Transitioning 3PL partners

The decision to outsource warehousing, logistics, transportation, and order-to-cash management is not an easy one for many pharmaceutical manufacturers. Selecting the right third-party logistics (3PL) partner to manage these efforts can be even more challenging. Thoroughly vetting a 3PL partner typically takes six to eight months and requires a significant investment of time and internal resources.

After extensive research, meetings, and discussions, most manufacturers identify the right 3PL for their company — at the time. But times change, bringing growth, new products, and increasingly complex regulations. All too often, the 3PL provider that was once the perfect fit becomes unable to keep up with the space, capacity, capabilities, or technologies required. When service issues arise and transitioning becomes unavoidable, manufacturers may begin to doubt their ability to choose a long-term partner. Instead, they should consider the four questions below. The answers may hold the key to ensuring their next 3PL partner is a better long-term fit.

This commitment to continuous improvement and expanding core services enables a 3PL to stay ahead of industry trends and anticipate clients’ future needs. Even if your company does not currently require temperature-controlled storage or outsourced financial operations, the right 3PL will be prepared to meet those needs as your business evolves.

What is the difference between a launch and a transition?

The shortest answer: quite a bit. Transitioning ownership of distribution while products are already in motion can be complex. Your 3PL partner should not only understand this but also have extensive experience to back up their expertise.

At time of publishing, we had successfully transitioned 15 clients from competitor 3PL providers. These experiences have informed a collaborative process that begins with a thorough query phase. The insights gathered during this phase are used to create a detailed transition guide designed to prevent disruptions to operations. This involves planning for various “if/then” scenarios, such as:

• If the current 3PL provider compromises the timeline, what can be expedited to shorten timeframes or allow for a phased transition?
• If the inventory is not clean, how will reconciliation be handled?
• If notification to customers is delayed, how can ordering and payment processes be adjusted to ensure continuity?

Of course, even the most experienced 3PL providers may encounter unforeseen challenges. In one instance, ICS was called in to assist a manufacturer that was in the middle of transitioning to another 3PL. Contract negotiations had not gone as expected, and a quality audit had raised significant concerns. ICS’s expertise in managing transitions allowed the team to step in mid-implementation and complete the process in half the usual time, ensuring a smooth transition with no operational disruptions.

When is the plan?

Understanding the right questions to ask and the actions to take is only half the battle in planning a successful transition. The timing of these actions is equally critical. For example, when should notifications be sent to customers? When should ordering and payment processes switch over? When can the previous IT solution be deactivated?

These time-sensitive tasks ultimately answer the most important question: when will the transition be ready? While every transition is unique, the depth of detail required in the planning phase allows for some standardization. ICS begins with a comprehensive transition project plan, broken down into program segments such as customer service, distribution, accounts receivable, and chargebacks. Each segment includes specific prompts to address potential challenges, identify needs, and outline the tasks necessary to ensure a seamless transition.

Where can we glean more value?

Amid the challenges of switching 3PL providers, it is easy for manufacturers to focus solely on fixing existing issues and ensuring a smooth transition. However, this is also an opportunity to identify and implement stronger solutions that better align with your company’s needs.

In the 15 transitions ICS has managed, the team has consistently identified areas for improvement. For example, during one recent transition, ICS simplified a client’s financial operations by reducing four cost centers to two and streamlining a previously unregulated returns process. These changes allowed the manufacturer to save US$2.4 million within just eight months of transitioning. In another instance, ICS provided high-level custom reporting that the client’s previous 3PL provider could not deliver. This reporting enabled the manufacturer to evaluate losses from poorly managed programs, ultimately improving cash flow and reducing past-due accounts receivable by two percent.