CURRENT GEOPOLITICAL volatility and trade instability present an enduring challenge to third-party logistics providers. Shifting trade flows and geopolitical conflict have meant that logistics providers are constantly redesigning sourcing, inventory and distribution networks. 

With more complex retail and fast-moving consumer goods (FMCG), 3PLs are facing pressure from all directions. Fostering strong collaboration with retailers and manufacturers will be integral to keeping service quality high and continuing to push innovation forward, as 3PLs are increasingly expected to participate as operational partners. 

This became transparent during consultancy firm SCALA’s 23^rd annual supply chain debate. In a snapshot of current industry thinking, 65% of the debate’s audience of senior supply chain and logistics professionals said that the primary role of a modern 3PL is to serve as an integrated extension of the business, and yet 27% highlighted a lack of trust as the biggest barrier to greater innovation between customers and 3PLs.

As the environment becomes increasingly complex, now is the time for 3PLs to step fully into the partnership space and target that trust gap.

Developing a fully realised and effective partnership between 3PLs and supply chains goes far beyond having good rapport. Rather, sustained partnerships require practical strategies and measures to be built into everyday operations.

The building blocks of shared goals

Communication

When it comes to building robust 3PL partnerships, basic-level communication between teams will only get you so far. Regular and structured dialogue needs to be integrated at all levels to ensure operational teams have the contact they need to solve problems, and senior leaders have the opportunity to remove blockers, approve potential investments, and align strategy. 

Failure to do so can stifle innovative thinking and the ability to adapt to events, leading to slower decision-making and costly delays. 

Key performance indicators

SCALA’s debate found that 82% of respondents said consistent, on-time and reliable service execution was the most critical factor when evaluating a 3PL partner. Clear, key performance indicators are therefore essential, but should always support the partnership rather than simply provide a mechanism for penalising the provider when targets are missed.

Effective KPIs reflect the retailer or manufacturer’s wider priorities, including service, cost, inventory accuracy, resilience and sustainability. They also distinguish between the aspects of performance a 3PL can control and the responsibilities of the customer. A provider’s ability to deliver on time, for example, may depend on accurate forecasts, reliable product data, realistic order cut-off times and sufficient notice of promotions or volume changes.

This shared accountability creates a more accurate picture of performance, encouraging both parties to address underlying causes of problems. It also helps build the trust needed for innovation. When a 3PL is assessed only on short-term cost or narrow service measures, it has little incentive or commercial scope to recommend changes that require investment. A balanced set of regularly reviewed KPIs can instead align both parties around improvements to the end-to-end operation.

Shared data

Data is also vital to 3PL partnerships. This is also a two-way street. While 3PLs should share operational and transport performance as well as capacity constraints, the client should be responsible for providing demand forecasts, promotional plans and early notice of expected changes in order volumes. When data between partners is visible to all parties, it allows room for the development and integration of new technologies and better productivity.

The clarity that comes with improved data sharing can also reveal logistics costs that would have been otherwise buried beneath other details. For example, one sales channel or region may be considerably more costly to serve than another, but it is often difficult to identify these discrepancies when data sharing is limited. 

Building for innovation

Within any business partnership, progress and innovation require direction. Taken together, shared goals, open communication, balanced KPIs and effective data sharing give both parties a clearer basis for decision-making. They help clients gain better visibility, service and resilience, while giving 3PLs the confidence and operational insight to recommend changes such as improved network designs, new technology or automation. This creates a partnership focused on long-term performance and continuous improvement, rather than one judged solely on short-term cost or narrow service measures.

With the increasing impact global events are having on supply chain and logistics, those with the strongest 3PL partnerships will be the best equipped to continue succeeding, driving innovation in the face of near-constant change.