A 12 steps guide on how to choose the right Third Party Logistics (3PL) provider

Having in mind a proper needs assessment  many companies in the field are considering the outsourcing of their logistic activities. But when it comes to the decision making definite decisions are required. This is a guide to assist you in the decision making for outsourcing your logistic activities:

1. Needs assessment : Which areas make sense to be outsourced.

2. Legal implications: Look for changes that need to be made in existing contracts, obligations for notice to other contractual parties or other financial obligations according to those contracts. Make sure you fix any issues before you move on to next steps.

3. Financial implications: Check with the responsible persons in your organisation the potential financial implications. Look at the total implications of your actions on the organisation and not just on your department. That means companies tend to forget that if outsourcing reduces their OPEX by also cutting jobs, there will possibly be legal fees and remuneration fees for ex employees. Those costs and implications should also be taken into consideration

4. Make a list of all possible candidates and arrange in advance personal meetings initially with their key decision making superior.

5. Check and assess 3PL providers' business models. Do they have their own physical assets or do they have a non asset structure? Are they asset light 3PL? This is a crucial part of 3PL evaluation as it is important to compare apples with apples. Ask for a list of assets related to business and focus on the key points that matter most to your organisation (GDP compliance, deep knowledge of responsibilities of a pharma 3PL logistic provider, transport time, regularity, safety, quality of assets etc.)

6. Financial stability of the companies you are going to contract with is essential. Financially stronger companies tend to be a proof for a healthy organisation and can prove to be a good partner in risk management and solution finding if things go wrong for any reason. But, on the other side, financially strong companies tend to be less flexible than smaller organisations, especially when decision making by more than one key stake holders is needed and time is not a luxury you have. Ask for insurance guarantees before you assess their financial status. Remember, no matter if you contract certain services, you might be the one who holds the "hot potato" when things go wrong in terms of product liability.

7. Ask for their specialisation and look if it matches your actual needs. You do not need to drive a luxury car to go around the corner. A bike can also do the work. Think about your future needs as well. Ask for a list of current pharmaceutical customers but also carefully assess new companies that have not yet proven their best in the market.

8. Perform a technology assessment and do not hesitate to ask questions that go in depth. You might find "skeletons in the closet" that are better to know about and to evaluate at this stage.

9. Check and evaluate their operational excellence. Do not hesitate to ask to discuss with more people in their organisation and definitely do interviews when performing an onsite audit. Check their knowledge on GDP or other relating regulations and how they not only train but educate their personnel. Always ask and have a chart of the organisation with people in charge. Keep in mind that people and their mentality make a business successful, not just technology and senior management.

10. Feel and smell the company culture. Choose what makes you feel more safe and do not forget to spend some lines on your MoJ or your report to your supervisors sharing details on that.

11.  Create a list of all candidates with remarks and your assessment on the aforementioned issues. Create another list of the prevailing candidates and check their reputation in the market. Always ask for references.

12. Share your thoughts and concerns with colleagues and supervisors in your organisation before you come to a conclusion.

Since GDPs have come into force more and more 3rd party logistic providers are keen to specialise in this field . Some of them have already managed to get a GDP certificate from their local authorities while other authorities refuse to issue such certificates. This can be a decisive parameter to your choice of a 3PL provider. However, bear in mind that procedures to that extent are not unified yet in many EU countries, and inspection authorities there are strongly opposing to issue GDP certificates to pharmaceutical 3PL providers.

(Savvas Koulouridas, Fagron Hellas, Greece)

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