Relationships are complicated – especially in logistics. There are many different types and each one requires you to act differently than the others. Vertical relationships, like those between different supply chain tiers (retailers, distributors, manufacturers, and parts or materials suppliers), are approached differently than horizontal relationships (those companies that operate parallel to you in the logistics process – e.g. competition, carriers, 3PLs, etc.). Other relationships like internal stakeholders or the government are often overlooked entirely in company supply chains. Each one is necessary to create a product and move it to market, but often companies miss out on opportunities because of the way they approach their relationships.
During much of the 20th century and before, companies held the majority of their relationships at arm’s length and treated their relations as transactional or strategic. Newer thought states that companies should, instead, approach their supply chain relationships as collaborations. This means they cooperate with one another and help each other achieve long-term goals and objectives. Collaborations can be immensely effective for most supply chain relationships (the exception being the government relationships as they are regulatory and transactional by nature). To help pursue collaborative relationships, companies should keep these six ideas in mind.
Collaborative Relationships Should Benefit Both Members
Collaborations are voluntary partnerships, and these partnerships need to be beneficial to all members in order to continue. Companies cannot participate in deals that they lose on constantly. There must be give and take, and the partnership must benefit both groups. This means building a partnership on each other’s complementary strengths.
Successful companies do not need to outsource for their core competencies – they outsource where they need help. For instance, a manufacturer may find it cost efficient to hire a carrier or 3PL to move their freight rather than purchase trucks and build a supply chain management infrastructure. The manufacturer benefits from cost savings and can focus on their core business of building products. Simultaneously, the 3PL or carrier may benefit from guaranteed business. Having a reliable customer can save time and money over constantly developing new customers.
Both parties in the example benefit from the relationship. Both parties can develop trust in the relationship and use the relationship to plan for the future.
Having either one-sided or transactional relationships turns one party’s focus to themselves. This behavior manifests in win-lose relationships and limit who will work with you. It might be retailers turning away customers for poor service or carriers refusing to deliver to certain facilities, but as long as companies operate with this perspective, they lose opportunities.
Collaborative relationships work the opposite. They work as win-win relations, so everyone is satisfied with their result and are happy and willing to return. They seize opportunities to grow stronger by synergizing with their partners.
When we create benefits and savings for our clients, we all succeed: LET’S TALK ABOUT YOUR LOGISTICS NEEDS
Both Members Must Understand and Agree to the Terms of a Collaboration
One way to help facilitate a collaborative relationship is to make sure both parties understand and agree to the terms of the relationship. Both parties should be aware of the other’s goals, priorities, and strategies to ensure that they can:
• Understand each other’s capacity
• Deliver the desired outcomes
• Communicate any disruptions to the desired outcomes
If collaborative partners do not know their partners’ objectives or what is expected of them, they will not meet the goals of the relationship. Then the relationship will fail.
So, before beginning a collaboration, each group must understand the desired outcomes, be honest about whether or not they can achieve the desired outcome, and provide the means for thorough communication and visibility to ensure the desired outcomes are met.
Both Members Should Measure the Relationship’s Performance
Nearly every business operation should measure its performance as a benchmark for future outcomes, and a company’s relationships are no exception. This is not a gauge of how much one company likes the other on a personal level. But, it is important to measure service levels in order to determine value.
Each supply chain operation will have its individual KPIs to determine success or failure. Companies need to measure if their partners are meeting the KPIs or not. If they are, then the partnership remains beneficial. If they are not, the relationship is not beneficial and needs to be addressed.
Addressing a relationship does not necessarily mean dissolving the partnership, but companies should consider:
• Confronting their partner – discovering the reasons for failure and determine how it will be corrected going forward.
• Disciplinary action – can be part of the initial action. These could be financial penalties or damages for lost productivity or other actions.
• Terminating the relationship – this is a last resort depending on the level of failure. This type of action should be discussed before beginning a partnership so that this can be avoided if possible.
Measurement is necessary from each supply chain member in order to gauge the relationship’s effectiveness. Often it is easy for companies like shippers or 3PLs to monitor a carrier or other supplier’s actions; however, they sometimes forget that they are responsible for meeting their vendor’s requirements as well. Vendors may require a certain purchase quantity or price, may require a specific pay schedule, or may require assessorial charges for failures from the shipper. The relationship is not a one-way street, and both parties should be monitored and held accountable to meet their agreement.
This is also essential to help determine growth and improvement, but more on that later.
ProTrans has created some advanced reporting metrics delivered to you in the most clear and concise manner: LEARN MORE
Communication and Visibility is Critical
Every relationship requires communication to be successful. For logistics, communication is critical in all directions. Every channel needs visibility and communication to help:
• Plan Ahead
• Manage Risks
• Understand Current Tasks and Situations
• Improve Quality
• Create Flexibility While Maintaining Resilience
Stifling communication upsets the balance of the relationship and does not make collaboration practical. Both parties need to be aware of situations like schedules, statuses, upcoming events, changes in strategies, or new products or customers. Otherwise, relationship members will work in opposition to one another, intentionally or not, because they thought they were doing what was right.
Some ways to improve communication and visibility are by investing in the right tools. There are many different types of devices and programs to help record, store, and transmit data in a functional way. We often recommend using transportation management systems (TMSs) because they are a central hub for most supply chain partners to meet and exchange information. These can be standalone packages or parts of broader ERP specific to your industry. Other useful tools like IoT devices, digital scanners, and tracking devices help provide visibility and can ease supply chain communication.
There are countless methods to improve communication; the important thing is to do it.
Have Flexibility and Security within the Relationship
Flexibility goes hand in hand with communication. If a customer is aware of an issue or delay, they can often be flexible and look for alternatives to meet their current needs. If they are kept in the dark, they have no opportunity to be flexible and must accept the situation as it happens. This type of behavior destroys collaboration and hinders the relationship.
So, it is important for both partners in a collaborative relationship to be flexible to give each other options for solutions and to offer grace for mistakes or unforeseeable issues.
This is not to say that companies should be so flexible with one another that they become doormats and are walked over. There should be limits, but it is helpful for partners to be understanding and have options when possible.
Speaking of limits; one area that should be rigid is security. Partnerships thrive on trust, and relaxing security diminishes trust. Partners need to know that their people, products/IP, and data are safe. So, it is essential for collaborators to have the right security. This could be anything from product safety standards, shipping safety certifications, or cyber security measures to protect data. Each aspect is important and failing to maintain that security corrupts trust.
So, to keep harmony in a relationship, have flexibility where you can, but guard against true threats and protect what is important.
ProTrans is a versatile 3PL management provider that changes to fit YOUR needs: LEARN MORE ABOUT HOW WE CAN CHANGE FOR YOU
Look for Opportunities for Growth in the Relationship
Collaborative logistics relationships, just like interpersonal ones, cannot remain stagnate or they will inevitably fail. It is important to help continually grow and/or improve relationships if companies want to continue them.
Stifling communication upsets the balance of the relationship and does not make collaboration practical. Both parties need to be aware of situations like schedules, statuses, upcoming events, changes in strategies, or new products or customers. Otherwise, relationship members will work in opposition to one another, intentionally or not, because they thought they were doing what was right.
Growth could come from learning more about your partner – taking time to analyze their business and come up with ways to be more effective and useful. It might be from purchasing more products or services from your partners and expanding business ties. For logistics in particular, taking on more responsibility and meeting more needs is a strong way to grow a relationship.
One effective way to improve a relationship is to analyze its performance and develop ways to make it better. This relates back to the relationship measuring. Companies can improve their relationships with their partners by improving themselves. QA processes like 5-Why’s or process gridwalks are internal monitors that help companies evaluate their own services. Once they can identify where they are weak, they can strengthen that operation. In turn, they can provide better customer service to their partner and help improve the relationship.
Growth and improvement are not finite processes. Each one is a continual step companies must take to be relevant and beneficial to their partners. As these improve, the relationship, and the business, improves.
Relationships can often be difficult – especially in logistics. It is important to remember that for a relationship to be successful, both parties should benefit. By collaborating with other companies, rather than keeping them at arm’s length, companies are able to synergize their efforts and exceed their own capabilities. That is what makes relationships successful.
A strong 3PL relationship can bring you logistics spend savings and efficiency: LEARN MORE
