BY CLIFFORD F. LYNCH
fastlane
an LSP’s bill of rights (and obligations)
GIVEN THE HIGH-STAKES NATURE OF LOGIStics outsourcing arrangements, it’s no surprise that
so much has been written on the “rules of outsourcing.” I’ve done it myself, as have scores of others.
Most have approached the topic from the client’s
perspective, offering advice on how to work successfully with a logistics service provider (LSP). But
providers have rights and obligations as well, and it’s
high time we concentrate on these. What follows is
my attempt to do so by offering 10 basic rules for
service providers:
1. Encourage strategic thinking and planning. In
their haste to hand off responsibilities, clients oftentimes fail to think through their outsourcing decisions. That haste has a price. When a client rushes
through the process, the result can be a badly flawed
request for proposal (RFP)—one that overlooks the
most cost-effective and/or efficient procedures (or
any unique services you may offer). To prevent this
from happening, try to become part of the process
from the beginning.
2. Know how you stack up in the marketplace. The
sophisticated client will conduct due diligence on all
prospective partners, running background checks,
talking to existing customers, and assessing financial
stability. As a provider, you should be prepared to
demonstrate not just your financial health but also
how you stack up against the competition with
regard to management depth, strategic direction, IT
capabilities, and labor relations.
3. Set realistic expectations. We’ve all heard stories
about outsourcing relationships that were derailed
by unrealistic expectations. Sometimes, the failure
stems from the client’s inability to provide accurate
(or adequate) information on, say, the volume, size,
and frequency of its shipments. Other times, the fault
lies with the provider—LSPs frequently underestimate the cost of providing the service, especially in
the IT area. Either way, the result is the same: The
provider ends up developing costing for—and committing to—arrangements that don’t reflect reality.
It’s worth spending the time up front to avert these
kinds of disasters.
4. Develop an airtight contract. Be sure that all obli-
gations, expectations, and remedies are clearly
spelled out. Include incentives for improvements in
operations and productivity, with both parties shar-
ing the benefits.
Clifford F. Lynch is principal of C.F. Lynch & Associates, a provider of logistics management advisory services, and author of Logistics Outsourcing – A Management Guide and co-author of The
Role of Transportation in the Supply Chain. He can be reached at cliff@cflynch.com.
