Communication, Outsourcing, Relationship, Transport

Communication key to successful outsourcing relationship

21 Sep 2006 | (Thinking Point)

When is outsourcing your transport task a good idea? What factors contribute to a healthy ongoing relationship?

What can suppliers and customers of freight services do to get the greatest return when outsourcing a business task?

A good relationship is based on trust, open communication, a proactive approach to problem solving, and innovation. That's the consensus of the Logistics Managers Group, who met recently to debate the merits of outsourcing the transport task.

Users and providers of transport and warehousing services both agree: an outsourced task will only work if the two companies involved invest in open dialogue.

"I suppose it's fair to say we have two types of relationships with 3PL providers," says Coles Myer's Rob Spooner. "One is transactional — they're the kinds of contracts we don't have to spend a lot of time on. They are, in a lot of cases, cost based. They tick over day-by-day."

The other relationships are more strategic — areas the company is focussing on as it rolls out its supply chain upgrades.

"From a strategic relationship, we're looking for a value add. We want to engage with companies that have the same type of core behaviours and values that we manage to."

The difference between operational efficiency and strategic gain, it would seem, is communication.

Technology and value-adds

Ideally, a 3PL service provider will offer expertise, in-built compliance to OH&S standards and efficient work practices at a cost competitive price, allowing customers to concentrate on what they do best; their core competencies.

"We [in2store] have won work … because we were able to show we've got all the necessary audit trails, we're now self-insured in both Victoria and New South Wales to comply with OH&S regulations, and we're providing the yearly training, induction, to make sure there are no incidents," says in2store's Kitty Lu.

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"In the past two years, Toll has implemented its risk management system — it allows greater company-wide visibility of incidents which occur. We've been able to identify root causes and collate that information."

One of Kagan's core strengths is its IT capabilities. Kagan offer a scalable paperless warehousing system, offering visibility from the sales officer through to the warehouse manager.

"We've got the ability to be flexible," says Kagan's Rob McKelvie. "If someone doesn't want to pay what it costs to do those sorts of things, then we can provide a service supported by our WMS ... minus the bells and whistles."

A 'peeve point' for many customers of freight providers is company specific IT loops. As one manufacturer put it, almost every transport company has its own 'you-beaut' information system.

"Everyone has a different you-beaut system, because that's what they see as giving them a competitive advantage," he says. "But in order to use that technology, as a customer, I have to log into multiple websites and multiple computer systems over the course of the day to try and get my freight out — if you use different carriers in different state or sectors around Australia.

"I think there's a huge opportunity for the transport industry to develop ... a more user friendly [overall] system, in terms of accepting my one system into whatever the customer's system, maybe through a middleware program."

The carriers agree: there is a long way to go before transport companies will happily share information on their customer base.

"Sharing consignment data … it's not a done thing in the transport industry," says Lu, saying a middleware system might be useful in future as a point from which to share information.

This is an excerpt from a report in the September issue of SupplyChain Review.

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