One of the most recognizable trends of the new economy is the increasing usage of outsourced resources. This practice is the result of increasing pressure on companies to streamline operations and focus on core competencies. No longer is it feasible for a company to have complete, or even partial vertical integration. As a result, the ability to successfully identify ideal corporate partners and third party service providers is becoming a crucial factor to company profitability. The identification of a company’s key logistics service providers is not excluded from this issue.

When identifying a proper corporate partner, and in particular an appropriate third party logistics company, it is paramount that your company’s goals and ambitions are specified in a selection framework to ensure that your corporate partners are working with you in a desire for mutual benefit. This selection framework should encompass those strategic, tactical, and operational requirements that are critical to (your) company. The creation of such an outline permits a quantitative analysis of the critical factors that dictate the success of a corporate partnership.

The following criteria are a set of guidelines established in an effort to assist in the selection of third party logistics providers.

1. Financial Stability: The financial stability of a potential service provider is a crucial factor. Many outsourcing arrangements require the investment of extensive resources. It is vital that a financially stable corporation is selected, so that both you and your logistics partner can see your partnership through to fruition.
2. Business Experience: A third party logistics firm must have a solid knowledge base in the area of logistics operations, preferably with a level of expertise in your company’s field of business.
3. Management Depth and Strength: When outsourcing it is important to remember that one of the products being purchased is expertise in providing the particular services. The logistics service provider must have a strong, skilled organization, as well as adequate, qualified management.
4. Reputation with Other Clients: Many companies lack the experience in the logistics industry to be able to identify a truly successful service provider. The best substitute for ones own experience in logistical operations is seeking out the experiences of other companies.
5. Strategic Direction: The best companies are here to meet the needs of today and tomorrow. Select a company with a history of performance and a systematic plan for continuous improvement for the future.
6. Operations: The proper operations evaluation is a broad one that includes the analysis of all company components, including those areas of commitment to best practices, housekeeping, attention to detail, human resource practices, and quality procedures manuals.
7. Information Technology: State-of-the-art systems are a critical component to creating a lucrative partnership. Not only are up-to-date IT systems vital to the operational performance of a logistics corporation, but are also key to the fluid exchange of information that’s necessary for mutual success.
8. Quality Initiatives: A superior logistics provider has a focus on continuous quality improvement to insure present and future corporate prosperity.
9. Physical Facilities and Equipment: It goes without saying that the physical facilities must be sufficient to support the outsourced activity.
10. Growth Potential: For many corporations, growth is defined by the expansion of a customer market and increased overall sales. Selecting a service provider that has the capacity to meet your current needs and future growth is necessary.
11. Chemistry and Compatibility: Seventy percent of the time your first impression is correct. Don’t be afraid to act because something doesn’t feel right. The best business decisions are based on a delicate combination of hard facts and subjective human instinct.
12. Cost: While cost cannot, and should not, be considered last, it should be used as a deciding factor only among companies that fulfill your other criteria.

* All quotes and references used in this article were taken from the book, Logistics Outsourcing: A Management Guide, by Clifford F. Lynch. Published by the Council of Logistics Management Circa 2000. www.clm1.org