Partner management: The future of logistics

Hans Gerl

Senior Expert for Logistics, Supply Chain & Supplier Management

Collaboration in the logistics industry aims at a good and secured supply and the optimization of processes for all stakeholders. This can be achieved through transparency and collaboration among logistics professionals. Currently, collaboration is still lacking, which is why someone has to take the reins to introduce future-oriented improvements. And that is you, dear logisticians!

In this article, we present an innovative model of how partner management can be set up in logistics in the future. Systematics, collaboration, and anchoring make all the difference and provide logisticians with practical recommendations for action as a best practice approach.

Table of Contents:

  1. Partner management in logistics
  1. Selection process of external providers
  1. Getting the collaboration rolling
  1. Successful partnership thanks to performance monitoring
  1. Take performance to the next level
  1. Worst & Best Case
  1. Preparing logistics for the future

Partner management in logistics

Unfortunately, partner management was scarce in logistics in the past. Suppliers were left to the purchasing department, they took care of getting goods from A to B and were happy if they even knew the name of their colleagues on the other side. But supply bottlenecks and declining resilience in global supply chains have dramatically changed the rules of the game. Mastering and controlling supply relationships (supply chain management) and actively collaborating with partners are now key competencies in logistics.

More than ever, every company must actively ensure that its requirements regarding products, services and processes are met. This change in perspective requires effective mechanisms for coordinating, monitoring, controlling and improving the relevant logistics and supply processes with partners.

This approach is also known as "partner management" or, for all certified companies committed to ISO 9001, "relationship management".

Combined with the principles of "Process-Oriented Approach", "Fact-Based Decision" and "Continuous Improvement", this results in a modern, professional approach to collaboration and partner management in our companies.

The process-oriented approach expands the focus from "suppliers" to "partners" and thus also to logistics service providers. The use of numerical data facts ("ZDF") requires transparency - with consistent monitoring, early detection of deviations & risks - and fast reactions. In this way, error sources can be identified, corrected and processes optimized.

The concrete operational design of these principles inevitably creates opportunities and necessities for the logistician to participate. If one follows the lifecycle of a partnership, then there are logistical participation needs in the following phases: Selection, Connection and Enablement, Monitoring & Evaluation, Improvement & Development, and Separation or Re-nomination.

Selection process of external providers

Partners with fair conditions and secure supply are sought after. Therefore, a concrete statement must already be made during the supplier selection, also from a logistics and supply perspective.  

Therefore, make your logistic requirements a binding part of the delivery & purchasing conditions and the tenders. Qualitative logistic requirements are e.g. packaging, transport or process rules. Quantitative requirements address performance indicators such as delivery capability and on-time delivery, etc. It is essential that the requirements are recorded in writing.

A sustainable supply process should also be efficient for the partners. Therefore, the discussions should take place between logisticians and not between purchasing and sales. In this way, a win-win situation can be created.

Robust data from current business can help in assessing existing partners. For new potential partners, experience and expertise should be used to predict whether said partner will be able to meet your requirements.  

A modern and effective selection process also includes a veto right for logistics. If a potential partner cannot meet the logistics requirements, logistics should be able to issue a no-go in the award process.  

The selection of external providers can be critical to the company's opportunities & capabilities.

Getting the collaboration rolling

Immediately after the selection, the concrete implementation of the collaboration begins. The nature and scope of this depends heavily on the business. In any case, it is necessary to exchange contact addresses and get to know the parties involved, followed by definitions of how the partners will work together, including process clarifications and rules of the game in the event of problems. The digital process connection, i.e. the setup of information and data exchange, also plays an important role.

Depending on the industry and partner relationship, it may be necessary to support new partners to ensure smooth cooperation. In more complex supply relationships - such as in the automotive industry - a qualification process up to start-up and ramp-up is common. Particularly with new partners or partners from outside the industry, evidence will need to be provided that logistics requirements can be met and logistics concepts confirmed, e.g., capacity availability, performance testing, delivery capability, and safety stocks.

Pilot deliveries and a regulated ramp-up secure this phase. Progress is also reviewed with the involvement of logistics in on-site visits and audits.

Through such measures, problems can be identified and solved at an early stage. Project managers can provide support here to drive implementation forward and maintain an overview.

Successful partnership thanks to performance monitoring

With the start of collaboration, continuous performance monitoring using logistics KPIs is required. Good collaboration tools like TradeLink already bring such performance and partner cockpits. The KPI system should be structured in such a way that you always have a drill-down for each KPI in order to recognize the partners' contributions to it ("league table") and, if required, also to be able to evaluate each individual partner for itself ("partner performance").

On the one hand, operational key figures such as adherence to delivery dates or supply performance and the recording of so-called "logistical quality" such as compliance with or deviations from packaging and transport, information or delivery agreements play a role. A comparison with the colleagues of the quality management, can bring further conclusions. This systematic recording of performance is incorporated in the "ZDF" supported partner evaluation, e.g. in a data-based 5-star rating.

Monitoring the performance helps tremendously in evaluating the partners and whether the collaboration is going as planned.

Take performance to the next level

Every detected fault or deviation in logistics performance should lead to an immediate complaint commensurate with the risk of error. In addition, an overall statement on performance must be made and regularly communicated to partners. Show each partner where they currently stand, and in all fairness, expect that in the process, improvement issues will also become transparent on your side.

Ideally, the performance data is automated as a logistical fingerprint and made available primarily to the logistics managers at the partners. These objective evaluations form the basis for the annual partner performance reviews ("supplier discussions") at management level - naturally also with the active participation of logistics.

Deviations can be systematically classified with reason codes. Over a longer period of time, the evaluations reveal recurring error patterns and trends. Use this transparency to conduct problem-solving discussions with the affected partners and initiate improvement measures. Please anchor successful process improvements as lessons learned for the future. Internally via process agreements and externally by adapting your purchasing and delivery conditions.

Be prepared for appropriate interventions to become necessary in the event of glaring performance deviations and for repeated "permanent burners". Systematic, hierarchically structured escalation processes ("escalation pyramid") with clearly defined and communicated escalation steps are suitable for this. Such escalation models are best established together with purchasing and management.

Worst & Best Case

In the worst case, chronic performance deviations and unsuccessful improvement approaches must be considered in terms of how long this partnership or supplier relationship can or must be maintained. Incurable cases of performance failures should be consistently thought through to the end. In the final analysis, exit scenarios should be defined in the collaboration and escalation model in order to separate from such partners. However, the better the partner management has functioned in the previous stages, the less frequently this option will have to be used.

In the best case, those who have proven themselves in previous collaboration should again be given preference in the list of bidders in future tenders. Give a bonus to good and proven partners.

This is where partner management runs into a classic corporate conflict of objectives, because purchasing is usually paid for the lowest prices, while logistics is paid for stable supply.

Therefore, synchronize your target system cross-functionally on the company level by having the purchasing department, in addition to the procurement costs, also have the performance of its partners and suppliers or the supply targets of logistics in its target scorecard. Also use a bonus-malus procedure in the supplier rating and grant a points or money bonus to good performing 5-star partners. In this way, the low-risk, low-cost offer can be objectively compared with a low-risk, best-performance offer, and the best overall price/performance ratio for the company can be found.

Shaping tomorrow's logistics today

As you now know, partner management is an important part of logistics that is becoming increasingly important. In times of wars, pandemics and staff shortages, we need to move closer together, coordinate better and stand up to crises through unity. Collaboration helps us to secure our supply chains and partner management optimizes all relevant processes. With TradeLink, you can bring all this under one roof. Our reporting feature supports you in achieving your goals and secures the processes in your company.

Preparing logistics for the future

Unlike in the past, the mostly loose approach of a more or less structured supplier management is no longer sufficient in the new logistics world. Accept the new challenges and develop your supply processes and cooperation with suppliers and partners systematically and professionally.

The logistical turnaround from "crate pushers" to supply chain managers and supply guarantors requires partner management geared to resilience and improvement, in which logistics also becomes a partner of purchasing. As an operational recipient of services, the logistics specialist becomes an active participant in supplier selection, evaluation and improvement.

Actively engage in the selection process with qualified logistical requirements, measure and monitor partner performance processes with objective metrics and assessments. Use this logistical monitoring for assessments, discussions, problem solving and continuous process improvements.

Opportunities will open up for joint projects, e.g. for digitization in collaboration. In order to ensure the systematic and dynamic nature of this continuous process improvement in a resilient and sustainable manner, we recommend the use of powerful collaboration software with an integrated measurement and key performance indicator system, such as that offered by TradeLink.

Find your own smart way. Modern partner management works in every industry. Collaboration is a question of transparency, systematics and consistency, but also of fairness and style in dealing with each other. And it is also a question of the will to question and improve processes and behavior.

And as a logistics provider, use your data to convince and make a difference. Data is your best argument, because:  

"Without data you're just another person with an opinion" - W. Edwards Deming

So, dear logisticians, the possibilities are open and diverse. It is up to you to successfully develop partner management as a powerful instrument in logistics.  

I wish you much success in this!

About the author

Hans Gerl is a senior adviser and expert in logistics, supply chain and supplier management. At the BMW Group, he was responsible for securing supplies for all plants worldwide. Since 2020, he has supported and accompanied TradeLink with his experience and expertise on its way to becoming the leading digital collaboration platform.



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