Supply Chain Brain

Harnessing the Power
of a 3PL Relationship
Strategic & Operational
Decisions in Tough Times

Choose a financially stable 3PL with a wide net-

work of associates and deep industry expertise to

handle your warehousing and transportation

needs, says Charles Gallagher, supply chain devel-

opment manager at Mars Chocolate.

It seems so simple: Stop to contemplate just what your company does, then focus on doing that as best you can and leave the non-core activities to someone whose business is to focus on those things.

Once Mars Chocolate stopped to think it through, Gallagher says, it decided to outsource all transportation and warehousing. After all, CPG companies should focus their energies on manufacturing in preparation to go to market with one or more products,” he says. “That’s where we invest our capital.”

Flexibility is the advantage that Mars finds in turning everything related to transportation and warehousing over to a third-party. “We can use the 3PLs to flex or consolidate as needed depending on how our manufacturing strategies play out,” says Gallagher. “That’s what blends well with our core competency and gives us flexibility.”

Of course, conflicts can arise in any relationship, and the manu- facturer-3PL partnership is no different. A 3PL should have an excellent understanding of the client’s needs and market strategy. Nevertheless, perspectives differ, and sometimes clients may want to see different approaches to the services that a third-party provides.

But Gallagher says the manufacturer is advised to keep an arms-length distance. “You can’t expect them to handle things the way Mars would.”

The provider has the network connections, the needed associations, and the industry expertise that the client lacks. At least, it should. A manufacturer wants its customers to view its 3PL relationships as a strength. After all, the 3PL is often the last touch point between the manufacturer and its client.

That’s why it’s vital to have a provider with enough “bench strength” to grow with you, says Gallagher. “You don’t just want a one-generation relationship.”

Gilmore notes that

Dwight Eisenhower said planning was indispensable to preparing for going into battle, and while the plan more than likely wouldn’t work out, the exercise of planning itself was invaluable. The same is true in business, especially when the economy is so challenging.

Quality is a primary concern at Cargill, where officials are keenly aware of health and safety issues that have haunted the food industry in recent years. Gilmore says the company CEO refuses to cut corners when it comes to guaranteeing quality both internally and from suppliers. Failure in that area can kill a company, Gilmore says, and the risk is just not worth it.

Controlling costs are always an issue, but never more so than in tough economic times. Gilmore says Cargill assesses its key performance indicators continually to know it’s benchmarking against the best.

Innovation likewise is an everyday occurrence, but it’s not something that only Cargill is supposed to focus on. “We expect our suppliers to innovate for us the way we innovate for our customers,” Gilmore says. That means demanding new concepts and new solutions from them.

As for one’s suppliers, today you must check and re-check their creditworthiness to ensure that they have the wherewithal to continue serving you.

Before workforce reductions are put in place, perhaps you should identify just what your weaknesses are. That way you can better determine the talent you need to retain to remedy those situations.

Gilmore underscores the importance of talent by quoting Woodrow Wilson as saying, “I need to use all the brains I’ve got, and all the brains I can borrow.”