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Choosing a Third-Party Logistics (3PL) Partner – A Critical First Step

Date Posted: 09.14.2021
Author
Blue Fin Group ,

Situation

A new and emerging pharmaceutical manufacturer was launching their first branded self-administered cold-chain speciality product and building a new company at the same time. The client team recognized the importance of ensuring a steady and predictable product supply to their end customers as well as the need for a reliable order to cash management system to support the growth of their business. The third party logistics (3PL) provider function has been identified as a critical component to commercializing the new product as well as recognizing revenue.  The clients leadership team wants to ensure they utilize a requirements-driven capabilities assessment process methodology to select the optimal 3PL partner for their first commercial product launch and beyond.

Problem

Perusing websites and listening to the vendor presentations did not help the client team truly understand the critical differences between their potential 3PL partners. The 3PLs appeared to have similar capabilities and services, with the exception of different footprints and marketing jargon, they all seemed capable of getting the job done which added to the selection difficulty.

The client team needed to understand internal requirements in order to better understand what to look for in a 3PL partner at a much deeper and detailed level. Such as: What’s their history and vision? What’s the disconnect between what they say they can deliver and what they’ve actually implemented in the market?  How do they differentiate on service levels? How well does the call center fit into the image the brand wants to present to the market? What are their order to cash capabilities and performance across industry benchmarks? Can the 3PL truly act as an extension of the company and be the partner they needed?

Approach

The 3PL project began with a detailed emphasis on alignment to the client’s key 3PL requirements. The internal cross-functional alignment was facilitated to understand and share the client’s vision, capabilities, constraints, opportunities and gaps across commercial teams. Then it was important for the client team to engage in milestone meetings to thoroughly review the current 3PL landscape, key players, product attributes and building bottom up requirements that met the critical needs across supply chain, finance, accounting, tech/ops, accounting and contract management, QA and others. Once the team was aligned and determined the requirements and product priorities, Blue Fin Group facilitated the request for proposal (RFP) process.  This included capabilities response analysis, financial modeling and aggregation of RFP summaries facilitated for the client team. The requirements-driven selection process combined with the 3PL commercialization objectives led the client through a process for the client to choose the optimal 3PL partner for their commercial design. Additionally, the 3PL selection decision and supporting rationale could be communicated to leadership and secondary stakeholders in such a way that the broader organization was fully capable of supporting.

Benefit to Client

3PL selection can be an overlooked component of a commercial launch because it lacks commercial excitement and is not well understood by the manufacturer organization. However, missing on this critical selection decision, can and often will cause years of potential challenge and rework. Blue Fin Group’s approach ensured that the team had a keen understanding of the market (players, history, key trends), cross-functional buy-in to validated requirements, alignment of the selected 3PL for commercial launch, reliable cold-chain logistical needs and an accurate cost-benefit analysis. The manufacturer client leveraged this approach to define the optimal 3PL partner for them at product launch and the long-term. At launch, the selected partner was able to meet critical expectations for call center services, order to cash management, data reporting, plus the many other critical functions a 3PL executes. This helped to ensure the product was available for sale through licensing in all 50 states at launch and allowed the team to start with the title-model that worked best for them.  Subsequently, the client transitioned to a non-title model as commercial benchmarks were met. For the commercial brand teams, appropriate support for customers and internal functions were in place from day 1 in a way that aligned their commercial priorities with key end customer service priorities.

Selecting a 3PL partner is a critical first step in implementing a product’s channel strategy and ensuring appropriate physical, financial, transactional and data flows in the market. A selection process should be rooted in the identification of potential partners who are aligned to your company’s vision and the key internal functions. As you prepare to launch the commercial product, consider engaging a multidisciplinary teams across the organization to begin the requirements and assessment process to identify the optimal 3PL aligned to commercial products needs.