So much so that the City of Miami has invested one billion dollars to build a massive underground tunnel to ease the congestion of container trucks now clogging the city’s roadways.
Everywhere I look, I see the global supply chain at work. From the manufacturer, to the distributor, to freigh forwarders, Miami’s economy–like so many others– thrives on global supply chain logistics.
It’s hardly a surprise that Ryder Systems, one of the world’s largest third party logistic providers, is based here in Miami.
I mention all this because Global Trade Magazine published an excellent article on the third party logistics industry or “3PL.”
The article, The Age of Value-Added Services in Global Logistics, provides an overview of the benefits a company gets when using a 3PL.
The article goes on to list a set of best practices to utilize when contracting with a third party logistics provider:
1. Know Your Business: The more you understand your company’s business, the more likely you’ll find a 3PL that is best suited for your particular needs.
2. Present Key Performance Indicators (KPI) to the Vendor: Logistics providers often have their own internal KPIs. A great practice is to come to the negotiating table with your own KPIs, which capture and measure end results.
3. Check References: It’s always a good practice to get as many references as possible from the vendor. a good rule of thumb is to obtain six to eight references. Doing so will cast a wide net and give you peace of mind in the vetting process.
4. Use More than One Vendor: You’ll always be in a better bargaining position if your not locked in to just one vendor.
5. Approach Negotiation with Objectives that Will Benefit Both Parties: Think about the vendor as a partner and explain how you intend to grow your business. You’d be pleased to know that vendors will consider a tired pricing arrangement based on the increase in sales volume you anticipate. This helps both your businesses to grow together.
It’s a great list. However, I’d also add that its critically important to communicate. While this may sound like common sense, you’d be surprised how often parties fail to articulate a companies aims and objectives in the negotiation process.
Follow the guidelines above and you’ll be well on your way to negotiating a solid third party logistics provider contract.