Cultural Fit, a Critical Criterion in the 3PL Selection Process

When a shipper is involved in selecting a 3PL, both parties often consider whether there is a business fit between them, however often times they minimize, or simply disregard the issue of a cultural fit.  In short, how well will the 3PL and the shipper be able to work together based upon their respective internal business cultures?

Dave Hauptman, the VP of Product Management atOHL, made the point that each party needs to be thoughtful in helping to establish the right chemistry.  As an example, prospective clients want to know which managers will be running their warehouse and who they’ll be working with on a day to day basis.  OHL thinks about which managers would be the right fit for a shipper and includes them in the RFP meetings.  This insures that these managers have a thorough understanding of the client’s objectives upfront versus having to learn it over time, or not at all.  Often times OHL hears from clients that involving and getting to know “their” 3PL team up front was a primary reason in choosing to do business with them.

Dave also noted that one part of this fit is related to industry and channel expertise.  It is very unlikely that a shipper will be comfortable with a 3PL that does not understand their industry.  But industry expertise also happens at the sub-vertical level.  For example, it is not enough for a retailer to talk to 3PLs with retail clients because there can be big differences between operations of boutique, luxury brand, and general merchandise retail.

Finally, Dave is a proponent of shippers working with a detailed RFP that has been built before the selection process begins.  He pointed out that even qualitative criteria – like cultural fit – can be included and that the different selection team members can score a 3PL on a scale, and those scores can be summed and averaged.  Dave pointed out that “A good RFP allows for a quick qualification process for both the shipper and 3PL.”

I also talked to Sean Coakley, a Sr. Vice President at Kenco. Sean pointed out that in examining 3PLs, one cultural issue shippers are concerned about is how will the two companies work through the inevitable issues that will arise?  A sales cycle is a highly artificial environment where everyone is on their best behavior.  But once the deal is won, and a 3PL enters the second and third years of a contract, are the two companies still effectively working through the issues?When assessing cultural fit, Sean believes indirect questions will often reveal more than direct questions.  Examples include, “Can you give me a specific example of where you invested resources in more advanced material handling equipment to help promote a long term relationship with that customer?”  “Can you give me an example of a client that had an issue that was imperiling the relationship and tell us what that issue was and how you overcame it?”

But there are also good direct questions that can be asked. “What percentage of your customers renew after the first contract period ended?” “How do you select the General Manager that will manage a prospective customer’s warehouse?”

But Sean pointed out that the cultural fit question runs both way.  They withdraw from bids and renewal opportunities when it is apparent that customers are not truly looking for a partnership or when they make requests that conflict with Kenco’s guiding principles.  Experience has shown that these customers can adversely affect Kenco’s own internal culture and rarely generates optimal results for either company.

Sean also pointed out that one cultural issue that shippers should care about is “whether a 3PL has a Lean culture, or whether Lean is a tool that 3PLs pull out of their tool box from time to time to appease customers.  Shippers should want to work with a 3PL that lives Lean, whose workers think about continuous improvement every day.”

Finally, I talked to a shipper that went through a 3PL warehousing services selection process about a year ago.  For this company, cultural fit was a critical criterion because some of their own employees would be working in a section of the 3PL’s warehouse performing high end value added services on the companies’ own proprietary machines.  This executive worked at a private family run manufacturing company, and saw many similarities in attitude and management style with the 3PL they ended up selecting.  The shipper’s cross functional team spent a considerable amount of time thinking about whether their employees would be comfortable in the 3PL’s warehouse, and whether their employees would be comfortable working and socializing with the 3PL’s workers.Based on this conversation, I concluded that two important questions for a manager involved in a selection process to ask themselves are, “Would I be comfortable working as an employee for the 3PL?  Why or why not?”  If all a shipper cares about is finding the lowest cost provider, shaving a few cents off each shipment, this focus on cultural fit may not matter.  But if the shipper is looking for a 3PL that is flexible and responsive, a partner they can grow with, these are the ultimate cultural fit questions.