Good vs. Excellent: How to Maximize Your 3PL Partnership

Co-Authored by Shannon Hybner and Amanda Quintanilla

Let’s set the scene: You’re ready to jump into the foray of commercialization planning and vendor selection. You’ve determined that a 3PL partner is needed for your supply chain strategy and have begun research. Still, you keep returning to the same feedback—all 3PL providers offer similar pick, pack, and ship solutions. And that’s all a 3PL is needed for, right? Not necessarily.

1. Contract and Chargeback Management

Arguably, order-to-cash services such as managing contract discounts with end customers and processing chargebacks with distributor partners are the most complex and a significant component of the transactional support a 3PL provides. Potentially surprising: Because of their daily interactions and existing relationships with downstream partners, chargeback obstacles can often be resolved without a manufacturer needing to step in—an excellent 3PL team trained on expectations will have you covered.

Good 3PL Partners:

• • Create systematic discount contracts
  • Load accurate eligibility dates, eligible downstream members, applicable products, and correlating pricing as a discount off of Wholesale Acquisition Cost (WAC)
  • Provide ongoing management of contract attributes, including any updates to effective dates, eligible members, applicable products, and pricing
  • Review, process, and reconcile chargeback submissions

Excellent 3PL partners:

• • Work directly with your customers to ensure EDI is set up to receive chargebacks electronically

  • Provide a manual offering to you and your customers where EDI is not available

  • Identify trends on denied chargebacks and proactively address them with downstream customers

  • Send notifications of contract pricing changes to downstream customers on your behalf

2. Accounts Receivable

3PLs are a one-stop shop for Account Receivables (AR). From credit limit management, receivables processing, late payment follow-up, and escalations—3PLs can do everything. Late payment collection is a thankless but necessary role that few want to take up—especially not manufacturers who wish customers to continue their purchasing patterns. So why not lean on your 3PL to lead this process?

Allowing the 3PL AR team to own the entire AR process empowers your 3PL to act on your behalf and serve as an extension of your team. Removing yourself from follow-ups on overdue balances allows you and your sales teams to maintain positive relationships with your end customers.

Good 3PL Partners:

• • Systematically load and map ship-to locations to their corresponding credit limits and payment terms as directed
  • Only make changes and additions to credit limits and payment terms at the manufacturer’s request; since you own the AR risk, your 3PL will defer to you on acceptable credit limits and terms
  • Offset invoices when an invoice is paid, track any outstanding invoices, and complete follow-up and escalation on all AR issues

Excellent 3PL Partners

• • Connect you with your 3PL AR contact quickly to create a good working relationship
  • Facilitate monthly calls to review open balances and trending issues, proactively addressing collection obstacles before they become problematic
  • Prepare for monthly meetings to discuss open balances, provide specific details for actions taken on open items, and recommend the next steps

3. Data and Reporting

Since 3PLs often manage end-to-end order-to-cash activities, it is vital that the reporting available from your 3PL meets your needs and allows you to operate with minimal intervention. Most 3PLs provide a suite of standard reporting enabling you to manage your daily needs; however, some partners offer advanced data solutions and dashboards to consider.

Good 3PL Partners

• • Provide real-time monitoring of product movement, open orders, and a corresponding reporting tool
  • Provide timely turnaround on new user requests for portal access
  • Offer a standard suite of EDI options
  • Offer report automation at a pre-determined cadence

Excellent 3PL Partners

• • Provide a month-end close package with status reviews for the financial team
  • Offer reporting tools that allow you to properly audit your 3PL fee for services generated by your 3PL
  • Take feedback in stride and urgently act on requested enhancements, i.e., portal updates, new reports, etc.
  • Allow manufacturers to drive customization within the portal reports without the need to involve the 3PL
  • Provide an enhanced dashboard tool that allows you to drill into your sales, inventory, and daily activity for your program

4. Account Management

A 3PL Account Manager (AM) is an essential role that is perhaps the most critical component of a 3PL program. AMs act on the manufacturer’s behalf and manage all program operations, including order-to-cash, warehousing, pick, pack, and ship operations, and issue resolution. Though the level of support differs between 3PL providers, each manufacturer is assigned an AM to oversee all day-to-day activities performed at the 3PL.

A 3PL program’s success greatly depends upon the knowledge and proactiveness of an AM. We highly recommend you meet with your appointed AM regularly to ensure their personality and goals align with your program objectives.

Good 3PL Partners

• • AMs serve as the manufacturer’s single point of contact within a 3PL, delegating requests to the appropriate teams within the 3PL and serve as the escalation point when needed
  • AMs lead status calls with their manufacturer partners to review open questions and update root cause analysis on addressed obstacles

Excellent 3PL Partners

• Proactively provide solutions and next steps to initiate issue resolution
• Regularly review transactional data to identify opportunities for improvement with performance trends and internal 3PL operations
• Share best practices across the 3PL program portfolio and identify strategic growth opportunities
• Serve as the manufacturer’s top advocate
• Proactively schedule regular business reviews and come prepared to these meetings with metrics on how the 3PL is performing

Learn more about our distribution team and the differentiators that matter most to manufacturers, and contact us today for assistance with your strategic and tactical distribution needs.

Archbow Consulting helps pharmaceutical and biotech companies in the USA and Europe design, build, and optimize product distribution and patient access strategies. Archbow was founded by industry veterans to meet a need in the marketplace for consulting options that offer diverse real-world experience, are able to leverage deep connections across the industry, and can also provide actionable strategic guidance. We invite you to learn more about our team, services, and clients’ success, and connect with us via email, LinkedIn or subscribing to this blog which you can do below.

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