Mhlnews 1313 Bob Gaughan

It Takes Two to Tango

Dec. 1, 2007
How to make 3PLs dance to your tune

Third-party logistics is a complicated dance in which no one wants to get their toes stepped on, and everyone wants to go home happy. Getting to the dance, however, is more than just answering the door when someone knocks. Here are some tips on how to go from first date to longterm relationship.

Bob Gaughan, group general manager, APL Logistics (Atlanta, has worked with more than 100 client companies in his career. One of the changes he’s noticed is that clients are getting better at qualifying service providers, and that’s the start of a rewarding partnership.

“Managers are doing their homework and are more knowledgeable about the functions of a 3PL, and that’s a good thing,” says Gaughan, who has been in this business close to 30 years.

He says inventory managers should look at the big logistics picture before focusing on the details of a 3PL’s services. By starting with a 3PL’s client list at the beginning of the qualifying process, a manager can learn a lot. To quickly determine if the service provider might be a good fit, managers should see if it already has clients in the same industry sector. The next step is to review a 3PL’s geographic locations and staffing potential.

“The 3PL business now uses a kind of reverse Field of Dreams approach,” says Gaughan. “Nowadays we say, ‘If they come, we will build it.’ It’s not about selling space anymore.”

A company that seeks the services of a 3PL also has to ask questions about itself, says Gaughan. The return to core competencies is the reason given most often when companies are asked why they would want to outsource such an important part of their business.

Serving the Big-Box Boys
Doing logistics with the big-box stores is not easy, which is why it’s part of the order fulfillment chain that many companies are handing over to 3PLs on a regular basis. Requirements that differ from one retailer to the next can seem daunting, says Gaughan.

Cost problems, in the form of chargebacks and fines associated with late and missing shipments, arise because many managers don’t know what their real distribution costs are, or what they’re being charged for by the big retailers. Logistics providers do know the costs, and how to avoid them, because it’s their business to know.

Gaughan offers a classic example of asking the right questions and understanding the intricacies of the supply chain that transformed a small account into a major client: Springs Global (Fort Mill, S.C.). Springs is a manufacturer of textiles and home furnishings with brand names that include Wamsutta, Springmaid, Nanik, Graber and Bali. Its products are found in all the big-box stores.

“Springs brought us in to handle some of its overflow distribution business, and it grew from there,” says Gaughan. “Soon, we were taking care of its second business, then the bath and bedding divisions.”

Doug Tatum is in charge of the Springs business for APL. While some 3PL managers are viewed as caretakers, Tatum views himself as more of a caregiver. At his weekly staff meetings, Tatum talks about all of the typical things: safety, budgets, and customer service, but he puts a twist on it. “I ask my people to come up with a single idea that will impact any of those areas of business and create a better way of living, for us or for our customer.”

Many of these suggestions save the client money. They all add value. Eventually, he sits down with the client and reviews the suggestions, which may be simple things like changing configurations of boxes on a pallet to better use the space, consolidating purchase orders, or eliminating excess labels.

When asked for an example, Tatum pulls up a big one: “Springs was using a single carton size for two products—bath and face towels,” explains Tatum. “The box really didn’t fit, either.” They redesigned the carton and saved the client $1 million in corrugated expenses.

Still thinking inside the box, Tatum and his team noticed that Springs had its corrugated shipping cartons delivered in larger cartons that were then thrown away. By setting up a reusable container program, the large boxes used to bring fresh cartons to the Springs’ manufacturing and distribution points are now being used, on average, 10 times, thus cutting the bill even more.