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What are the most effective ways to use performance metrics to negotiate contracts with 3PL providers?

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If you work in logistics management, you know how important it is to find and partner with reliable third-party logistics (3PL) providers. But how do you ensure that your 3PL providers deliver the quality, efficiency, and cost-effectiveness that you expect from them? One way is to use performance metrics to negotiate contracts with them. Performance metrics are measurable indicators of how well a 3PL provider performs in various aspects of logistics, such as delivery time, accuracy, customer satisfaction, and sustainability. In this article, you will learn what are the most effective ways to use performance metrics to negotiate contracts with 3PL providers.

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Thiago Lima

Director | Doctor in Business Administration | Professor in Executive Programs l Lean Six Sigma Black Belt | Certified…
Wilson Cruz 威尔逊

Logística | Transporte | Armazenagem | E-commerce | Distribui??o | Supply Chain | Delivery | First Mille | Middle Mile…

1 Define your goals

The first step to using performance metrics effectively is to define your goals and expectations for your 3PL providers. What are the key outcomes that you want to achieve with your logistics operations? How do you measure success and value? What are the minimum standards and the desired targets that you want your 3PL providers to meet or exceed? By defining your goals clearly, you can communicate them to your 3PL providers and align them with their capabilities and incentives.

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Wilson Cruz 威尔逊

Logística | Transporte | Armazenagem | E-commerce | Distribui??o | Supply Chain | Delivery | First Mille | Middle Mile | Last Mile | Carga Fracionada | Carga Lota??o | FTL | LTL I PTL
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3PLs criam valor através da compreens?o dos padr?es da indústria, o que exige ajudar os clientes a desfrutar de melhores servi?os a custos mais baixos através de melhorias táticas e tecnológicas, aumentando o desempenho geral da cadeia de suprimentos com melhorias nos processos. Espera-se que comuniquem os objetivos claramente e continuem a destacar os principais indicadores de desempenho (KPIs) que s?o mais importantes para o cliente. Uma verdadeira parceria requer uma compreens?o mútua de metas, objetivos e principalmente confian?a. Quando ambas as partes chegarem a esse ponto, informa??es e ideias podem fluir para frente e para trás, permitindo que ambos os lados se adaptem rapidamente quando necessário e promovam o servi?o geral.

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Juan Carlos Zapata Matienzo

Dirección de Operaciones/ Seguridad Patrimonial / Senior Lead Risk Manager / Logística
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Lo primero que debemos evaluar es el tipo de empresa 3PL con la que deseamos trabajar, debemos evaluar si dicha empresa cuenta con las necesidades especificas de nuestro negocio, la idea es que tenga experiencia en el giro que nos movemos, verificar su historial, buena reputación y si cuenta con la adecuada tecnología.

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Dafit Herikson Marbun

AK3-PAPA, AK3-U, Pengawas K3 Migas BNSP, TOT level-6 BNSP (Master Trainer), Inspektur Pesawat Angkat BNSP, K3 Teknisi
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absolutely... You have to really determine your goals. Create a map or route to get to the goal you have created and determine the criteria for achieving it step by step to find out whether you are still on that route and in accordance with the expected progress based on the achievement timeline.

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Dante B. Avenda?o Marroquín
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Tenemos que evaluar si la empresa 3PL cumple con todos los requerimientos que necesitamos para poder dar la respuesta que necesitamos a nuestro consumidor, el nivel de exigencia de servicio al cliente, tener una estrategia conjunta diferenciada con los competidores, buscar aumentar el potencial de productividad en las diferentes operaciones entre otras.

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Thiago Lima

Director | Doctor in Business Administration | Professor in Executive Programs l Lean Six Sigma Black Belt | Certified International Advanced Procurement Professional
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Definir metas para provedores de logística (3PL) é crucial para alinhar objetivos operacionais com estratégicos, essencial para o sincronismo organizacional. Metas claras garantem que os 3PLs compreendam as expectativas. Ao definir metas é essencial usar o método SMART (Específicas, Mensuráveis, Atingíveis, Relevantes, Temporais) para alinhamento estratégico e operacional. Na minha experiência prática, Metas SMART garantem clareza e eficácia, permitindo que os 3PLs compreendam e atendam às expectativas. Estabelecendo padr?es mínimos e alvos desejados de forma SMART, a empresa assegura um desempenho mensurável e alinhado com seus objetivos estratégicos, promovendo sincronismo organizacional e maximizando o valor das opera??es logísticas.

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2 Choose relevant metrics

The next step is to choose the relevant metrics that will help you monitor and evaluate your 3PL providers' performance. There are many types of metrics that you can use, depending on your industry, product, market, and customer needs. Some common metrics include on-time delivery, order fill rate, inventory accuracy, damage rate, return rate, and carbon footprint. You should choose the metrics that are most relevant to your goals, and that are easy to track and verify. You should also avoid using too many metrics that may create confusion or conflict.

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Dafit Herikson Marbun

AK3-PAPA, AK3-U, Pengawas K3 Migas BNSP, TOT level-6 BNSP (Master Trainer), Inspektur Pesawat Angkat BNSP, K3 Teknisi
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Use the SMART method (Specific, Measurable, Achievable, Relevant, and Time Bound) in creating a metric for your goals. Carry out 5 stages of analysis using the SWOT method (strengths, weaknesses, opportunities, and threats)

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3 Establish baselines and benchmarks

Once you have chosen the relevant metrics, you need to establish the baselines and benchmarks that will serve as the reference points for your contract negotiations. Baselines are the current or historical performance levels of your 3PL providers, while benchmarks are the industry or best practice standards that you want your 3PL providers to match or surpass. By establishing baselines and benchmarks, you can identify the gaps and opportunities for improvement, and set realistic and achievable goals for your 3PL providers.

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Dante B. Avenda?o Marroquín
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Para poder establecer buenos puntos de referencia es indispensable contar con sistemas de gestión de almacenes, transporte, datos y entrega.

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4 Negotiate incentives and penalties

The next step is to negotiate the incentives and penalties that will motivate your 3PL providers to perform according to the metrics that you have agreed upon. Incentives are the rewards or benefits that you offer to your 3PL providers for meeting or exceeding the targets, while penalties are the costs or consequences that you impose on them for failing or falling short of the targets. Incentives and penalties can be financial or non-financial, such as bonuses, discounts, referrals, recognition, or termination. You should negotiate incentives and penalties that are fair, transparent, and proportional to the performance levels.

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Thiago Lima

Director | Doctor in Business Administration | Professor in Executive Programs l Lean Six Sigma Black Belt | Certified International Advanced Procurement Professional
(已编辑)
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Ao negociar incentivos e penalidades, sugiro o uso de um Scorecard O Scorecard é fundamental para gerenciar a performance de provedores logísticos (3PL). O scorecard deve incluir indicadores chave de desempenho (KPIs) alinhados aos objetivos estratégicos da empresa. Ao estabelecer incentivos, promove-se a excelência, recompensando os 3PLs que excedem as expectativas. Simultaneamente, penalidades para o n?o cumprimento de metas asseguram comprometimento com os padr?es definidos. Essa abordagem equilibrada incentiva a melhoria contínua e a responsabilidade, enquanto mantém um relacionamento construtivo com os provedores. é uma estratégia eficaz para otimizar a cadeia de suprimentos e alcan?ar resultados desejados.

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5 Monitor and review performance

The final step is to monitor and review the performance of your 3PL providers regularly and systematically. You should collect and analyze the data from the metrics that you have chosen, and compare them with the baselines and benchmarks that you have established. You should also solicit and provide feedback to your 3PL providers, and discuss any issues or challenges that may arise. You should use the performance data and feedback to evaluate the effectiveness of your contract, and to adjust or renegotiate the terms if necessary.

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6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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Dante B. Avenda?o Marroquín
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Que el 3PL tenga un ecosistema logístico con capacidad de integración con clientes y proveedores podrá aportarnos la visibilidad que hoy día es imprescindible para una cadena de suministro capaz de ofertar un servicio de alto nivel al cliente final. La colaboración entre partes es una fuente de valor de la cadena logística que brinde una experiencia de servicio.

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What are the most effective ways to use performance metrics to negotiate contracts with 3PL providers?

1

2

3

4

5

6

1 Define your goals

2 Choose relevant metrics

3 Establish baselines and benchmarks

4 Negotiate incentives and penalties

5 Monitor and review performance

6 Here’s what else to consider

Logistics Management

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What are the most effective ways to use performance metrics to negotiate contracts with 3PL providers?

1

2

3

4

5

6

1 Define your goals

2 Choose relevant metrics

3 Establish baselines and benchmarks

4 Negotiate incentives and penalties

5 Monitor and review performance

6 Here’s what else to consider

Logistics Management

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