In the last few years, the relationship between companies and third-party logistics (3PL) providers has shifted. The previous emphasis on short-term (3 year) transactional relationships with supply chain partners—driven mainly by a 3PL’s physical assets and cost—has been replaced with a more strategic partnership approach where trust ranks higher than cost and long-term, collaborative relationships are evaluated on qualitative metrics.
In his 2014 18th Annual Third-Party Logistics Study, Dr. C. John Langley, Ph.D., professor of supply chain and information systems at Penn State University, found companies that strive for strategic, collaborative relationships with 3PLs stand to gain the most advantages; and in fact, 91 percent of companies surveyed have already adopted this approach.
Why Are Strategic Relationships Becoming Increasingly Important?
On average, sixty to seventy percent of the total cost structure of an organization is supply-chain led, making it arguably the most underutilized competitive advantage for a company. As the main artery that controls the flow of materials and information from suppliers through the company to the customer, optimizing performance and eliminating disruptions can significantly boost revenue.
What Makes a Good Relationship?
Just like any relationship, success depends greatly on mutual understanding and common goals. For a 3PL tasked with suggesting more cost-effective alternatives to increase efficiency and promote growth, the supply chain partners effectiveness lies in their understanding of the customer’s values, strategic objectives and business model.
This approach, labeled onboarding by Dr. Langley, requires a gradual integration of cultures and should address:
- Mutual goals of the relationship, clear metrics on how they will be evaluated and the role of each party to ensure they are addressed.
- Clearly defined and mutually agreed upon Key Performance Indicators (KPIs) to measure effectiveness.
- The compatibility of corporate philosophy, management capabilities and management styles.
- How to engage employees and drive improvement through the alignment of core values and objectives during employee training and development.
By sharing expertise and aligning goals, both parties are able to drive innovation, adapt to changing needs, and mitigate risk in the pursuit of mutual success and sustainable cultural alignment.
The Culture at Kenco
The focus on cultural alignment to form long-term partnerships is a long-standing tradition at Kenco. Our average customer relationship spans 17 years and we boast a 100 percent customer renewal rate after the first contract term.
This longevity is driven by our guiding principles, which are rooted in what most people already know is important:
- Put integrity above profitability
- Demonstrate courage, commitment, and compassion
- Be remarkable and create uncommon value
This is a message I bring to all our employees through team building and training exercises. They hear the stories that built Kenco’s reputation, and through them develop a common understanding of our company culture. From there, a sense of pride in and connection with the organization is created that fuels employee retention and engagement, and inspires them in their work.
Our Approach to Cultural Alignment
Cultural fit is a fluid and flexible process that when achieved, can enhance employee satisfaction, improve performance, and increase financial standings for both parties. The proof is in our decades of experience. We’ve seen how our focus on supply chain evolution enables our clients to increase functionality, reduce costs and drive network enhancements—and the important role our respectful, long-term relationships play in the process.
If you want to learn more about Kenco's process to cultural alignment, check out Cultural Alignment: The New Normal in Third-Party Logisitics.