and inquire about how long it has typically taken each one to begin receiving and shipping clients’ inventory in your venue of choice.
If any candidate can’t provide you with a clear, realistic answer to either of these questions, take heed. It could be an indication that you’d be in for a bumpy start-up.
Don’t Be Lax About Checking References
Any 3PL sales team trying to win your business is going to do its best to present you with a highly-positive picture. Your job is to make sure it’s an accurate representation.
Contact independent sources such as professional organizations, independent consultants or industry analysts to get their take on your front-runners. (But be careful to include only those who have no vested interest in seeing you select one 3PL over another.)
Interview current clients of each of the 3PLs you’re considering to get their take on what each does especially well.
In addition, encourage your 3PLs to provide some candid feedback of their own by asking questions such as “What’s the last piece of business you turned down, and why?” and “Tell us about a time something you did for a client didn’t go exactly as planned and explain what you did to solve it.”
The information you glean from these reality checks should be enlightening – and make your final decision considerably easier.
Do Consider Sticking with a Good Thing Once You’ve Found It
It’s a well-known fact 3PL arrangements don’t carry the same extended obligations as in-house operations. In fact, that’s often one of the most attractive parts of their value proposition.
However don’t confuse the ability to migrate from one 3PL relationship to another with the requirement to do so. Many companies have worked with their 3PLs for decades, with great success and high satisfaction levels on both sides of the equation. In fact we have one such relationship that’s been going strong for 40 years.
If your search leads you to a 3PL that winds up performing well for you, feel free to reward its performance with a contract extension or renewal or additional business – and to do so repeatedly. Just as important, as your relationship with that facility matures and gains traction, consider engaging that facility and its leadership just like you’d involve an in-house team. Your supply chain will ultimately be better and stronger because of it.
Bio: David Frentzel is Vice President Of Global Contract Logistics for APL Logistics, one of the world’s leading of third-party logistics services. Based in Phoenix, Arizona, he is responsible for the company’s warehousing, deconsolidation and distribution businesses, which consists of more than 20 million square feet of warehousing space located in more than 40 countries.