The importance of a logistics partner in supply chain operations
- Ganesh Jadhav
- Aug 10, 2023
- 7 min read
Selecting the right logistics partner is a critical decision for any company involved in manufacturing or distributing products. An efficient, reliable logistics partner can have a significant impact on the success of your supply chain operations. This article explores the key reasons why partnering with a skilled logistics provider is essential.
Table of Contents
Why you need a logistics partner
Reduced costs: An experienced logistics company can optimize your shipping and fulfillment processes to reduce operational costs. They have the technology and strategic relationships to secure better rates and manage shipments more efficiently.
Flexibility: An adaptable, responsive logistics partner can scale according to your evolving business needs. They can implement customized solutions to handle new products, increased sales volume, rapid growth, and seasonal fluctuations.
Focus on core competencies: Handling logistics operations can divert focus and resources away from your core business. The right partner allows you to focus on what you do best and leave the logistics execution to experts.
Access to technology: Top logistics companies utilize advanced TMS (transportation management system) platforms, EDI, tracking systems, predictive analytics, and inventory optimization tools you may lack access to or capability with.
Delivery performance: An experienced logistics provider has the carrier relationships and shipping routes to meet your delivery timelines, ensure on-time arrival of raw materials to your facilities, and deliver finished products to customers when promised.
Customer service: Logistics partners have the infrastructure, processes, and staff to provide high levels of service around shipment tracking, communication, issue resolution, claims, returns, and more.
Global scale: For companies shipping internationally, a global logistics partner provides duty/tax expertise, compliance management, and the ability to transport products almost anywhere in the world.
Supply chain visibility: Logistics companies provide shipment tracking data, inventory visibility, and supply chain analytics to give you enhanced visibility and control across your fulfillment network.
Factors to consider when choosing a logistics partner
Selecting the ideal logistics partner depends on your unique operational needs. Key factors to evaluate include:
Services provided
Transportation management (TL, LTL, FTL, intermodal, rail, ocean, air)
Warehousing and distribution
Reverse logistics/returns management
Cross-docking, transloading services
Inventory management
Freight bill auditing/payment
Customs brokerage for global shipping
Consulting to optimize supply chain
Technology and analytics
TMS and other software/tools used
EDI integration capabilities
Visibility and supply chain analytics
Reporting and metrics
Infrastructure and IT capabilities
Network coverage
Domestic and international shipping capabilities
Warehouse locations and capacity
Strength of carrier relationships and negotiated rates
Ability to meet pickup and delivery requirements
Operational capabilities
Expertise with your products, customers, shipping lanes
Flexibility and scalability to handle changing requirements
Experience in your industry
Ability to handle compliance, security, special handling needs
Capacity to manage new product launches or volume spikes
Costs
Pricing model (fixed, variable, hybrid)
Potential for cost savings through optimization
Billing process and payment terms
Customer service
Responsiveness to issues and speed of resolution
Communication and collaboration
Ability to deliver on performance KPIs
Experience and training of team
Company attributes
Industry reputation and longevity
Financial strength and stability
Safety record and security protocols
Sustainability initiatives
Compatible company culture and values
Assessing your supply chain needs and requirements
Determining your supply chain needs starts with a thorough analysis of your internal operations and logistics processes. Important areas to examine:
Current logistics challenges: Where are inefficiencies occurring? What causes delays? What are the pain points? Where do costs escalate?
Network analysis: Map your entire supply chain network. Review all product flows, transportation modes, inventory locations, order volumes, and more.
Logistics spend analysis: Break down all current transportation and warehousing/distribution costs. Benchmark against industry standards. Identify opportunities to reduce costs.
Shipment characteristics: Understand special handling needs, security protocols, regulatory issues, customs requirements, and compliance needs. Provide details on all products shipped.
Order profiles: Analyze order data to determine seasonal variability, peak volumes, average order sizes and weights, and shipment frequencies. Define pickup and delivery time requirements.
Inventory analysis: Assess inventory management strategies, safety stock needs, demand forecasting methods, inventory holding costs, and DC network location relevance.
Logistics performance: Identify key logistics KPIs and acceptable metrics around costs, service, visibility, and delivery performance.
IT systems/EDI: Evaluate your technology stack and EDI capabilities. Assess where integration with logistics systems is needed.
Future plans: Account for upcoming new product launches, process changes, warehouse moves, acquisitions, or growth projections that could alter logistics needs.
Documenting your strategic supply chain goals and tactical needs provides the criteria to match against possible logistics partners.
Researching and Evaluating Potential Logistics Partners
Once you have defined your requirements, creating a list of leading logistics providers to evaluate is the next step.
Industry directories:
Search relevant association directories like CSCMP or ALAN to find companies providing services you require.
Peer recommendations:
Speaking with peers in your industry to get recommendations based on direct experience.
Request for proposals:
Creating an RFP outlines your needs and invites structured responses from bidders.
News and research:
Consult rankings, reviews, reports, and news articles profiling top providers.
Industry events:
Attending tradeshows and events allows you to directly interact with logistics companies.
Assess each potential partner using selection criteria that covers:
Services, technology, and capabilities match
Global and regional coverage footprint
Operational track record and experience
Relationships with major carriers
Account management and customer service approach
Ability to provide cost savings
Cultural fit and shared values
Key questions to ask potential logistics partners
To make the best choice, come prepared with probing questions that provide insights into capabilities, experience, and operational approach.
Services
What specific services do you provide? How are they organized?
Do you offer LTL consolidation and freight optimization?
How scalable are your operations as my volumes grow?
How do you determine optimal transportation modes and carriers?
How do you reduce costs in the supply chain?
Technology/Systems
What TMS and other software platforms do you utilize? How do you integrate with clients' IT systems?
What supply chain data and analytics do you provide?
How can you help us gain end-to-end visibility across our supply chain?
Network
Can you provide full coverage of the key geographies we ship to?
Do you have relationships with all the major carriers we require?
Where are your warehouses located? What capacity exists?
Performance
What KPIs do you track? How do you measure success?
How do you communicate issues proactively? What are your escalation procedures?
What teams and accounts support ongoing performance management?
Implementation
What does your onboarding process entail? How long does implementation take?
How do you determine requirements, flows, protocols?
What training do you provide around new processes and technology?
Account Management
Who will our day-to-day contacts be?
What executive sponsorship will be provided?
How do you prefer to collaborate and communicate with clients?
Cost
What pricing models do you offer? How will you provide cost transparency?
Where do you see opportunities to reduce our supply chain costs?
Compliance
How do you handle security protocols and regulatory requirements?
How do you manage customs documentation and clearance?
Gaining their insights in response reveals alignment with your needs and provides clarity into their operating approach.
The benefits of working with a reliable logistics partner
Selecting and onboarding the right logistics partner provides both tactical and strategic advantages.
Cost savings
Optimized transportation routes, modes, and carriers
Consolidated LTL shipments
Improved inventory management
Strategic locations to reduce miles
Better customer service
Faster deliveries increase satisfaction
Real-time tracking improves communication
Quick resolution if issues arise
Growth enablement
Scales as your business grows
Handles new product rollouts smoothly
Provides flexibility for mergers, acquisitions
Management focus
Frees you to concentrate on core business
Less distraction handling logistics challenges
Peace of mind
Confidence in on-time, secure deliveries
Continuous process improvements
Technical expertise on regulations and compliance
Supply chain efficiency
Streamlined, optimized workflows
Integrated systems and higher automation
Enhanced control and visibility
Competitive advantage
Differentiated customer experience
Ability to rapidly meet changing market demands
Faster new product speed to market
The collective impact is the ability to drive growth by delivering higher customer satisfaction, entering new markets, and having a supply chain tailored to your strategic business goals.
Case studies: Successful partnerships in streamlining supply chain operations
HomeGoods streamlines through consolidation
Challenge: Needed to drive costs out of supply chain to support rapid growth
Solution: Partnered with XPO Logistics for consolidation program
Impact: Saved $18 million in first year. Currently runs over 5,000 loads per year through consolidation program
Peloton accelerates delivery times
Challenge: Need for premium delivery experience with exercise equipment
Solution: XPO managed solutions for freight and final mile delivery
Impact: Reduced average delivery times from 18 days to under 5
Wayfair optimizes customer experience
Challenge: Managing increasingly complex omnichannel supply chain
Solution: Genpro implemented omnichannel logistics programs
Impact: Saved $18 million in year one. Improved delivery times. Enhanced customer experience.
AMD simplifies global distribution
Challenge: Complex supply chain spanning 200 countries
Solution: SEKO automates processes and shipment consolidation
Impact: Saved $25 million annually. Optimized global distribution.
These examples illustrate how aligning on shared goals allowed the logistics partner to drive significant transportation savings, service improvements, and supply chain optimization.
Implementing and managing the partnership
Once a logistics partner is selected, careful implementation planning ensures a smooth transition:
Project plan
Define all implementation milestones, activities, timeframes, and owners
Stakeholder alignment
Get involvement from all teams involved in supply chain processes
Requirements gathering
Provide key operating data like product details, order information, network maps, volumes
Process design
Map out new workflows, handoff points, communications protocols with logistics partner
Technology onboarding
Establish data exchange methods, integrations between IT systems
Operational alignment
Nominate account teams, agree on performance metrics, communications cadence, and meetings schedule
Training
Educate all employees on changes to roles, processes, and systems
Testing and validation
Start small. Pilot new processes. Fix any issues before full rollout.
Transition
Organize detailed transition plan and ramp up volumes with partner
Continuous improvement
Review performance. Refine processes. Enhance technology integration.
This structured approach allows the partnership to launch successfully and run smoothly from day one. Ongoing collaboration, data sharing, and performance reviews ensure it continues to deliver maximum value.
Monitoring and measuring the success of your logistics partnership
To sustain a productive partnership, relevant metrics and KPIs need consistent monitoring:
Costs
Transportation and warehouse cost per shipment/order
Cost as a percentage of sales
Savings from consolidation, mode shifts
Service
On-time pickup and delivery performance
Perfect order percentage
Order accuracy
Efficiency
Invoice and shipment accuracy
Load utilization and cube optimization
Dock-to-stock time
Flexibility
Time to reroute shipments
Scalability to handle surges
Technology
EDI and integration uptime
Data accuracy and timeliness
Automation rates
Customer Satisfaction
Customer feedback scores
Claims and complaints
Timely issue resolution
Sustainability
Carbon emissions
Waste reduction
Packaging optimization
Evaluating results, benchmarking against goals, and addressing any deficiencies ensures the partnership continues to deliver on expectations.
Conclusion: The impact of choosing the perfect logistics partner on your supply chain operations
Selecting the ideal logistics partner holds significant strategic importance. It creates value across your supply chain:
Enhanced efficiency through optimized workflows, freight consolidation, and automation
Improved flexibility from scalable solutions and expert resources
Greater reliability through reduced disruptions, process errors, and delivery delays
Superior customer service with faster deliveries and responsive issue resolution
Higher profitability by driving out substantial costs across the supply chain
Better data visibility for more informed, data-driven decision making
Less complexity through integrated systems, standardized processes, and single provider management
More innovation by freeing internal focus from logistics execution to strategic initiatives
Decreased risks through compliant, resilient operations and financial stability of partner
Ultimately, the ideal logistics partner becomes an invaluable supply chain asset. Their customer-centric, collaborative approach feels like an extension of your own team. Together, you share the commitment to leverage logistics as a competitive differentiator that delivers business results and fosters enduring customer loyalty.
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