Dan Gilmore's excellent Supply Chain Digest quotes this conclusion from the recently published CSCMP sponsored 27th annual report on the state of shipper/3PL business and relationships, from industry veteran Dr. John Langley of Penn State:

"The report observes that Successful shipper/3PL relationship trends include using longer contracts, consolidating business into fewer 3PLs and creating relationships that benefit both parties."

This is a very promising trend as logistics can be very complex, and the trade-off between service and cost has many parameters that are difficult for most shippers to optimize. This is the core of what 3PLs do, so it makes sense to involve them, and provide incentives when the succeed. But how exactly do you do that?

Step 1: agree on what type of deal you want. You can use the 7 sourcing models to find the right model and make sure both parties are seeking the same relationship - tactical, approved, preferred, output based, outcome based or collaborative, shared service, Joint venture.

More here: https://app.pubfunnels.com/v2/preview/HaHhFCr3ll3hLlMn7OXf/b/which-model-is-right-for-which-deal

Step 2: Figure out what the right deal looks like. The 5 rules of VestedTM are a good place to start if you want a collaborative deal.

1. Outcome based – what do you really want to achieve when all is said and done?

2. What not how – when you engage with experts that do what you want done all day/every day and have developed carefully honed skills, capabilities and tools, don’t try to tell them how to do their job. Tell them what makes it special and difficult for you and let them work out how to do it in the best way possible.

3. Defined and measured outcomes – outcomes are important, but how you recognize the success is really critical to making it real.

4. Pricing Model with incentives – obtaining outstanding results from something you don’t want to do yourself is fraught with risks. For the risks that are core to the delivery and success, a pricing model allows you to pay for performance.

5. Insight vs oversight - focus on fixing challenges, not assigning blame.

A What’s in it for WE approach will get everyone pulling in same direction together. Don't underestimate this! More here: https://app.pubfunnels.com/v2/preview/HaHhFCr3ll3hLlMn7OXf/b/7-sourcing-models.

Step 3: Make sure you have the critical contractual elements in place:

1. An explicit joint business model that aligns with both parties objectives

2. A shared vision of intent that spells out how you will treat each other during the entire relationship. That means beyond the first onboarding huzzah and into year 10 when everything has changed.

3. A clear delineation of scope, responsibilities and milestones that will show that the objectives are getting closer.

4. A succinct set of metrics that will measure performance, not only today, but as things get better.

5. How you will manage performance - who does what.

6. A comprehensive pricing model that reveals the full value being delivered and includes worthwhile incentives for both parties to perform exceptionally.

7. An effective governance model that spells out roles, responsibilities and authorities, and transcends the current set of players.

8. A plan to achieve the transformation required to reach exceptional outcomes.

9. The plan to transition away from the relationship if/once it has run its course, ensuring an orderly transition and due consideration of people and skills, orphaned assets, systems, and intellectual property rights.

10. Other items not above, such as specific industry issues or legislation that must be complied with.

Following a plan and methodology will get you there faster and more certainly than trying to make it up as you go.