3pls at your service

Sept. 1, 2004
at a glance This article looks at how shippers can stay in touch with their customers even after outsourcing customer service to a 3PL. Just because you

at a glance
This article looks at how shippers can stay in touch with their customers even after outsourcing customer service to a 3PL.

Just because you may have outsourced significant logistics tasks to a third-party logistics provider (3PL), you still need to maintain contact with your end customer. The questions is: How do you stay warm and fuzzy with your customers when you're separated by a 3PL?

“It's irrelevant to the customer that we use a third party,” says John Mascaritolo, director of global logistics with financial electronics company NCR Corp. While Mascaritolo looks upon his 3PL as NCR employees, if there are transportation problems, NCR solves them. “We always try to have NCR exposure to the customer. If we have a set delivery schedule going to 1,000 stores for a retail customer, NCR's project manager oversees that we meet our commitment.”

Keeping in touch with the customer doesn't necessarily equate to micromanaging the 3PL. “We expect the 3PL to handle most tactical, day-to-day activities,” notes Gary MacNew, vice president customer service and logistics with food and beverage producer Rich Products Corp. He has people directly accountable for each 3PL or group of 3PLs and sees weekly reports on operational performance and monthly data on financial activity.

“We continue to have accountability for the performance of our organization even though we outsource the work,” adds MacNew. “We expect the same or better performance than if we did it ourselves.”

Even though NCR outsources everything logistics-related, Mascaritolo strives to deliver complete customer satisfaction. “Our customer service goal is on-time delivery, complete and damage-free,” he notes. “We measure ourselves against customer expectations.” To that end, project managers and sales teams meet with customers on a regular basis during roll out of typically large, one-time installations of NCR product.

Mascaritolo recognizes not every customer nor every part of the logistics function requires the same level of service and he applies that knowledge when he negotiates service contracts with 3PLs.

“Our 3PLs meet the service levels we require. Each business unit has different requirements. Retail, for instance, requires Six Sigma performance. On the flip side, one branch of a business unit just needs general warehouse storage. If we set lower standards, they provide the level we request,” says Mascaritolo.

“While we pick and choose the level we need, carriers always have to perform to that level,” Mascaritolo adds. “We expect 98% performance. If we pay for guaranteed delivery, we expect 100% performance.”

Network computing company Sun Microsystems Inc., like NCR, has negotiated 3PL service agreements to meet its needs. Sun's outsourced physical distribution, warehousing and transportation are run by a 3PL that acts as lead logistics provider (LLP), also handling import/export.

“Globally, we only use two LLPs. We've been with one partner since 1993,” comments Hugh Aitken, vice president worldwide customer fulfillment with Sun.

Eugene McCabe, Sun's senior vice president operations, notes that long-term relationships are one of the aspects that allows you to achieve excellent customer service. When Sun began partnering with its main LLP, developing metrics and service level agreements, performance was nowhere near its present level.

“We built the relationship over time. It was a partnership where we helped the LLP develop the capabilities we needed,” notes Aitken. “You can't do that sort of thing with 12 to 15 partners.”

To achieve its customer service goal, Sun involved its LLP and more than 25 suppliers to ensure cooperation in pick-ups, Customs compliance and clean documentation. They ran frequent voice-of-customer meetings to ensure they understood and met customers' operations requirements.

Starting in Europe, it took Sun and its LLP eight years to get to the service level they required. Having worked out all the kinks getting set up in Europe, it took only a year to get the stateside LLP to the desired performance level.

“It's difficult when you turn logistics over to a third party,” agrees Brian Hancock, vice president and general manager with 3PL Schneider Logistics, a subsidiary of truckload carrier Schneider National. “Ten years ago, we were not in the business of automotive parts. We had to invest in years of experience and training to understand the business enough to make the right decision every time. Our customers have allowed us to learn that business over 10 years.”

Hancock suggests there are two pieces to the customer service issue. “First, to what extent do we touch our customer's customer? Then, how do we deal with our customer when they're serving their customers? In the automotive industry, we touch every dealer for General Motors and Ford every day. A lot of those touches are untended, middle-of-the-night deliveries. Drivers have keys, leave parts, pick up returns and lock the door as they leave. This operation requires confidence won over time.

“We know the business of the dealers,” continues Hancock, “and we protect that trust. When we outsource to another third party, we interview the manager and the driver and take them to meet the dealers. Dealers can show the driver where they want the parts placed and any other special circumstances.”

As an LLP, Schneider Logistics has a customer service organization that works directly with dealers. “We have people at our automotive customers' parts distribution centers and headquarters,” Hancock notes. “Our field organization provides daily touch to our customers.

For dealer feedback, Hancock's team attends weekly regional dealer council meetings. Schneider Logistics may present new strategies or new ways of doing things and receive direct feedback. “We take a program off the books if dealers think it's a bad idea,” Hancock points out.

Schneider Logistics touches the dealer every day, but Ford and GM want daily feedback — electronic or face-to-face — on what's going on in their networks. Hancock's team participates in plant meetings and Ford's and GM's plant managers work with Schneider Logistics' people to plan daily operations.

The logistics team at Sun Microsystems believes daily performance measures are a good idea when you outsource. Getting face to face on a regular basis keeps problems to a minimum.

“At the operations level, we get performance and financial reports and meet face to face weekly and monthly,” explains Aitken. “We look at the metrics on operations and cost performance quarterly. If we don't achieve our target — 95% or above — we meet with our LLP. Even when all is well, I meet with the LLP quarterly.”

“As long as we're above goal, we stick to normal meeting times,” adds Sun's McCabe. “If service drops below the target, it kicks off a set of actions.”

If things start to go wrong, Sun expects the LLP to get it back in line. If the LLP misses the target level, Sun meets with them immediately. If things go wrong repeatedly, there will be face-to-face dialogue. If a subcontractor doesn't measure up, the LLP is responsible for finding one that performs to Sun's target.

NCR's Mascaritolo also meets frequently with his 3PL. “We expect some problems or blips and we bring out-of-scope issues as well as new business challenges to them. Our business and our relationship are always changing. Our partners need to be flexible enough to go along with the changes,” he adds.

At the operations level, NCR people have daily contact with the 3PL. Mascaritolo meets with 3PL management monthly and quarterly unless there is a major issue beyond the ability of regional people to solve. “We and the 3PL have established an escalation process. If we have a continuous problem with a 3PL, it comes to my level,” states Mascaritolo. “Otherwise, those closest to the source deal with it.”

Dealing with 3PL customer service is not a static issue. “We're not finished,” comments McCabe. “We keep asking ourselves: How can we be better? How can we continue to reduce time and cost?”

“That's the critical point of this discussion,” agrees Aitken. “We'll never finish. Our supply base and customer base keep changing and the supply chain changes. With our partners, we develop ways to meet those changing needs.” LT


Ford Motor Co.

General Motors Corp.

NCR Corp.

Rich Products Corp.

Schneider Logistics

Sun Microsystems Inc.

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