| Q: I need a local fulfillment operation in | | | | negotiated an agreement. Developing a |
| Canada to effectively grow my business there. | | | | successful 3PL partnership requires a |
| How would I proceed to develop an external | | | | significant amount of time, effort, and |
| fulfillment operation in Canada? | | | | follow-up by the client company. You need to |
| | | | make clear that you have relinquished only |
| A: First and foremost, you have to develop a | | | | the physical handling of your product to the |
| business model for the designated selling | | | | 3PL, not the responsibility to manage your |
| area. This is a three- to five-year strategic | | | | business. |
| plan comprised of historical data and a | | | | |
| projected forecast. A few pieces to the model | | | | Identify key client contacts and |
| are: | | | | decision-makers who will be issuing direction |
| | | | to the 3PL. The 3PL provider needs to clearly |
| Three to five years projected sales | | | | understand who will provide direction and who |
| as orders, detailed to a weekly/daily (where | | | | is responsible for resolving problems. |
| appropriate) plan | | | | |
| | | | Remember that the 3PL is proud of how it |
| Average units and lines per order | | | | manages its business. Use the same |
| shipped | | | | consideration communicating with the 3PL that |
| | | | you would extend to your most valued |
| Seasonal or peak volume increases as | | | | associates inside your own company. Never |
| orders shipped, average lines per order, | | | | ignore issues or problems, but be firm and |
| average units per line, average cartons per | | | | respectful in resolving them. The 3PL is |
| order | | | | normally quite aware of who is paying the |
| | | | bills and who owns the inventory. The 3PL |
| Method of shipment and percentage of | | | | exists to serve; you should be a gracious |
| volume by type for purchase orders (small | | | | ruler. |
| parcel, LTL, T/L, container) | | | | |
| | | | Communicate daily with 3PL management and |
| Preferred method(s) of shipping by | | | | visit the site as frequently as travel |
| percent of total volume | | | | restrictions permit. Discuss the basics of |
| | | | the previous day's operations-receiving, |
| Average weight per order shipped | | | | shipping, inventory management-and always |
| | | | inquire what you can do to assist them to |
| Second, identify where your projected | | | | achieve their goals and objectives. If |
| concentration of sales will be and determine | | | | possible, visit monthly, but no less than |
| the most advantageous physical location | | | | quarterly. This sort of relationship can |
| within the new selling area for a fulfillment | | | | become a classic case of "out of sight, out |
| operation for your projected business model. | | | | of mind." |
| Site selection is critical to managing | | | | |
| shipping costs and to assuring there is an | | | | The client has to be diligent in managing the |
| adequate labor pool. | | | | 3PL through daily reporting. You are now |
| | | | managing a remote location, and therefore |
| Third, decide whether you should handle your | | | | your best source of information is the 3PL's |
| own fulfillment or contract a third-party | | | | daily reporting and invoices. This is no |
| logistics provider. You must identify any tax | | | | different than managing your own operation. |
| implications related to opening a new | | | | Master the information reporting so you can |
| business as an employer. Normally the | | | | identify trends and immediately spot issues |
| least-cost method of establishing a new | | | | as they appear. |
| operation is with a 3PL provider. Unless tax | | | | |
| concessions for new employers are significant | | | | Inventory management is the most important |
| and long-term, it will likely be more | | | | reporting in managing a 3PL. The client has |
| economical to operate for the first two to | | | | to know where to look for issues such as lost |
| three years with a third party. You can use | | | | or damaged inventory, out-of-stock, and when |
| the Internet to identify potential 3PLs. | | | | the inventory records indicate adequate |
| However, we definitely recommend a visit to | | | | supply. These are indications of performance |
| prospective partners as a preliminary to any | | | | concerns requiring the client's follow-up and |
| further conversation. It is much better to | | | | resolution. |
| have a visual image later as you review | | | | |
| respective proposals. | | | | Receiving performance reports and inbound |
| | | | scheduling are next in importance for daily |
| Third-party fulfillment | | | | follow-up. The client has to know if there |
| | | | are vendor delivery problems or 3PL receiving |
| If you do decide to explore contracting with | | | | issues that will affect the customer service |
| a 3PL, you must develop a request for | | | | level. This is also where the daily phone |
| proposal. The primary content of the RFP is | | | | follow-up will indicate any "carry-over" |
| your business model. The more accurate the | | | | receiving issues on a purchase order. |
| information you supply about your business, | | | | |
| the more effective the proposals from 3PLs | | | | Normal daily shipping follow-up is important, |
| will be. Send the RFP, with a clear deadline, | | | | but the most important point is to know what |
| to three to six 3PLs that you believe are | | | | did not ship. |
| stable, industry-proven, and can effectively | | | | |
| handle the volume from your business. | | | | Returns reporting is crucial not only to |
| | | | identifying customers' satisfaction with your |
| It is important to identify clearly every | | | | product, but also to discovering any 3PL |
| statement of what the candidates propose to | | | | -related performance issues. Detailed reason |
| do and not to do, and every requirement and | | | | code reporting is imperative, and cumulative |
| cost within a proposal. Establish a | | | | graphing is valuable in discussions with the |
| spreadsheet so you can compare proposals and | | | | 3PL. |
| details. If your team does not possess the | | | | |
| experience to review and negotiate | | | | Growing a business by expanding operations to |
| agreements, pursue the services of a | | | | Canada is an exciting and challenging |
| consultant. Next you have to negotiate all | | | | prospect. If you take the time to lay the |
| the standards of work and contract terms to | | | | groundwork by developing a comprehensive |
| assure that the 3PL can actually provide the | | | | business model and researching site selection |
| service you expect. | | | | and possible 3PL involvement carefully, you |
| | | | will significantly reduce the challenges and |
| Your work is not complete even after you have | | | | increase your chances of success. |