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Release Date 6/29/2007

	Contact:
	Brian Everett, Executive Officer NASSTRAC 952/442-8850 ext. 201

	The Relationship Conundrum – Can 3PLs and Clients Survive the Long Haul?

	As 3PLs become more prevalent and begin to burrow deeper into their client’s culture and operations, a lot of issues come to light on both sides of the relationship. How you identify and address those issues moving forward will determine how long you remain partners. Much has been written about 3PL client relationships likening them to a marriage, but while marriage is typically about equal partnerships, 3PL’s must never forget that the customer will always be the customer. There are, however, similarities between marriage and 3PL/client relationships. You need to work at it every day in order to keep it flowing smoothly. Complacency is the cancer of any relationship and will kill this one. Either side taking the other for granted spells trouble. The following are some issues that arise in mature 3PL/Client relationships that cause friction and can break up what was a solid relationship. Poor Executive Communication – This can occur on both sides of the relationship. The day-to-day operation is humming along, so it’s easy for senior management to get complacent for forget the importance of maintaining the relationship at various levels throughout the organization. While senior management communication may not be necessary every day, regular contact between parties is essential to maintain strong ties to decision makers on both sides. A sure warning sign that you’re running into trouble is when the client does not return a phone calls or emails. The client may even mention to the day to day managers that he/she hasn’t heard from you. Not only is formal communication necessary, but the informal “how are you doing?” calls are vital to make sure you don’t get blindsided. The “warm and fuzzy” feeling is more important in 3PL relationships because of the subjective nature in much of what 3PL’s do. Failing to Monitor the Relationship – Managers of 3PL relationships need to be collaborative problem solvers who can address performance issues and results. They also need to be able to discuss corrective action and improvement needs rather than telling the 3PL how to run their business. 3PL senior management needs to always be aware of subtle and not so subtle changes in the tenor of the relationship and proactively seek out issues. Formal reviews are necessary. During this process, Key Performance Indicators (KPI’s) are reviewed and examined, issues are brought to the table and discussed, and the parties exchange information regarding the direction their organizations are taking. Not only should the client review the 3PL, but this should be an open exchange were 3PL’s can bring up troublesome issues to the client for an open and frank discussion without repercussions. Clients must be prepared to hear the truth and act on it just like the 3PL would. Leadership Focus on Continuous Improvement – Over time, businesses evolve and go through cycles. It is important that performance levels are reviewed and kept current. It’s easy for an operation to grow stale. There should also be planned updates for service levels, budgets and incentive plans. For example, dedicated truck operations should be set up for periodic route optimization to make sure it is still an efficient means of transport. Failing to Acknowledge the Impact of Outside Factors – Client leadership or management changes can put people who are not familiar with the 3PL or their operation in positions to work with them. Mergers and acquisitions also introduce new 3PL alternatives into the equation. Recent consolidation within the 3PL industry presents new options to clients. Both the client and 3PL need to be aware of factors that can affect their relationship. Both parties should feel free to bring up these issues during their reviews and discuss the possible impact on their operation. Conflict Resolution - Having a method of arbitrating and resolving conflicts is essential. Requiring that the two day to day managers are the first line of resolution will go a long way to keep disputes from rising to the senior management level or ending up in court. Requiring these two managers not only to come up with an equitable resolution, but to document that resolution will help them become better managers. No one wants to escalate a problem or admit they can’t come to resolution. When that does occur, the next level of escalation will allow for senior management intervention. Celebrate every Success and have Fun – In order to keep in the game you must acknowledge and celebrate your successes. A 3PL’s sense of enjoyment of their role comes across more clearly to a client than a solid technology platform. It’s been said many times before; you have to love what you’re doing.

	This article, written by Gail Rutkowski of AIMS Logistics (current NASSTRAC President), was recently published in Logistics Quarterly.