Sorry our 3PL division is currently full…but there are still options…

• Guaranteed waiting list, we have plans to release an additional 4000 pallet spaces towards the end of 2016. Registrations for the waiting list are being accepted with a deposit equivalent to 10.00 per pallet space equivalent (a combination of pallets and shelving). E.g. if your account is estimated to be 50 pallets or 2000 pallets the deposit is 500.00 or 20k (the deposit is refundable upon moving in, otherwise it’s non-refundable, i.e. if you lock in the space then change your mind at a later stage the deposit is not refundable) this guarantees a place for your business.
  1. The end of 2016 date is contingent on one of number of property strategies we’re currently exploring (our preferred option currently), other strategies are likely to offer space sooner, we will update through blog posts as appropriate.
• Ad-hoc waiting list for if a client leaves (unusual) or goes under (rare) we are now building a list of potential customers we will contact in order of their application, paid registrations are contacted first then the unpaid registrations.
  1. Paid – 1000.00 deposit (refundable at any time)
  2. Unpaid
     Note: We have a large client who is reasonably overstocked, with the recent appointment of a new SC Manager there is a renewed focus to reduce inventory and they have committed to reduce their storage with us by 1500 pallets by the end of March 2015. If they achieve this, this will create some capacity under this category.

Note: We may be entering discussions to enter a JV, it’s very early stages however this may also open up some capacity in the near future.

Note: There is a strategy being considered currently that may force us to lease additional space for existing clients who are growing, this may move forward an opportunity for some smaller prospective customers.
Note: (I will keep this updated as the lists evolve)
As at 10.02.15 we have 2000 pallets registered (unpaid)

• Professional services. You can engage our professional services division to help you find a 3PL partner. 3PL partnerships will fail if they are not set up correctly (even if the provider is tactically capable), for a fee we can help companies assess the market, structure a robust services agreement and help mitigate many of the pitfalls many 3PL clients endure. Costs for this vary depending on the complexity of the business, fees are a mixture of Supply Chain Strategy and Supply Chain hourly rates http://www.supplycs.com/supply-chain-advisory/ as a rough indication a small account may spend 2-4k a large account 20k.
  1. Why this may be of interest.
     1. It is estimated that 80% of 3PL customers (including some veterans) will end up paying 30%  more than expected, the post mortem always reveals a combination of the items listed below (refer – Ready, Fire, Aim)
     2. 3PL services should be strategically procured (like an agency or partnership) not tactically purchased (like freight or stationary), if you don’t understand the differentiation between procurement and purchasing then you should buy in the expertise from a “qualified” consultant. The caution here is that it can be easy to hire a consultant to find out later they have not delivered the result you needed, do lots of reference checking.

• Most 3PLs including ‘respected’ multinational companies leverage buyer misunderstandings on purpose to maximise profits (in our view this is unethical, embarrassingly however for our industry it is a common tactic), the only way to reduce your risk is through a robust services agreement. Buyer beware.Please note: As at 28/01/15 I regret our professional services division is currently fully booked through to April 2015, we are currently looking to expand and recruit more consultants however the skill set for (excellent) supply chain consultants is complex and suitable candidates are rare. That said we are in discussions with some potential people so we may be able to provide services sooner, keep checking in.

If you’d like to explore any of the options mentioned above please drop a line to sales@supplycs.com.

Ready, Fire, Aim

SCS  has been built entirely from referral business (we don’t have a sales team),  a good 3PL solution is brilliant, its cheaper, significantly less stress on your business and offers scalability, better use of working capitol and with the right partner you’ll get competitive advantages too as well as future proofing, that said, to most of our clients we have been the ‘ambulance at the bottom of the cliff’ rescuing them from a poor performing 3PL competitor, over 80% of our clients have come to us, recycled from under-performing competitors who had sold the client a vision they couldn’t deliver on, the most common mistakes we frequently see are as follows:

• The single biggest mistake is that customers underestimate the complexity of 3pl (multi-tenant) fulfillment facilities, they look at what they think is “just” warehousing and think “how hard can it be?” Ironically most providers think the same thing, even for us it took nearly 9 years of singular focus, millions of dollars in software development and specialist staff training to  get to a level where we can now guarantee our services (we’re the only 3PL know who actually guarantee services).
  • Customer is just looking for a “simple” solution, 3PL can end up simple but getting there “well”  involves understanding the  complexity first and “knowing” the rules of engagement and how to work the partnership from your side to extract the value you need , customers who look to hand over their logistics problems to a provider and “wash their hands of it” invariably end with an under-performing solution that can deliver the reverse effect of what they want and will also negatively effect the goodwill in the relationship because invariably expectations will end up misaligned with deliverables.  An analogy I use a lot is that procuring a complex software application (ERP, WEB Platform, WMS etc…) is a lot like procuring a 3PL. If you dive into the process knowing what outcome you want and you are happy to rely on the salesperson who “should know what you want and what they are doing” then you’ll will almost certainly not get a good software implementation and the software will never will live up to your expectations in fact it will end up costing a lot more in the long run and be a constant point of disappointment. We see this happen a lot in the software game with customers burning hundreds of thousands of dollars, we see exactly the same thing every week with customers selecting a 3PL provider poorly.
• The second biggest mistake is that customers trust the salespersons pitch. A lack of robust reference checking (3PL clients, especially new ones, tend to rely almost exclusively on the salespersons pitch, this is tantamount to accepting a potential employee at their word without bothering to reference check, the outcomes are the same)
  1. We’ve also seen reference checking done and bad selections still made, a key reason for this is that the correct questions were not asked and/or the person asking was too close to the business and already convinced by the pitch so they tailored the questioning to support the decision they wanted to make anyway, this turns out to be disastrous,  this supports an argument to use an impartial 3^rd party who can offer an unbiased view.
• A poor misunderstanding of the rates, through our customers we’ve discovered many hidden “Gotcha’s” lurk in 3PL proposals, common ones include:
  1. Freight tariffs, tariffs are complex, clients don’t know how to model when shipments swap between tariffs in consideration to conversion factors and what rules (or technology) the provider actually applies. They commonly under calculate by 10-25%. Not understanding unspecified destinations  can blow out a cost model by 50%. We’ve seen unreconciled freight invoices with errors of up to 60k, rates were correct but the invoice entry’s were not and no one picked them up and they were paid.
  2. A pallet is not a pallet e.g. we commonly find with clients in our facilities we end up charging about 1/3 less pallets stored than the previous incumbent, recently we saw a client who was paying for 1900 pallets with the incumbent but was paying for 1100 with us for a similar amount of inventory. Clients can’t easily check if the pallets stored is accurate and/or fair which many 3PL providers take advantage of. (SCS use a technique we invented called compression ratios but we’re not aware of another provider that offers such a tool however there are other methods). A large well known logistics provider was caught out charging 2000 pallets to a large sporting goods importer (Cameron Sports) who got disillusioned with the service and  ended up getting their own warehouse, the listed provider delivered 600 pallets. This is an extreme example in my experience but overcharging of 30% is common in my experience.
  3. Not understanding how to compare rates (many 3PL tariffs are materially different) unsophisticated buyers get this wrong and it ends up costing tens of thousands of dollars in surprises, some unwitting clients find out the hard way they end up paying for every little thing imaginable by the 3PL including phone calls.
     1. A common ploy (more-so in Australia) is to buy the standard work then charge like mad on anything remotely out of scope, very similar to how a lot of IT companies make money, a recent example I heard of was returns were charged at a high hourly customer account management rate which was sold in hour blocks of around 50.00/hour instead of what would have been a reasonable returns fee of circa 15.00 on a transactional basis, this was one of the two largest 3PL’s in AU and their justification was that it was not clearly stipulated in the contract.
        1. A similar ploy is used by domestic freight forwarders where they look at your freight, price out the common destinations competitively then put in an unspecified rate at a huge margin, they only need 10% of your freight to end going to unspecified destinations and they can double their profit on your account.
     2. Pallet rates are unclear, often the actual pallet per week cost is on the tariff but the pallet rental (for the actual wooden pallet) is ‘hidden’ somewhere else in the contract and presented as a small daily fee of e.g. 7 cents but when you add this to the pallet rate it adds on another 0.45 cents per week to the hire .
     3. Ullage (damage and loss) is not addressed adequately at the onset, I’ve seen many 3PL providers bet away with hundreds of thousands of dollars of stock mismanagement and the client didn’t have a leg to stand on and was actually tied to the contract and forced to endure the poor service because this was not managed.
     4. A common ploy we see is where a 3PL buys the business then somewhere between 6 and 12 months they come back with a story about how they didn’t understand the service requirements (normally they pin this on the client for providing a poor scope) and then they crank up the rates betting the client won’t move because it’s too hard now, the investment in IT has already been made and the client is now gun shy and resigned to better the devil you know. Mostly they get away with this. I’ve had discussions with 3PL owners/managers who have admitted this is a key part of their sales strategy.
        1. Its estimated up to 80% of 3PL clients are not happy with their provider (conversely SCS surveys with our clients show nearly 100% are happy or very happy) so if you get it right it can be fantastic, either you luck in and get a brilliant 3PL or you cover yourself to manage the reasonable number of ‘hooks’ that exist.

• KPI reporting is vague (this is critical, your performance management platform and grounds for action)
  1. Lack of a service guarantees or an inadequate services agreement. This needs to tightly manage fulfillment metrics and freight KPI’s. This is key, we’ve seen customers not fully understand this part of the deal, in my view the entire deal can be distilled down to a fee for a KPI level, you pay more you get more you pay less you get less, of course clients to pay less and get more. Squeezing into this space, hitting this sweet spot is achievable but the technology and staff management expertise is mind blowing to get here.
     1. Another caution around KPI’s is be realistic,e.g.  a really good domestic bulk freight forwarder will perform at around 98.5% on time delivery damage free, if you expect 100% you’re set up to be disappointed, a lot of freight forwarders will promise you a high level like this then deliver much lower but the client has no recourse or protection because they did not manage the contract and believed the salespersons pitch.
• Customer service response times and rules are not established up front then the client finds once they are in they can’t get hold of anyone – very common with ‘cheap providers’, this can kill a business who is targeting the quality end of the market and higher margins who needs fast response times. We know of competitors who sell a good story and once your in can take a couple of weeks to get back to you and its only until you’re in you find out the CS team is drastically understaffed. Again the provider relies on the fact that once you’re in you’ll find it too hard to move out again (moves can be very disruptive and expensive you don’t want to be doing too many of them if you can avoid it)
• Volume peaks and processes around these are not clearly discussed therefore not managed and the 3PL provider ends up falling days and even weeks behind, the client has no recourse, they find out too late that the provider wont work weekends or create multiple shifts.
• Novice 3PL buyers purchase, they don’t procure, successful 3PL partnerships are just that, partnerships, partnerships are procured, there are many dimensions beyond price and service that aggregate into the Total Cost of Ownership (and a successful relationship). These include things like cultural fit, IT capability (this is huge as it leads into future proofing), financial stability, metric reporting, quality programs, staff training programs and communication platforms to ensure idiosyncratic procedures are executed in alignment with your strategic expectations, security, future direction (B2C, Drop ship, x-doc), project management capability, scalability. Any one of these items can materially affect the total cost of ownership and make a mockery of the actual rate card. These issues are best managed using a structured scorecard approach (refer image for an example that we use, double click to expand it).
  1. As mentioned earlier, procuring 3PL services is a lot like procuring an IT system (e.g. ERP, web platform, WMS, CRM etc…) the worst way to do this is to jump in and assess the price and features, when the first thing I hear from client is that they ask for my rates I go uh-oh here’s a novice, it’s a clear signal that they don’t know what they are doing and they have a purchaser mentality, I worry for them knowing if they take this approach with many competitors they will be taken advantage of and  they will end up in the “paying 30% more category and never get what they actually want” category.Using the analogy of software, the ONLY way to procure software is to start with a functional requirements scope, this breaks down the business process in tedious detail (which is why most people don’t do it), from there you build up a functional requirements spec to give to the vendor, then there is a collaborative process to understand how your requirements will align with the software then the decision of whether you modify the process to fit the software or vice-versa (should always be the former incidentally – in my view) then you can cost the software accurately. Companies who adopt the later method generally boast good implementations, companies who fall in to the first category generally end up with a disaster…and blame the software.Borrowing from this analogy, procuring a 3PL is similar, you should seek to understand the items listed under Ready, Fire, Aim  and build up to a price and service…do this and your chances of getting a good outcome will increase enormously.

Good luck in your endeavors

Cheers

Brad