Earlier this year at the JDA FOCUS 2015 conference, I led a panel discussion on the third-party logistics (3PL) industry that featured Rick Jordon, SVP Regional Head of Logistics – Americas at Panalpina, and other 3PL executives. I caught up with Rick again on a recent episode of Talking Logistics, where we discussed a variety of topics related to the 3PL industry.
I kicked off the conversation by asking Rick to share his perspective on how the 3PL industry has changed over the years. Here are some excerpts of what he said:
It’s certainly an evolving industry and it’s amazing to see how things have changed in the 20 years that I’ve been involved.
If I explained what I did 10 years ago, it was very transactional-based, for the most part…Now, we’re evolving beyond the traditional logistics space, into manufacturing, for example…If you look at who is or is not a 3PL, it could be a very long and detailed discussion. Everyone from freight payment companies to consultants to software vendors to transactional transportation providers consider themselves in the 3PL space.
Today, scale is becoming a much more important part of the value offering. I either need to be in every major market or offer the breadth of services that my key competitors are or I just won’t be considered any longer in the target markets I am trying to deliver to.
In light of these changes, what factors should customers take into consideration when evaluating 3PL partners (beyond providing operational excellence, which is the “ticket to the dance” and expected these days)? Rick focused on two factors: vertical industry experience and expertise and talent development and retention:
I agree with you 100 percent that operational excellence is the “ticket to the dance” — if you don’t perform at a level required by the customer, you won’t be performing for them very long.
Also, as scale becomes more important, there’s also a danger in it. You can’t be everything to everybody. Trying to offer every service to every market to every customer in every industry just doesn’t work, [so 3PLs have to define and enable scale appropriately].
Two things customers should look for when evaluating 3PLs. First, are they proven in your industry? For example, if you’re a consumer goods manufacturer, does the 3PL have a presence in the CPG industry? That’s key because at the end of the day success breeds success, and if a 3PL already has [a proven track record] in your industry, the likelihood for success is greater.
Second is talent development and retention, which is something we’re spending a lot of time on and it’s something that is coming up more frequently in customer meetings and request for proposals (RFPs). Is the 3PL retaining its talent? What actions is the service provider taking to retain its talent and keep them fresh? This isn’t a transactional business anymore and if 3PLs just focus on moving product in and out, they’re not going to develop the talent they need to get to the next level [of value delivery], which customers really expect, not only today but tomorrow and beyond too.
Rick’s comments echoed what I wrote more than two years ago in 4 Important Factors to Consider When Evaluating 3PL Partners:
There is a shortage of supply chain and logistics talent in the industry, and it’s arguably the biggest issue facing both 3PLs and their customers. At the end of the day, it’s people that make or break any relationship, including a business one….How deep is the 3PL’s talent pool?…Ideally, the 3PL will have people across all levels of the organization that are knowledgeable about your vertical industry, and even better, have worked in it. Also, take a close look at the training and development programs the 3PL invests in, and the content of those programs. This will shed some light on what skills and knowledge the 3PL deems important, and if they align with your expectations.
Rick also highlighted another important aspect of leadership development: empowering employees to make timely decisions, especially under pressure:
Not having to escalate every decision to a senior person at the company is a very valuable aspect of talent development. Employees have to be able to make decisions as things happen — they can’t wait to track me down if I’m on a 7-hour flight somewhere, they can’t wait to track down their manager in some cases — so empowering them to make decisions is important, but also having the confidence that they’re going to make a decision under pressure and do the right thing.
Shifting gears a bit, I asked Rick what attributes he looks for in customers and prospects that often lead to successful, long-term relationships? Watch the short clip below for what he considers is the top predictor for success.
I encourage you to watch the rest of my conversation with Rick for additional insights on what’s happening in the 3PL industry, including the clips below where he discusses the role of IT in the industry and how Panalpina is working with JDA Software (a Talking Logistics sponsor). Then post a question or comment and keep the conversation going!
How are the IT expectations of your customers different today than in the past and how are you responding?
What JDA solutions are you using and what factors led you to select them as a partner?