Strengthening Partnerships with 3PLs: A Necessity in Uncertain Times
In today’s volatile economic landscape, supply chains are constantly in flux, adapting to ever-changing conditions. As businesses navigate this uncertainty, the importance of deepening relationships with third-party logistics (3PL) providers has become evident. This article explores how fostering stronger partnerships with 3PLs can help businesses not only survive but thrive amid unpredictability.
The Evolving Economic Landscape in 3PL Partnerships
Recent economic reports have shown unexpected growth rates, defying traditional economic models. With a reported growth rate of 3.1%, the economic environment has surprised many analysts who anticipated recessionary impacts due to inflationary pressures. This unpredictability extends to supply chains, which face challenges such as increasing customer demands, rising operating and financial costs, and ambitious sustainability targets set by corporate leadership.
Transitioning from Transactions to Partnerships
To navigate these challenges, businesses must move beyond transactional relationships with their 3PL providers and cultivate true partnerships. While transactional relationships can handle current workloads, they may not be equipped to manage future uncertainties.
According to Statista, the 3PL services market is projected to reach $1.31 trillion in 2024 and continue growing at a compound annual growth rate (CAGR) of 2.39% through 2028, reaching $1.41 trillion. In this context, establishing deep partnerships with 3PLs is crucial for sustained success.
Key Areas for Deepening Partnerships
Achieving a true partnership with a 3PL requires trust, transparency, and collaboration in five key areas: value, governance, performance, visibility, and co-innovation.
Value: Shifting the focus from cost to overall value allows both parties to align strategically and work towards shared success. A cost-centric approach can lead to transactional relationships, whereas value-driven partnerships foster continuous improvement and mutual benefits.
Governance: Effective governance involves establishing the best ways of working together and setting up performance measurement systems. Moving beyond quarterly business reviews to real-time performance tracking can ensure both parties operate from a single source of truth.
Performance: Meeting service and quality expectations is fundamental. A 3PL must consistently deliver on performance to build and maintain trust, which is the foundation of any strong partnership.
Visibility: Enhanced visibility across the supply chain is often undervalued. By sharing near-real-time transactional data, financial visibility, and environmental, social, and governance (ESG) metrics, shippers and 3PLs can make informed decisions and improve overall supply chain resilience.
Co-innovation: With the rapid proliferation of supply chain technologies, co-innovation is essential. Shippers and 3PLs should work together to leverage technologies such as artificial intelligence (AI), automation, and flexible network capacities to drive value and innovation.
Delivering Value to All Stakeholders
Professionals in established 3PL partnerships understand that meeting customer expectations is paramount. The value derived from these partnerships should benefit the end customer, the shipper, and the 3PL, creating a three-way value proposition.
Customer Value: The primary goal is to meet and exceed customer expectations by delivering a frictionless, flexible, and fit-for-purpose experience.
Shipper Value: Shippers benefit from increased customer loyalty and growth by consistently meeting customer needs at high service levels.
3PL Value: For 3PLs, deepening partnerships with shippers enhances their ability to serve other clients and apply learnings across industries, driving growth in the market segment.
The Role of Data and Technology
Data and analytics are crucial for inspiring and driving better business insights. Aligning on how various technologies used by shippers, 3PLs, and customers integrate to manage and analyze data is essential for improving value across all parties.
Moving Forward as Partners
In facing multidimensional uncertainties, shippers and 3PLs can take pragmatic steps to advance their partnerships:
Revisiting Contract Terms: Aligning contract terms to balance penalties for not meeting service-level agreements (SLAs) with rewards for exceeding them can foster a more robust partnership.
Leveraging Talent: Expanding collaboration to include strategic talent can enhance the value chain and address challenges more effectively.
Optimizing Networks: Combining the shipper’s network with the 3PL’s network can lead to synergistic benefits, allowing for real-time flexibility and expanded supplier pools.
Deepening relationships with 3PLs is not about adding more services but about fostering trust and transparency. By working together at new levels, shippers and 3PLs can create value, innovate, and build resilient operations to thrive amid supply chain uncertainties.
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