I RECENTLY HEARD OF NOT ONE, BUT TWO, OUTSOURCing relationships that had gone bad. This is always unfortunate
for both parties in the relationship, but it can be particularly
tricky for the client company. In fact, I think terminating a logistics service provider (LSP) for a breakdown in service is one of
the most difficult tasks in logistics management.
There are a couple reasons for that. It’s partly because no one
wants to be the bearer of that kind of bad news (although ideally,
In my March 2011 column, I offered some
recommendations for ways to minimize the
disruption resulting from an early contract
cancellation. In light of recent marketplace
developments, I think they’re worth revisiting.
What follows is a slightly updated version of
those guidelines:
1. First and foremost, avoid acting impulsively. No matter how often you’ve been told to
act swiftly and decisively, that advice doesn’t
hold here. Before rendering the first notice of
unsatisfactory performance, you should have
already developed a contingency plan and shared it with appropriate managers within your company. Don’t allow yourself to
become so frustrated that you terminate an arrangement with an
LSP before its replacement is ready.
2. Include the new provider in the planning process. If the operations are being transferred to another LSP, it is important to
involve the new provider in the transition planning early on.
Ideally, the outgoing LSP will make every effort to ensure a seamless transition, working with its successor to bring it up to speed
on critical activities like order processing. But you can’t assume
things will work out that way. To head off trouble, sit down with
your new provider and develop two separate timelines for the
transfer of responsibilities—a plan for an orderly transition and
a contingency plan for making the switch on short notice.
3. Identify alternative distribution points. If DCs are involved,
you don’t want to be caught short if a total breakdown occurs
BY CLIFFORD F. LYNCH fastlane
Breaking up is (still) hard to do
before the new provider is ready to take
over. As part of your contingency planning,
identify other DCs that could be used in a
pinch and make the necessary arrangements.
That includes ensuring that adequate labor,
equipment, and inventories are available at
the alternate sites.
4. Maintain good internal communications.
No one likes to admit that a relationship
has failed, but it’s important to keep your
colleagues in the loop. Let managers from
marketing, sales, and other areas know that
the relationship has gone bad and outline the
corrective measures you’re taking. Keeping
them informed will make
it easier for them to anticipate and head off potential
customer and other issues.
5. Keep emotion out of
it. Once you’ve delivered
the bad news, frustration
levels will likely run high,
tempers will fray, and the
atmosphere may become
downright chilly. Try to
maintain as much equilibrium in the relationship
as possible and handle the
myriad details in a professional manner.
More often than not, the provider will take
its cues from your behavior.
6. Make a clean break. When it’s over, it’s
over. Don’t spend an inordinate amount of
time dwelling on the past. There’s nothing
to be gained from recriminations and second-guessing. Learn from the mistakes that
were made. Then leverage those lessons to
make the new relationship a successful one.
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.
