In today’s economic climate, third-party logistics (3PL) organizations are faced daily with obstacles and uncertainty. At times, 3PL business owners feel isolated trying to find solutions to challenges that are affecting their organization’s growth, such as:
- Limited cash flow for infrastructure upgrades
- Rising costs and economic uncertainty
- Warehouse space and capacity issues
- Labor shortages
- Supply chain disruptions, like port delays or driver shortages
- Warehouse technology and integration of systems
To overcome these issues, to better manage the supply chain, and diversify risk, successful 3PLs are developing their own 4PL networks. Developing a 4PL network starts with building a strategic business partnership with like-minded business owners. With greater connectivity than ever before, there is no reason for business owners to work in isolation to achieve their business goals. There is strength in numbers.
In this blog post, we will discuss how to develop strategic alliances with other 3PLs and leverage the relationship to grow together.
What is a Strategic Alliance?
A strategic alliance or partnership is when two or more companies or individuals agree to collaborate professionally without changing their independent status. The companies keep their individual identities, but they can work together to achieve a common goal. Forming a strategic alliance usually involves creating and signing a partnership agreement with terms that outline shared goals, associated financial commitments, and contribution of resources. The benefits of entering into this type of agreement are that companies can take advantage of the other’s resources without having to make a significant investment of their own. Valuable resources might include distribution channels, knowledge, experience, or other tangible or intangible resources.
There are two types of alliances: horizontal and vertical.
A horizontal alliance is when two companies of the same status in the same industry create an alliance to together improve their individual positions in the market. They can accomplish this by:
- Cooperating on development and research.
- Pursuing economies of scale.
- Collaborating to sell additional products or services to new markets.
A vertical alliance is when two companies using the same supply chain create an alliance to reduce costs or risk. They can accomplish this through:
- Making long-term commitments.
- Building their working relationship.
- Encouraging collaboration on distribution and design.
6 Steps in Developing a Strategic Alliance
Step 1: Start with the End in Mind
Successful partnerships are a team effort. You will want to ensure everyone is on the same page—from executives to leaders in sales, marketing, logistics, warehousing, and product. Make sure you start the process by answering “why enter this partnership?” Do you want to:
- Generate leads
- Acquire new customers
- Retain and provide value to existing customers
- Fill gaps in your service portfolio
- Cut costs with more efficient fulfillment
- Offer complementary services to your customers
- Create a bi-coastal distributed inventory strategy
- Speed product to market while reducing freight costs
It is important to understand the business outcome(s) you are trying to achieve so you can build a program that supports these goals.
Step 2: Find the Right Partners
Now that you know what you want to accomplish, the next step is to identify partners who will help you get there. Finding the right partners can be both an art and a science. While a potential partner may meet all your questions on paper, it is equally important to find partners who are engaged, collaborative, and as committed as you are to your customers’ success. Extensiv is here to help provide recommendations for partner placement from our user base, listed in Fulfillment Marketplace.
Here are some of the criteria to consider when evaluating potential complementary partners:
- What client problems do they solve?
- Do they provide additional warehouse capacity?
- Are they in a desirable geography?
- Do they provide service capabilities that you cannot manage on your own today?
- What is their market position, and how do they stack up against the competition?
- How big are they today, and what is their growth trajectory?
- Does their ideal customer profile overlap with ours?
- Do we share any mutual customers?
- Do their customers and prospects need our services?
- Do they have partnership experience?
- How engaged and excited is their team?
- What are their go-to-market capabilities (sales, marketing, customer success)?
- Do their core values align with ours?
- Do our pricing and Service Level Agreements (SLAs) align?
By answering these questions up front, you will uncover the partners who are best aligned with your organization and best positioned to help you reach your business goals.
Step 3: Commit to Driving Mutual Value
If you are not crafting a partnership that is mutually beneficial from the start, you are missing the point. Successful alliances focus on driving value for both parties, but far too many people come to the table with their own list of requests and no insight into what they can do to help their partner.
Quantify your business strengths. Calculate your efficiencies in high volume order processing, receiving, inventory management, integration capabilities, after-hours support, and experience, to name a few.
This sets the stage for an equitable and healthy long-term relationship where both partners (and, most importantly, your customers) win.
Step 4: Empower the Right People
Build a cross-functional team of specialists responsible for managing and fostering relationships. Specialists in warehouse management system (WMS) administration, integrations, order management, customer service, warehouse operations, billing, and any others who may be relevant. This team should be focused on building bridges, identifying challenges, and aligning the mechanisms that impact trust and productivity in this relationship. All actions should be “customer” focused.
Step 5: Maintain Open Lines of Communication
This is a no brainer, but with any partner relationship, misunderstandings over requirements are the biggest cause of angst. Commit to a regular communication cadence. Start with meeting daily, weekly, then monthly. Record minutes of meetings for actionable follow-ups.
Step 6: Share Dedicated Infrastructure
One of the best ways to create transparency and visibility that help partnerships thrive is to adopt some sort of shared technology. Utilizing the Extensiv Network Management application provides the connectivity of data in one application for the end customer and all partners within the Network to share collectively. This application provides visibility–of outbound/inbound order data, perpetual inventory records down to the batch, lot number, expiration date and serial number level tracking, adjustments, and workorders. Having both partners on the same WMS platform creates the ability for best practices in workflows and processes to be coordinated. Both will be singing from the same book, if you will, so there will be a better understanding of system capabilities.
Benefits of Using the Extensiv Platform in Building Your 4PL Network
- A shared WMS infrastructure to connect to existing Extensiv customers, like-minded 3PLs
- Updated and shared online user documentation and best in practice workflows
- A Consulting and Professional Services offering to provide supply chain optimization, warehouse layouts, business analytics, transport service improvements and cost savings. ROI (Return on Investment) calculations for in-house vs outsourced business models for new facility startups
- A user community portal to communicate directly with other Extensiv customers
- Fulfillment Technical Program Managers to aid in 3PL Partner recommendations
- Fulfillment Marketplace to highlight and market our 3PLs to produce referral business
- Dedicated Customer Success resources to manage your subscriptions and service escalations
- Dedicated technical support infrastructure
- Annual user group forum to build end user relationships, provide education on new warehouse best in practice workflows, release new product roadmaps, and share new techniques to optimize your warehouse
The Extensiv Network Manager and Fulfillment Marketplace programs are built to address the needs of our 3PL WMS business owners to maximize their investment, so they can share the collective Power of the Group to be competitive in this new supply chain world.
No 3PL business owner should ever be in isolation to achieve their business goals. Contact us today for a free demo!