August - 20238 logisticstechoutlook.comIn early 2020, Spin Master's North American warehousing and logistics team was challenged to transform 3PL warehouse operations to reduce costs and improve customer service. To-date, we have reduced annual warehousing operating costs by 35%, reduced annual retail non-compliance charges by over 80%, and improved on-time shipments to 99.7%. Following are some of the best practices for successful 3PL partnerships that we learned along the way. Building a close partnership Fundamental to a successful relationship with a 3PL provider is finding a partner with whom you can establish a high level of trust. In my view, the ideal business relationship is far more than a transactional, "zero sum" relationship in which each partner is focused only on their own profitability. My preference is always to seek out synergistic relationships, where the 3PL is a trusted partner that treats the customer's business as their own, not only providing world-class service but proactively showing the customer ways to improve operations and reduce costs. In return, the customer is always watching for opportunities to make the 3PL more effective, which can be as easy as simplifying order processes and sharing forecast information that will help the 3PL to plan labour schedules. As with any relationship, this requires good communication, mutual respect, and the willingness of both partners to always seek out the "win-win" in every scenario. At Spin Master, we have also domiciled our own, small on-site operations teams at each site. While regular video calls were useful in maintaining ongoing coordination at the peak of the COVID-19 pandemic, they are not a substitute for the informal communication, relationship building and "walking the floor" that is possible by having our own team resident in our 3PL facilities. As time and budgets permit, we also prioritize site visits by our senior leadership, including holding at least one Business Review on-site at each facility, each year. Invoice scrutiny and dispute mechanisms Even in the most trusting relationship, invoicing errors can and do occur. One of the first steps that our team took was to implement a rigorous invoice review process that thoroughly validates the services, rates and billable materials and assessorial charges on each and every invoice before it is paid. While it seems common sense, this due diligence and review process has resulted in significant savings for Spin Master on an annual basis, by finding and correcting rate errors, double-charges for the same work, and incremental charges for items already included in the basic statement of work. It has also resulted in numerous healthy "win win" conversations that have improved operating practices and identified opportunities to reduce waste. To facilitate this review process, contracts should always contain a clearly-defined scope of work and rates for each type of service provided, to minimize subjective interpretation by either party. Shipment profiles should also be clearly defined, avoiding assumptions and "blended rates" without a clear range of tolerance and mechanism to update rates if the business or labour market changes. A clear definition of which inbound and outbound activities will be billed at each rate, circumstances in which overtime is and is not billable, financial responsibilities for consumable and non-consumable materials and supplies, as well as any assessorial expenses (think yard shunting, security, etc.), should also be established. Plan capacity and share information openly A portion of Spin Master's warehousing cost overruns in 2019-2020 were due to excess inventories that drove us into offsite overflow warehouses. Early in the transformation, we created a capacity management role, responsible for compiling various streams of information from our S&OP, customer orders, and inbound logistics specialists, to provide a weekly, 12-week view of anticipated inbound and outbound activity, and to collaborate on appropriate labour capacity plans. This role also provides rolling nine-month views of projected inventories and warehouse capacity utilization, which allow our sales and supply planning teams time to act on projected excess MAXIMIZING LOGISTICSEFFECTIVENESS: BEST PRACTICES FOR A SUCCESSFUL PARTNERSHIP WITH 3PLSBy Thomas White, Senior Director, Warehousing and Logistics, Global Supply Chain, Spin Master Ltd.IN MY OPINION
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