Supply Chain Blog

Logistics Outsource Tendering in CEE - Top 7 Hazards

Posted by Dave Jordan on Wed, Nov 16, 2016

This process can be straight forward but a little extra care and knowledge will ensure you achieve the best warehousing and/or transport solution for your business.

Just a quick reality check, do you need to outsource? Before embarking on a complicated and potentially disruptive tender are you convinced your current in-house operation is unsuitable? Think long and hard about outsourcing or you could be trapped in a long-term relationship with someone who may not care about your business as much as you.

Assuming you have taken the correct decision let us look at 7 things that can go wrong.

1. Process Leadership If possible, appoint a leader from outside of the Supply Chain team, e.g. Finance. This will promote impartiality and in any case, many of the key debates will be in the Finance area. For complete impartiality, you might consider hiring an experienced Interim Manager or Consultant who has no long term interest. All contenders will be trying to pick up snippets of advantageous information and you must not compromise the tender process in any way.

2. Qualification. Get an idea for which companies are likely to be interested in and capable of being your 3PL partner. Do not be surprised if your list is relatively small but you should aim for 8-10 contenders in this first sweep. Contact these companies with a questionnaire asking them to outline their capabilities, pedigree and reputation in your geography and follow this up with a face to face meeting where you can get a better feel for competence and commitment.

3. Cost Comparison. Outsourcing is not always about cost reduction but the costs of the 3PL contenders will be a major element in the decision. Ensure you know your accurate current costs for the entire service you are expecting the 3PL to provide. You need transparency on your own cost structure to make a valid and meaningful comparison.

4. Time Expectations. Don't rush the process despite the pressure from above (or below) to make a change. You will be reliant on your 3PL to support your business so make sure a timetable is agreed with all stakeholders, including your own Supply Chain people. The tender process will not be a secret however hard you try and your people will be nervous. The changeover should fall in a slack period so avoid your seasonal peaks and major promotional periods.

5. People. If you are outsourcing your existing in-house Logistics function, then you are either going to make several staff redundant or you will be looking for the new 3PL to take those staff on board. Either way you must treat people in the best way possible or your service levels will suffer as you make this difficult change.

supply_chain_3pl_logistics_transport.jpgIf you are making staff redundant you must keep them fully informed at each critical step. Why not consider an escalating loyalty bonus linked to performance? If existing staff members are being offered the opportunity to join the new 3PL then it is your responsibility to ensure terms and conditions are fair. From experience in CEE it is wise to build a "parachute" agreement into the new contract ensuring existing terms and conditions are maintained for a period of say, 12-18 months.

 

6. Beware of well- meaning Distributor partners trying to step up to the mark as a 3PL and be similarly aware of any of the big names who are not present locally but "expect to be". This means they are unlikely to enter your market unless they get your business and you will not appreciate being their new guinea-pig!

7. Start-up Phase. Ensure your tendering process includes a clear understanding of what will happen as the business is transferred. How soon will KPI's be at the required level? Does the 3PL have the necessary staff with relevant skills, e.g. narrow aisle FLT drivers. Do they have extra FLT batteries than can be swapped to maintain the operation? Has the WMS been robustly tested? Do they have sufficient trucks and drivers?.........Even some of the big name 3PLs make mistakes at this crucial time.

Taking care of these 7 elements will help you move through the all-important implementation phase to a steady business state without surprises.

Some 3PLs tend to be very slick at securing new business but some of them are not very good at keeping it!

Want to know more about logistics in the CEE region?  Check out these posts too!

Logistics: Working With 3rd Party Logistics Providers in CEE 

Working With 3PLP's in CEE - When did you last see your stock count?

Top tips to improve your cycle counting & avoid suffering stock shock 

Image courtesy of Stuart Miles at freedigitalphotos.net

Tags: Customer service, Logistics Service Provider, Supply Chain, Cost Reduction, Transportation, 3PL

Supply Chain Analytics: Is your data providing information & actions?

Posted by Dave Jordan on Wed, Nov 09, 2016

Who coined the term “Big Data”? How did we get there without tiny data, ordinary data, slightly larger data, chubby data and bordering on big data? People working in or associated with Supply Chains seem obsessed by data yet data itself tells you absolutely nothing. Really, not a lot apart from the fact that something is being measured or calculated.

Firstly, a couple of information irritations. If you need to renew your UK passport (must be similar for other countries too) you need to have your identity confirmed by someone in a certain profession, e.g. doctor, teacher and be a person of “good standing in their community”. The allowed list of professions includes Bankers which baffles me these days. Anyway, the signatory must provide information confirming your identification and you get the passport. Information and not data gets the job done.

 

My bank writes to me – note, sends me a physical letter – asking me to confirm my address! “If you know where I live why do I have to call you to confirm what you already know?” TINA as Maggie Thatcher would say, there is no alternative so you must bite your tongue and provide the information.

In Supply Chains the data obsession is growing. “Show me the data. How does the latest data look? Will the data protect my backside?” Data is only valuable if you know what it is measuring, what it means and what you need to do to change or influence an aspect of future business performance. For data to be useful it must be converted into useful information and then into appropriate actions.

Someone is shouting “data is information isn’t it”? Well, no it is not and as Michael Caine insists he never said, “not a lot of people know that”. Consider this example.

Due to some poor forward planning by the travel department you find yourself airborne for the duration of a vital end of season relegation encounter. On leaving the plane you ask an airport worker about the big football game. All he/she can tell you is that 4 goals were scored. Is that helpful?

CANALYTICS_SUPPLY_CHAIN_DATA_INFORMATION.jpgertainly, the match sounds like it was entertaining but your overpaid wimpy football idols needed a win. The data you have been given is 100% accurate but it does not actually tell you anything about the outcome. Was it 2-2, 3-1, 1-3 or even a diabolical 4-0/0-4?

When you understand the final score was 3-1 in favour of your football wimps you are elated and think about kissing the moustachioed guy at security but back down just in time – that metal detector sausage could cause some damage. Instead of being as sick as a parrot you are over the moon, y’know what I mean?

You have converted that raw goals scored data into information and then into celebratory actions. In terms of actions this means you have wisely decided against kissing the Village People lookalike security guard to head off to quaff several pints of the foaming ale. When you only had the 4-goal data you had no idea of the outcome.

Increasingly you need to turn to analytics to understand what is actually happening in your Supply Chain why it is happening and most importantly, what needs to change for future business success.

Image courtesy of ddpavumba at freedigitalphotos.net

Tags: Supply Chain, Inventory Management & Stock Control, Supply Chain Analytics, IT

Supply Chain Analytics: The birth of a new Dawn, or Daniel

Posted by Dave Jordan on Wed, Nov 02, 2016

Anyone expecting their first child has probably been told by a gloating-doting grandparent-to be that their lives are about to change dramatically. This is of course untrue as in reality dramatically is too simple a word and in any event, that “change” is far, far different than granny suggests. Your pre-natal life as you know it will become obsolete at the snip of a chord.

Sleep, sanity, social life and other activities beginning with “s” will soon become history as you become slaves to the mini-me you have created who appears to have over active exhaust systems at both ends. Night and day whizz past in a blur of endless demands for food and cleaning and screaming and that is just the husband.

Did you know what sex the little darling was before the big day or did you wait and see what would be delivered? Did you and the family try to predict boy or girl based on family history? You know, things like the first born is always a boy if the birth takes place in summer. Or, it must be a girl based on the size of the baby bump etc., etc.

Supply_Chain_Analytics_CEO_Planning.jpgDespite all the indicators and family history and old wives’ tales you got the sex of the baby wrong? Dear me, there are only 2 options after all! If you can get that 50/50 prediction wrong how on earth do people cope in the supply chain business when the number and type of variables is enormous? (You knew the segue was coming and there it is!)

What is going to happen in the future is always difficult to predict even remotely accurately.

Hold on a minute but what about all that Supply Chain data? Your Management Information System is running red hot; the KPI Dashboard has digital steam coming out of its ears and you can see numbers bursting out of the air vents on the top of the Data Warehouse. You have more data available than you can shake a USB Data Stick at!

The problem is that all those numbers and colour coded percentages help to tell you everything that has already happened in your Supply Chain. Good to know of course but isn’t it better to know why certain events happened and how they can be avoided in the future?

I can imagine your last S&OP meeting involved making considered changes to plans and activities to correct certain deficiencies or to take advantage of opportunities. All well and good but the internal operational deficiency you have is that you must wait weeks or months or longer to find out if your strategy was successful.

What you need is an analytical tool to take advantage of all that data and convert it into actionable information. A tool which allows you to diagnose the precise causes of past events and which allows you to model the probable results of your decisions into the future. These tools exist as cost effective cloud based solutions but most companies stubbornly remain convinced that their expensively installed MIS/ERP should be sufficient. Put simply, alone, they are not.

When you were thinking about starting a family if you knew which “tadpole” was most likely to win the race you would not be on a ladder hurriedly repainting the nursery blue!

Image courtesy of dream designs at freedigitalphotos.net

Tags: CEO, Forecasting & Demand Planning, Supply Chain Analytics, IT