4 Questions to Ask Before Entering into a Logistics Partnership
Don’t Enter into Partnerships Built on an Unstable Foundation
By the very nature of what the logistics industry represents, companies are constantly trying to find new ways to do better. Whether it is through processes, services, or products that improve their customers’ lives, the goal is always to enhance and optimize what a given company can offer.
That’s why many companies look to outside vendors to enhance their client offerings through expanded capabilities and services through a partner ecosystem. But there are significant concerns that every company must address before deciding to bring in an outside partner or vendor to offer those enhanced services. How, then, does a logistics company know how to select, onboard, and integrate such a partner into their business plan to benefit their clients’ bottom line?
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Here are the top 4 questions logistics companies must ask before beginning a product or service discussion with a potential partner:
- Does it introduce risk?
Logistics companies are very protective of their client relationships; hence, they should be very selective in whom they bring into their “circle of trust.” To mitigate this risk, they need to look for some level of validation from potential outside partners or vendors. It could be in the form of certification, but it could also be by professional association or through customer testimonials. Does the vendor offer training? How is their support? What is the partner’s client retention like? How many of the partner’s clients come through referrals? If those numbers are good, it’s a strong indicator that your vendor has not only a proven technology and support system, but also a proven partner program. Organizations simply don’t produce strong numbers in these areas by failing to execute.
- Does it drive and protect revenue?
Logistics companies must seek to understand how potential partnerships benefit their bottom line—and, by proxy, their clients’. Does the partnership drive additional revenue opportunities and does it create a competitive advantage that protects secured revenue? These are not mutually exclusive, but should both be considered with equal weight. Does the potential partner deliver their services through a private label program of sorts, or through their own, often-unrecognized brand name? It’s important to know the difference and how your clients will react to an outside vendor, even if they are introduced directly through your company.
- Does it diversify current offerings?
It’s critical to understand the potential outside partner’s business. Diversification could be a key factor in a logistic company’s decision to move forward in a relationship. Yet often, they may feel they have too many eggs in one basket. Finding a good partner offers opportunities to mitigate that risk by diversifying product or service offerings, but it’s important that logistics companies take the time to know their partner’s business—and their key business drivers. Think of it as a mutual fund strategy. Logistics companies need to consider how both they and their partners will achieve success through the new relationship, as well as the goals that will contribute to that success.
- Does it enhance or elevate market position?
Lastly, logistics companies must ask whether a relationship with an outside vendor or partner can enhance or elevate their market position. Does it create opportunities to differentiate? Does it enhance the brand? Can it give industry validation or recognition? Does it help in RFP responses? Does it help in analyst relations or positions? These are subjective value statements, but they are important. Remember that this is a decision that can have a huge ripple effect within a company; it can tie into the overall corporate strategy to include marketing, product development, and sales. Selecting the right partner for the right reasons is an important decision—and one not to be taken lightly.
Logistics companies who haven’t addressed these questions in their partner discussion will likely never achieve or even understand the intended goals and benefits of such a partnership. Entering into a partner relationship after avoiding (or simply not knowing to ask) these questions means the entire partnership will be built on an unstable foundation. It’s important that companies seeking to expand their offerings partner only with other like-minded companies that understand their business as a whole—not just the technological side of things.