How do you measure and improve the performance of your outsourcing partners?

I worked with management and site leadership to identify the goals and expectations needing to be met from our logistics service providers (LSP’s). With the current “in use” LSP’s, I drove the execution of our Quality Agreements, which defined the scope, terms, and all conditions of the relationship. I was responsible for procuring a new LSP, which I successfully onboarded, utilized and gave them a global contract for our counterparts. I maintained the data for all our logistics deliveries, expanding all key data points needed. From there, I created KPI’s that were tracked on a weekly basis and reported directly to management and the LSP for quality improvement.

In my experience, defining goals and expectations is the most key part to any RFP or vendor relationship. It level sets the relationship and both parties know what is important. What is they 'why' for having this LSP? Specifically, as specifically as you can get. For example, if I'm bringing in a TMS partner what benefits do I need most critically (versus the nice to have bonus' that get thrown into the mix during the RFP process). -Is it to save time on the dock when creating shipments? -Is it to save money by using the least cost carrier? -Is it to provide customers with fastest shipping time? -Is it to provide visibility to my sales team? Depending on the answer, your KPIs and preferred partner will be different than another.

Having managed petroleum logistics (vessel, pipeline, rail, trucking, terminal storage) for over 3 decades - it is striking how poorly many US companies oversee their logistics relating to supply & offtake. The "supply chain crisis" of recent years seems largely the result of lax contract terms with counter-parties and poor vetting of contractors. When this occurs - expect delays, losses, quality impairment, demurrage, angry customers

Having a logistic partner with a clear vision of what they want to achieve is expected and communicate how will they rate performance and how often. Having a formal contract or agreement let's the logistic partner know where they should stand in the gaps.

I agree. I feel it is also refreshing to offer incentives. Incentives can help to motivate outsourced partners to perform at their best. These could be financial incentives, such as bonuses or performance-based payments, or non-financial incentives, such as recognition or career advancement opportunities. Offering incentives can help to foster a sense of ownership and commitment to the work.

As a logistic service provider it is much appreciated when one monitors and evaluates my performance, this helps me keep in algin with their vision. Numbers don't lie, using date and metrics to track progress ensures gaps are being filled and issues are being solved. Feedback from customers can go a long way. Customer feedback is needed to know rather the service is aligned with the vision. Reviewing performance reports should be a necessity to communicate. This gives the outsourcing partner a chance to solve problems and continue to improve on current methods.

The most effective way to monitor and evaluate performance is to routinize it. When we set our KPI's, not only must they be pertinent to our business needs the LSP is solving, but they must also be easily measured with available data. The more difficult the KPI is to measure, the less consistently it will be reviewed. Regularly reviewing the selected KPIs with the LSP will ensure that they can correct minor errors before they become major issues. It will also prepare you to defend against anecdotal issues that may arise internally with the selected LSP. There is nothing worse than having to replace an LSP doing a good job, because of a high exposure event not reflective of the LSPs performance and contribution to your company.

Integrate enterprise CTRE software into company operations to provide scheduling of receipts, deliveries, inventories, working capital projections. Be familiar with Incoterms, be willing to by-pass arbitration of disputes and proceed with court action for remedy. Adopt industry GTC (general terms & conditions) to provide a template of commercial rules & expectations. Use hedging protocols to limit financial losses attributable to "acts of God" which can not be recovered from CP's or Contractors.

When running an RFP take the time to meet with providers if requested. When a new participant is added they need to know that you are seriously looking at them as a future option. The minute a meeting request is rejected you've indicated that their submission is simply for price-checking purposes and that you don't see them as a legitimate option. The salesperson will still do their best, but their bosses and operations departments may not offer the most competitive costs available. It's doesn't have to be a long meeting, and it doesn't have to be in person, but have the courtesy of acknowledging that their time is valuable, too.

In looking for an LSP look for a provider that has a demonstrated track record of continuous improvement. A strong culture of CI is critical to long term success, include questions about CI and Joint Process Improvement in your reference checks.

Remember that measuring and improving performance is an ongoing process. Regularly review and adjust your approach based on changing circumstances and feedback from both your internal team and the outsourcing partner. By nurturing a collaborative and results-oriented relationship, you can enhance the performance of your outsourcing partnerships and achieve better outcomes.

Utilize "loss control" experts, utilize inspection companies, utilize demurrage analysis, adopt contract terms which require written notifications of "anticipated loading windows" , "updated ETA to reach delivery/discharge", etc. In turn, your operations managers coordinate these updates with the 3P terminals/docks/warehouses involved in the logistics process.

Logistics providers give their best work when you share information with them. My favorite part of this job is not landing a new account, it's helping to create efficiencies and fixing problems. I WANT to know about your business, all the details big and small, so I can help you.

Recently my daughter had the opportunity to partner with other high school students in a Pre-Engineering program to collaborate on various real world logistics issues impacting Ford Motor Company. They were able to “think outside the box” and came up with many ways to cut cost and save time. This was all completed free of charge to Ford and offered the students an invaluable learning opportunity. I’d recommend collaborating with local colleges or high schools and seeking out new ideas and solutions to solve logistics issues. It never hurts to think outside the box.