Spray Cranberries, Inc. is an agricultural co-op owned by over 750 growers in the US and Canada. They produce everything from bottled juice to food products and have four distribution centers in the United States. During their upcoming holiday season, Ocean Spray Cranberries has a particularly challenging time pumping up the volume to meet the surge. Ocean Spray realized that in order to maintain their leadership, they needed to focus on their core competency and look for outside sources to help them reduce the variability in operations and expand their logistics network. There is interest in 3PL.
During an investigation of Ocean Spray’s transportation capabilities, the director of logistics wanted to take a serious look at third-party logistics (3PL) providers. The rationale for his idea to use 3PL is that they can provide more depth and breadth of service offerings, allowing for less focus on transportation and warehousing and more on core competencies. This will allow Ocean Spray to centralize logistics, reduce variability in operations, and expand its logistics network. If Ocean Spray wants to stay competitive in their industry, they will need to investigate the possibility of using 3PL. I believe that the reasons cited for Ocean Spray’s use of 3PL are sound, and in order to reach its goals, they will need to do this.
Choosing a Type of 3PL
Based on the needs of Ocean Spray, the greatest type of 3PL firm that holds the greatest potential in relationship to Ocean Spray is a warehouse/distribution service. The warehouse/distribution type of 3PL offers a wide range of activities such as inventory management, warehousing, distribution, and more. This type of 3PL has also been found to have a less complex transition to integrated logistics services than a transportation provider. A warehouse/distribution type of 3PL has significant experience in logistical operations and will be a very good fit for Ocean Spray.
Steps to Investigate 3PL
There are six steps that must be completed before choosing the right 3PL that Ocean Spray should follow. The first step is to perform a strategic assessment of the company so that the organization is fully aware of its logistical needs, which begins with a logistics audit. The second step is to decide to form a relationship. In this step, the organization needs to make a careful assessment of which firm has core competency. It is necessary that the organization has expertise, strategic fit, and the ability to invest. If the organization does not have any one of these characteristics, then it is necessary to seek an external provider. In the relationship decision, the firm must have drivers, a compelling reason to partner, facilitators, and supportive corporate factors to enhance growth and development in the partnership, as well as exclusivity, shared competitors, and others. The third step is to evaluate the firm’s alternatives. To utilize this step, the organization should conduct a thorough assessment of the manufacturing company’s needs and priorities and then compare them with each potential partner. In step 4, the organization will select a partner and get to know the final candidates on a professionally intimate basis. Step 5 requires the organization to structure its operating model. They must plan, join operating controls, communicate, and share the risk and reward.
They must form trust and commitment, style the contract, develop the scope of the relationship, and invest. The final step requires full implementation and must strive for continuous improvement. This is the most challenging step in the process. Depending on how complex the relationship is, the implementation may be short or extend over a long period of time. The success of the relationship depends on how involved each organization is when striving to achieve improvement. This is essential to enhance the function and market positioning of all organizations that are involved (Staudt & Stranz, 2009). If the organization does not follow these steps when investigating a 3PL, the consequences can have a huge impact on the business’s supply chain ecosystem. It can adversely impact customer service, profitability, and stakeholder value. The effect of choosing the wrong relationship can be costly and painful. The full recovery process can take over 2 years (Millar, 2012).
Choosing a 3PL relationship.
In the case of Ocean Spray, I would recommend a collaborative relationship between the firm and its chosen 3PL provider. These types of supply chain relationships are more effective with providers of logistics services and all parties involved. It encourages individual organizations to share information and resources for the benefit of each company. In the 2013 Third Party Logistics Study, it was found that organizations have experienced more openness, transparency, and good communication in their relationships.
It will also allow Ocean Spray to leverage the 3PL on an operational basis. This type of business partnership requires the following: the parties involved must share and interchange information, the benefits must exceed the individual benefits, all organizations must modify their business practices, the business parties must act in a visible way, and each party has to provide a mechanism for collaboration to occur. In the end, this creates a synergistic business environment where the sum of the parts is greater than the whole.
Ocean Spray has made a significant step in securing its future success. By understanding its business needs and reaching out to seek 3PL providers, the company will benefit greatly in focusing on its core competency, centralizing its logistics operations, and expanding its logistics network.
