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

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

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

During several recent trade shows and conferences, we have heard organizations and retailers discuss the “new normal” in regards to the economy and its lasting affects on the industry. For retailers, there is a realization that things may never be quite the same again. The idea of “hanging on until things get back to normal” is simply not an option. It is doubtful that things will get back to the old normal; this is the new normal.

So what exactly is the new normal? We began to explore this topic in the blog post about our Symposium which provided an open forum for leading retailers. Generally, there is a new set of expectations to deal with this tough, demanding retail industry climate. Shifting patterns in consumer demand combined with increasingly complex supply chains bring new challenges. For retailers to survive they must adjust and develop new ways of managing and directing their businesses. Smarter logistics can help simplify these challenges as retailers look to increase productivity, streamline operations, maximize efficiency & lower costs.

We did see an emerging optimism and energy especially lately, as companies are beginning to move past merely coping with the crisis, to actively planning for the long term. At the recent GlobalShop show for instance, we saw a stronger attendance of retailers and vendors. And we’ve certainly seen the shift toward remodels and retrofits versus new store openings. Takeaways from the findings of the 2009 Study on the State of the Retail Supply Chain by RILA noted that in light of the current economic cycle, the need for effective supply chain capabilities is more pronounced. At Koch Logistics, we continually seek even smarter supply chain connections while maintaining our track record of 99% on-time pickup and delivery. It’s how we help customers meet the challenges of this “new normal.”

What does the new normal mean to you?

-Jeff Faust, Vice President & General Manager

In my last blog I highlighted the importance of seeking a 3PL provider who will invest fully in the client relationship. At Koch Logistics, a new client relationship begins with process mapping to gain valuable insight into the customer’s needs as we (together) analyze the details of the way an organization operates. This insight identifies opportunities for improvement so we can implement a program to most effectively meet a client’s needs.

An integral piece of mapping is to identify key metrics or importance factors for our customer. Because we provide a customized approach, it’s critical to determine what is most important to the client—from complex problem solving to on-time delivery to increased visibility. Process mapping is the basis on which a customized program can build and succeed.

At Koch, we believe it is just as important to engage in “dual mapping” where we seek to match customer requirements to the core capabilities and strengths of vendors. It’s about determining a “best fit” for the customer based on their individual needs. This approach allows us to coordinate better service and increased productivity in the most cost-effective manner.

Take for instance the trend of tighter inventory management, especially among retailers, as evidenced this past holiday season. Dual process mapping allows Koch Logistics to select warehouse vendors to best accommodate the customer’s often strict requirements to keep stock low but not sacrifice service or performance. Koch’s customers have confidence that they are on the path to smarter supply chain connections.

-Meg Schmidt-Duncan, Manager of Carrier Relations

By working with a logistics partner with detailed budgeting and analysis capabilities, shippers can expect to learn exactly what the cost drivers are. This increased level of information can provide dramatic results—oftentimes saving customers hundreds of thousands of dollars. By implementing a collaborative review process with your 3PL, inefficiencies can be identified and addressed jointly. This provides the opportunity for significant savings in the future. Collaboration with a 3PL to better manage the supply chain can help a company not only effectively manage costs, but improves its reputation and competitive position in the marketplace. Rethinking logistics does pay.

-Tom Torreson, Director of Administration

Do you really know where the costs are in your supply chain? Most shippers understand the importance of affordability, on-time delivery and controlling freight loss/damage.  But proactive supply chain managers also concern themselves with data.  Not just raw data, but the type of transactional and historical trend analysis rendered by business intelligence tools.  Access to this powerful information empowers shippers to easily become more efficient. Unfortunately, supply chain visibility isn’t always available to the shipper who works directly with multiple carriers or relies on suppliers, due partially to available technology platforms and/or the scale of the relationship.

Technology is obviously a powerful tool for achieving a more convenient and efficient supply chain. Look for a 3PL that will not only manage your physical transactions, but one that will help manage your business information using web-based tracking, automated rating tools, data-warehousing, custom reporting and analytics to create greater visibility and accountability throughout the entire process.

-Paul Grothe, Director of Information Technology

To outsource or not outsource? As discussed in last week’s blog post, it is a question frequently posed by shippers. Some in the logistics industry would advise that an outside logistics provider does not understand or know your specific requirements as well as internal personnel. However, the value of utilizing an outsourced organization—to augment services, provide insight into improvement processes and to supplement an organization’s core competencies—should not be overlooked.

The shipper must seek a 3PL that will fully invest in the relationship, starting early with a rigorous mapping process to gain a keen and thorough understanding of a shipper’s supply chain requirements. This will allow the 3PL to develop a customized transportation solution to integrate into the shipper’s existing operations.

The shipper and the 3PL should also collaborate and develop a detailed execution plan. Not only will this allow the 3PL provider to bring greater value and accountability to the partnership, but provide common understanding of KPI’s, execution timelines, and shared goals.

What other ways does your 3PL provider bring value?

-Meg Schmidt-Duncan, Manager of Carrier Relations

Outsourcing continues to gain momentum in business strategy as companies strive to develop activity-based or variable cost models designed to reduce risk and maximize internal resources. Why? In-house initiatives often require a significant investment in people, technology and infrastructure. Out-sourcing is an attractive option, but does require a due diligence phase along with a careful selection process in order to identify the right long term partner.

As it relates to supply chain, the flexibility, resources and stability available through a strategic third party can help companies create significant competitive advantages. By outsourcing with the right partner, shippers can tap the expertise of supply chain managers, utilize current technology and gain access to additional resources while they stay focused on their core business.

Simply put, the right 3PLs can offer a breadth and depth of experience and scalable resources that can be difficult to maintain as cost-effectively in-house. The hard part in the process can be assigning the realized value and the corresponding cost. In most cases, the true values and efficiencies fall outside of the traditional rate and discount models that are so commonly utilized as the benchmark.

-Darren Nelson, National Sales Manager