In our last blog entry based on the new book, Vested Outsourcing, Kate Vitasek and her team illustrate a better way to work with service providers. Vested outsourcing takes the concept of partnership to new heights with the power to deliver transformational results.

Because competition is at an all-time high and businesses continue to become leaner, it’s more important than ever to develop a trusting relationship with your logistics partner. Inbound Logistics reports that some companies that outsource spend up to 60 percent of their logistics management time defining, selecting and negotiating the 3PL agreement, instead of fully realizing the total benefits available from the outsourced relationship. Those benefits include the power of a true partnership. Collaboration with a 3PL to better manage the supply chain can not only help a company effectively manage costs, but improve its reputation and competitive position in the marketplace.

When you choose a 3PL provider, what should you look for? Our research reveals that the ability to provide on-time pick up and delivery and proactive response to problems remain the most important performance factors. But beyond these must-haves, look for a 3PL who can be a partner for the future. Choosing a third party logistics provider engaged in your success—through good times and bad—will provide a sustained competitive advantage. A strategic 3PL partner plays a significant role in optimizing the supply chain and lowering overall costs. They will dig deep to uncover inefficiencies and new opportunities for customers to improve their logistics outcomes.

The time is right to learn more about Koch’s approach to logistics. Please contact me to learn more.

-Tom Hall, National Account Executive

The work and research developed by Kate Vitasek, in conjunction with the University of Tennessee, aims to answer that question in the recent book, Vested Outsourcing: Five Rules That Will Transform Outsourcing. Vitasek, lead researcher and faculty member of the University’s Center for Executive Education, introduces the concept of vested outsourcing to help create a true vested partnership that will deliver transformational results. I recently finished reading this book and was captivated by the premise and message.

Consider: most often companies are developing supplier and outsourcing agreements that don’t allow for innovative partnerships that strive to help solve real logistics and supply chain problems. These kinds of agreements more than likely do not produce satisfying results. Companies that are frequently bidding out business just to capture the best market price may be inhibiting innovation from their suppliers. This is because most suppliers will not risk investments in innovation or new processes for fear of the business being bid out and “taken away.” Suppliers are unable to justify the investment or collaboration because they may not realize the ROI.

Instead, vested outsourcing requires both partners to assume a degree of risk and reward to drive transformational behaviors and results. Vested outsourcing adds order through its “rules” and provides a roadmap for creating mutually beneficial agreements. The goal is to create a true vested partnership whereby the economics of the deal structure drive, and reward, transformational behaviors and results. This type of collaboration is a win-win for both partners by ignited innovation, improved service, lower costs, and increased profits.

The book also shares 10 Ailments that can affect achieving a true vested partnership and how to lay the foundation for a vested approach. If you are seeking a way to improve your partnerships, I recommend picking up a copy of the book.

Have you ever read it? Share your thoughts.

-Jennifer Johnson, National Account Executive

Capacity restraint has been a topic in transportation circles for quite some time. Over the past five months, capacity has become an even hotter topic for 3PLs. The good news is that business and consumer moods are brightening; demand has begun to pick up. This is good news for shippers – but where are the trucks and drivers?  This new capacity situation is predicted to continue and could become more intense.

Transportation was one of the hardest hit sectors in the most recent economic downturn. Many asset-based carriers sold or parked trucks to reduce their fleet size to manage through reduced volumes. While signs generally point to better times ahead, most carriers are not yet willing to fully re-invest in bringing their fleets back to prerecession levels. One stumbling block is the pro-rated licensing fee. With some doubt surrounding the timing of a full recovery, carriers won’t invest in the annual fees if these currently high volumes subside substantially after the upcoming busy season. For this reason, I believe we’ll continue to see these capacity issues for at least two years even as the economy continues to show stronger signs of recovery.

So what can shippers do?

When capacity tightens, shippers that are flexible and work closely with a seasoned 3PL can proactively navigate the situation to minimize potential delays.

1)       Become more flexible
Consider initiating flexible loading/receiving hours to make your shipping requirements more easily serviced by the carrier.

2)       Focus on preplanning
Preplanning allows for more time in the delivery cycle—for instance for Thursday delivery, seek to ship the previous Friday rather than waiting until Monday.

3)       Money (still) talks
Work with your 3PL to negotiate rates earlier. Be prepared to possibly pay higher rates in this environment to lock in on the service. When evaluating overall costs, this approach may actually be more prudent than being caught with expensive delays.

4)       Choose your 3PL wisely
Insist on better communication with and from your 3PL. Look for a 3PL that keeps in close communications with the carriers to anticipate problems and provide effective alternatives. This alone will make your supply chain smoother and ultimately more cost-effective in the volatile shipping market.

While it has been a tough last few years for the entire logistics industry, we are seeing confidence rise and more positive movement. Shippers that make some changes now will also see success when the economy rebounds.

-Karl Fillhouer, Director of Operations

We all know there have been rough seas to navigate in Retail and Hospitality. Those that have survived and thrived in these challenging times have worked closely with partners and suppliers to lower overall costs and create value for customers. Of course in some ways this has always been the case. But during the economic storm during the last couple of years, as the stakes mount, more retailers and hospitality providers are placing greater importance on the size and stability of their 3PL partners.

In our recent post on the unwavering importance of on-time delivery, we shared data from our primary research study among retailers and hospitality firms. We asked what the most important factors were when selecting a 3PL provider. It is not surprising that when we compared responses to a similar survey from 2008, factors like on-time pick-up and delivery and responsiveness remain a priority. And it’s no surprise that there is now a greater importance on lower overall costs. However, what was a bit of a surprise was the greater interest in a 3PL provider’s business. Nearly three-quarters of respondents rated Financial Stability and Size as very important or important, compared with just half two years earlier. As our challenging global economy has demanded many changes, customers more strongly factor whether a 3PL provider is financially stable and able to deliver.

Longevity is a good indicator of stability and flexibility to manage through economic downturns and industry changes. At Koch Logistics, we are proud of our 30 year history of smarter shipping. As a division of Stan Koch & Sons Trucking, Inc., a leading, privately held international transportation and distribution firm, we stand firmly behind our promises and keep our word around the world. We welcome site visits from our customers and prospects to see firsthand how our team performs and to experience our culture of energy and determination – that helps you succeed.

As the logistics market has evolved, importance factors for decision-making have changed as well. Financial stability as well as experience and size are important indicators of the suitability of a 3PL as your partner going forward. We’re proud of our ability to stay connected with industry currents so we can continue to deliver smarter supply chain connections and lower overall costs to meet your needs.

-Jeff Faust, Vice President & General Manager

We hope we’ll meet you at the 2010 Commercial Construction Show next week at the Minneapolis Convention Center June 9-10. This is our first year exhibiting at the event where we will showcase the comprehensive, smarter logistics services Koch offers to the commercial construction industry that help customers overcome challenges to improve supply chain performance.

At Koch Logistics, we understand how important it is to manage a project as efficiently as possible and keep crews on schedule, especially with the rigorous demands of commercial construction and design build. This is why we maintain our 99% on-time pick up and delivery rate. Logistics plays an increasingly important role in project delivery methods and we work to identify ways to make your scheduling more efficient with flexible, customized solutions to meet the unique needs of your job site. Koch Logistics customers have a dedicated account team to manage your project delivery process from start to finish, including coordinating carriers and supplies, tracking and tracing delivery status, and tackling any issues that may arise.

Attending the show? Stop by the Koch Logistics booth #1203 to learn how our 3PL approach can help you solve your complex logistics challenges and concerns. If not, please call or email. I look forward to talking with you to discuss your specific logistics needs in commercial construction.

View a schedule of events here.

-Tom Hall, National Account Executive

Our challenging global economy over the last year and a half has demanded many changes from our industry. The new normal now requires that we do more with less. However, one component is unchanged: on-time pick up and delivery remains a top priority for shippers.

We know that on-time pick up and delivery is not only important but more critical than ever before. Koch Logistics recently completed a survey among both retailers and hospitality firms. We asked what their most important factors are when selecting a 3PL provider. These responses were compared with a similar survey we conducted with our customers two years earlier. From our analysis, we were able to assess what has changed as a result of economic changes – and what elements of supply chain management have remained constant.

Koch is proud of our industry-leading 99% on time delivery rate. And that’s why Koch Logistics has the systems in place to arrange precision delivery to meet the most important needs of our customers.

Proactive response to problems has increased in importance since our last survey in 2008 and now ranks as the second most important factor for retail and hospitality providers. Many customers begin a new 3PL partnership with Koch because of past logistics headaches or problems. When customers choose Koch Logistics, they get a dedicated account team that deftly coordinates multiple carriers, vendors and the inevitable last minute changes. And if something goes wrong, we’ll make it right.

We are excited to share our insights and key findings with you. Check back to our blog over the next couple weeks for expanded findings and please share your top priorities or factors with us.

-Jeff Faust, Vice President & General Manager

We enjoyed meeting and reuniting with so many of you at the NASSTRAC Logistics Conference last week. For the third year, Koch Logistics was a premier sponsor of the conference which saw a boost in attendance this year, as nearly 400 shippers and carriers gathered.

At the conference sessions we gained insight and perspectives on navigating global shipping regulations, new challenges facing global organizations that affect supply chain and logistics planning, and next steps for moving toward a positive future. Sessions highlighted shipper-carrier relationships, perspectives from motor carrier CEOs, and a recap from Wall Street on the freight recession and forecasts for 2010 and beyond. Discussions included the importance of a strategic partnership – particularly during a challenging economic climate – and how to streamline supply chain management. In the wake of market shifts, maximizing supply chain value has become imperative for businesses to succeed.

The expo floor provided an intimate venue for networking with attendees and vendors and continuing to build relationships with current clients. With key decision makers and major shippers as well as transportation providers in attendance, the open forum was helpful for networking and table discussions.

If you attended the show, feel free to share your thoughts. View photos and session recaps at nasstrac.org.

-Meg Schmidt-Duncan, Manager of Carrier Relations and Karl Fillhouer, Director of Operations

Earlier this year Inbound Logistics Magazine released its “Ten Tips for Using Social Networking for Logistics.” Rule number six reminds social networkers and online visitors to “Decipher the negative.” In other words, “Social networking can provide information about a potential partner, but you need to know how to discriminate between posts (for example a true negative analysis versus a disgruntled consumer or employee.) Examine criticism and positive online comments about a provider whose services you are considering.

When it comes to logistics services, our research with both retailers and non-retailers affirms the importance of references or referrals when selecting a 3PL partner. These references may be hard copy or on a website, but be cautious about seemingly vague references such as testimonials that don’t list an actual company or contact name and title. This provides the reader assurance that the referral is credible and real.

At Koch Logistics, we are proud of our client relationships and are building a library of case studies for others to gain insights about our work. We hope you will visit this resource and return as new content becomes available.

-Jennifer Johnson, National Account Executive

Often we hear the terms “broker” and “3PL” used interchangeably. While both serve as a liaison between shippers and carriers, on closer comparison, there is certainly differences between the two. The term broker usually refers to an agent for truckload shipments, matching smaller shippers with carriers. Brokers are increasingly internet-based and price driven. Beyond the seemingly lower upfront cost, they may not offer the value-added services a 3PL provider can, and their knowledge of customers and their unique needs is more limited.

The CSCMP (Council of Supply Chain Management) defines logistics management activities as including (but not limited to) inbound and outbound transportation management, fleet management, warehousing, materials handling and order fulfillment, and many others. In addition, 3PLs are typically involved in all levels of planning and execution and are an integrating function that coordinates and optimizes all logistics activities with other functions including sales and IT.

A 3PL offers brokerage services but many more value-added services. 3PLs take a look at the entire supply chain and offer in essence a “one stop shop” to customers for their supply chain management functions. A 3PL provider will customize programs for each customer and match unique customer needs to carrier core competencies. With access to a greater number of industry contacts they offer flexible, customized solutions. In addition, as a 3PL focuses on your business, they work to identify ways to make your supply chain more efficient, which ultimately saves cost and improves performance.

Although it may be easy to interchange the terms broker and 3PL, remember that a 3PL partner invested fully in your business will have a positive impact on your organization’s future.

-Thomas Hall, National Account Executive

At Koch Logistics, we take great pride in developing partnerships with our customers. Through mutual trust and dedication, we are able to provide turnkey services that create both lasting value and tangible savings.

Please read our newest case study that highlights our work with Minnesota Rubber & Plastics, a privately held company that provides difficult-to-manufacture rubber and plastic parts and assemblies for diverse industries including medical, electronics, pharmaceutical, fluid power, agriculture, food and beverage. Koch Logistics has managed MN Rubber’s transportation services for more than six years and helped generate results like an on-time delivery rate increase of 20%.

-Jennifer Johnson, National Account Executive