A Guide to the 3PL Engagement Model: From Transactional to Strategic

Companies often enlist a 3PL to tackle pressing issues like overflowing inventory or market expansion. Yet the true potential of a 3PL partnership extends far beyond immediate needs. It’s about evolving together, not diving in all at once.

Outsourcing logistics lets companies focus on core strengths as supply chains grow more complex. A 3PL’s value proposition can extend beyond warehousing and transport to value-added services and advanced logistics solutions.

Most 3PLs offer a wide range of services, so the relationship they can offer companies is not one-size-fits-all. Typically, a 3PL customizes a service package for an organization’s current requirements. As one’s business needs evolve, the relationship with the 3PL can mature from basic services like warehousing to strategic planning and network development.

The 3PL engagement model typically matures over three stages: transactional, tactical and strategic. The relationship develops as a 3PL creates long-term value through collaboration and commitment, and the customer experiences the benefits.

Level 1: Transactional

At this level, the 3PL relationship is contractual, focusing on short-term performance for non-critical functions. For example, a 3PL may store excess inventory. The relationship at this level doesn’t require much coordination or communication, and there’s little room for performance improvement.

This level suits firms in stable markets with less urgency for agile supply chains. Companies that don’t experience seasonal surges, for example, can manage with existing resources.

While initially, a company handling its own logistics might tap a 3PL for a unique situation, deeper ties can form over time as goals align.

Level 2: Tactical

As trust and collaboration grow, the relationship may shift from transactional to cooperative. The emphasis moves from mere cost savings to creating value through innovation and strategic planning. If a 3PL consistently meets KPIs, it can build a track record of performance.

Enhanced efficiency and quick problem-solving become the norm as companies feel comfortable sharing plans and metrics. Meanwhile, the 3PL steps up with value-added services like custom packaging, drop shipping and fulfillment.

With a baseline of trust, companies are willing to increase their volume of business with the 3PL. Clients expect customized products and services that make them more competitive. The 3PL is better equipped to develop solutions to reduce costs and identify opportunities for investments and improvements.

Companies that maintain some level of supply chain management in-house may maintain a tactical relationship for certain product categories or market channels. The 3PL may have specific capabilities that can’t be easily replicated.

Level 3: Strategic

Here, the 3PL isn’t just a service provider; it’s a strategic partner. This level fosters mutual understanding, innovation and risk-sharing. It’s about shared goals and growth.

A strategic 3PL undertakes a thorough analysis of a company’s needs and develops strategies for creating a competitive edge. The 3PL may provide services like optimized network design and order profile management, both of which flow from a company openly sharing information with the 3PL.

In dynamic industries, quick reactions are key. A highly responsive 3PL with intimate insights gives companies an extra edge with the ability to dynamically scale resources to address emerging trends.

Ultimately, trust is the linchpin. It defines the entire partnership, paving the way for shared success. Trust and collaboration allow clients to share critical information with the 3PL, invest in shared infrastructure and commit to the relationship.

A strategic, collaborative relationship helps the 3PL understand their customers’ expectations and demands. Both parties benefit from synergies through collaboration, innovation and sharing of critical information within the relationship. The 3PL has the knowledge and experience to consult on business processes and share risks.

As the collaborative relationship matures, so does customization and strategic alignment. Find a 3PL that can grow with you, adapting to your needs at every stage.