Your ODM isn’t Performing Now What

Here is a scenario that is all too familiar with many of those in supply chain using an outsourced partner. You have transitioned all or part of your production or distribution and your ODM/3PL are not meeting your needs in the first 3 to 6 months. The ODM/3PL is not achieving the KPI’s that are needed to achieve your supply chain needs.

How is this affecting your supply chain and your customers? The more adversely this affects your customers the quicker that you and your supply leaders will need to respond and deal with these performance issues. KPI’s which can’t continue to be missed are typically missing the production requirements, quality, field and customer complaints, order cycle times or timeliness and quality errors in distribution.

In your contract agreement with the 3PL/ODM/Partner Contract should have a detailed outline with a well defined escalation process during the first year and specific expectations within the first ninety days of the agreement.


Managing an Out of Control Situation:

This will start with a defined “corrective” action plan that is initiated by the Partner Management team in your company. Partner Management will be the responsible group within your company to solicit the input from the other organizations, procurement, planning, partner management, quality and logistics regarding performance deficiencies. Partner Management will then develop a “corrective” action plan that is approved and supported by executive management prior to discussing the plan with the ODM management team. Here are the keys for a successful corrective action plan strategy.

• Ensure that both Executive Management teams are available to attend a face to face meeting.

• The meeting should be held at your site or neutral site not at the ODM’s site.

• The corrective action plan must be specific and provide details outlining the expected improvements which measurable and timed or phased improvement over a specific period of time.

• The corrective action plan should show specific examples of how the ODM is failing to meet expectations. Also indicate to the 3PL/ODM the specific impact to your company is in either lost business opportunities or service level penalties. This will provide a baseline for activating the penalty clause in the agreement.

• The action plan should include any and all areas of concern including personnel, capacity, ERP system, general responsiveness to supply chain requests. You are now providing clear and direct communication without reviewing other concerns later.

• During the meeting you should define how the corrective plan will be reviewed; a written response with a specific action plan to correct each area or KPI, responsible person for the action plan. Also, develop meeting frequency for action plan and KPI progress reviews and required attendees for meeting attendance.

• The 3PL/ODM must have a complete understanding and agreement of the consequences of not meeting the corrective action plan including contract default per the contract terms.

• The 3PL/ODM should be asked to assign one single point of contact to lead the corrective action plan as well as the 3PL/ODM executive sponsor for the corrective action plan.

If the 3PL/ODM execute and deliver to the documented action and KPI’s, then your company’s supply chain move back to a normal partner relationship. If the 3PL/ODM does not meet expectations then the next step in the process must be determined with more corrective or a transition to another partner?