How to Build a Successful Partnership with Your Logistics Provider

A successful logistics partnership is more than a service agreement. It involves matching the business with the logistics provider's vision on:

• Service expectations
• Operational responsibilities
• Performance metrics
• Communication processes
• Technology and data
• Cost and efficiency
• Scalability
• Continuous improvement

The goal is to establish a partnership in which the logistics company gets to know the company and can adjust its services as needs change.

1. Clearly Define Expectations and Responsibilities

The key to any logistics relationship is transparency.

Both parties should agree before the operations start on the scope, responsibilities, timelines and performance of the services.

Depending on the engagement, this may include:

• Transportation and delivery requirements
• Warehousing and inventory management
• Order fulfillment
• Replenishment
• Returns processing
• Service-level agreements (SLAs)
• Reporting and communication
• Exception management

Defining responsibilities minimizes confusion and helps you determine where the issue arose in the operation when a problem arises.

Future needs, like planned expansion, new product developments, seasonal demand, or new market entry also need to be communicated.

2. Select a provider that suits your business.

The first step of a successful logistics partnership is selecting your logistics provider.

When considering potential business partners, more should be looked at than price. Relevant considerations include:

• Industry and product experience
• Service capabilities
• Geographic coverage
• Warehouse and transportation infrastructure
• Technology capabilities
• Scalability
• Operational track record
• Compliance and specialized handling requirements

The right provider must be able to meet the capabilities needed today and be able to meet future needs.

The point is not always to choose the biggest logistics company, it's about selecting a business partner that has the capabilities, operating model and approach to suit your business needs.

3. Establish Regular Communication and Collaboration

Communication must be organized and uniform in logistics operations, which have several active elements. There need to be clearly defined points of contact and regularly occurring forums to discuss:

• Operational performance
• Current challenges
• Upcoming demand changes
• New products or launches
• Capacity requirements
• Delivery or inventory issues
• Improvement opportunities

Communication on a regular basis enables problems to be detected earlier and provides the chance for both to plan instead of to react.

Regular communication also creates trust and helps the logistics partner to understand the business.

4. Technology and Data to Enhance Visibility

Technology can effectively improve the collaboration by giving access to real-time and accurate operational information to both parties.

Based on the logistics model, the organization can enjoy:

• Real-time shipment tracking
• Warehouse Management Systems (WMS)
• Inventory visibility
• Automated order processing
• Digital proof of delivery
• Performance dashboards
• Analytics and reporting
• System integrations and APIs

But technology is not about replacing collaboration, it's about enabling it. The true value lies in shared data being used to address problems, gain insights into trends, monitor performance and improve operation decisions.

5. Measure Performance and Work on Continuous Improvement

A business relationship between a logistics partner and the business should continuously adapt to changing business needs.

There should be regular monitoring of agreed performance indicators including:

• On-time delivery
• Order accuracy
• Inventory accuracy
• Order processing time
• Transit performance
• Damage rates
• Returns processing
• Cost performance

Performance reviews should not be only to look for failures. They should provide a formal opportunity to gain an understanding of the cause of a problem and of what could be done to ensure that it doesn't happen again.

For instance, frequent delivery failures could result in a change of carrier, routing, warehouse location, inventory positioning, or order cut-off time.

Continuous improvement is the process of making an incremental improvement over time based on operational data.

6. Collaborate in Planning for Growth and Change

A logistics partner should be involved in planning for significant changes in the business.

These may include:

• Seasonal demand spikes
• New product launches
• New sales channels
• Geographic expansion
• Changes in product mix
• Higher order volumes
• New delivery requirements

By sharing these plans early, the logistics provider will have time to assess the capacity, workforce, inventory, transportation and technology needs.

Such a co-ordinated effort can help them avoid unnecessary capacity problems and make their business scaling more seamless.

Within logistics, trust is especially vital since numerous logistics-related decisions must be made in a timely fashion.

A business must have confidence in its logistics partner to clearly communicate issues when they arise, safeguard inventory, deliver to agreed service levels and be able to react well if the situation changes.

A long-term relationship can be beneficial in a number of ways:

Greater Reliability

The logistics provider will be better equipped to provide more consistent service when he or she is knowledgeable of the business and operating needs.

Better Cost Efficiency

Long-term collaboration can lead to opportunities for process improvements, optimizing routes, minimizing unnecessary handling and maximizing the utilization of infrastructure.

Greater Flexibility

A trusted logistics partner is more likely to be flexible in adjusting to ups and downs of demand, additional requirements, or unforeseen operational issues.

Better Problem Solving

If there is a flow of information from both sides, this makes it possible to deal with recurring problems at their source, instead of as isolated matters.

It is not about not wanting to be accountable. It's about establishing enough confidence and openness to each other that they can work constructively to resolve issues.

Establishing the relationship is just the beginning. It should be kept up-to-date as the business and supply chain evolve.

Businesses should:

• Review performance regularly
• Share upcoming business plans and demand changes
• Revisit SLAs when requirements change
• Evaluate new technologies and services
• Encourage the logistics provider to suggest improvements
• Discuss recurring operational issues openly
• Review costs alongside service performance
• Conduct periodic business reviews

A logistics provider may also know about operational trends which are not easily visible for the business. By accepting their suggestions, they might be able to identify opportunities for the processes, capacity utilisation, delivery performance or customer experience to be improved.

It is not a good idea to accept mediocre performance over the long haul. Companies need to review again and again if their logistics provider is still suitable for their needs.

Symptoms could be:

• Consistently missed SLAs
• Poor communication
• Recurring inventory or fulfillment errors
• Limited scalability
• Lack of operational visibility
• Inability to support changing business requirements
• Unexpected or poorly explained costs
• Limited willingness to improve

Where these problems are ongoing despite review and enhancement, there may be a need to review the partnership again.

The successful logistics partnership depends on transparent expectations, proper capabilities, frequent communication, shared data, tracking performance and making continuous improvements.

A service contract is not the only basis of the strongest relationships. They arise when the logistics provider knows the business, is involved in decision making, is proactive in communicating and collaborates with the business to address operational issues.

As supply chains become more complex, businesses need logistics partners that can do more than execute individual tasks. They need partners that can provide the infrastructure, expertise, flexibility and operational support required to grow.