Culture as the Game Changer for a Successful 3PL Transition: The Transformation Journey of a Distribution Center Operation Supporting a 24/7 Manufacturing Plant

A market leader and one of the largest U.S. manufacturers of residential and commercial products was managing a global network of plants and had approximately 100 distribution centers (DCs) across the U.S. Since its founding in the 1950s, the company’s success is largely attributed to its winning culture of innovation, collaboration, and taking care of their people. The business was growing in both size and complexity. To successfully scale, they realized they needed a new third-party logistics partner to manage the 24hr. / 7 days per week DC operation supporting its plant in Tennessee.

The decision to change their 3PL provider who had managed its DC for nearly five years was not made lightly. There was risk of potential service disruption to both the plant and to their customers, and it would require allocating resources to manage the project.

The manufacturer needed a 3PL partner with expertise who could help lead them to perform better and who would serve as an extension of their team. After a thorough bid process, the manufacturer selected Sunland Logistics Solutions as their 3PL partner. They selected Sunland over larger 3PLs based on their comprehensive solution proposal, demonstrated service capabilities, and because the feeling that there was a good culture fit between the two organizations.

While “culture fit” is traditionally not a heavily weighted selection criteria when deciding on a new service provider, it is often a key differentiator that will help drive a team or business partnership to be successful.

Both the manufacturer and Sunland had company cultures rooted heavily in people and continuous improvement. Their alignment in culture, leadership commitment, and a strong process for managing the relationship helped the new partnership between the manufacturer and Sunland to successfully work through the many challenges they faced with the complex transition taking place during the Covid pandemic.

The driving motivators for change were the following challenges the manufacturer was experiencing with the incumbent 3PL provider:

• Lack of transparency & communication
• Lack of involvement and engagement
• No continuous improvement efforts
• “Old school Management” driving high turnover
• Undefined relationship and poor account management structure

Despite the best attempt from the manufacturer to accurately communicate the current state of the operation during the RFP process, the adage “you don’t know what you don’t know,” rang true. After the incumbent 3PL was gone (having provided zero transition support or transfer of knowledge), the fuller scope of challenges started to be uncovered.

High-level Summary of the Inherited Pre-Go Live Challenges:

People Challenges:

• High turnover
• Low team engagement & morale
• Skeptical of management & change
• Inaccurate and delayed roster information with minimal visibility to shift assignments and positions

Process Challenges:

• No documented processes or work instructions
• No audit process
• Lack of performance visibility on the floor

Data & Technology Challenges:

• Manual data tracking with spreadsheets
• Legacy WMS with limited quality hold and order wave capabilities
• Poor integration and data transmission between WMS and SAP

Performance Challenges:

• 200+ container backlog
• 40% Inventory Accuracy
• 77% OTIF

Sunland brought the capabilities and industry best practices across functional areas that are needed to manage a transition and operation successfully. However, industry best practices alone would not have been enough to make it through the transition stage and turnaround the operation. The transformation also required a powerful culture change that was possible because of:

• The wisdom of an experienced project team
• The unwavering commitment and inspiring support of Sunland’s leadership
• The customer trust earned through the transparent partnership approach to the relationship established by their new 3PL provider

The Wisdom of an Experienced Transition Team

Although still a smaller 3PL in size relative to many recognizable global brands, Sunland Logistics Solutions’ leadership started a strategic growth plan in 2013 and had built up its cross-functional management team with warehousing and logistics experts who were experienced in leading complex transitions of large-scale operations supporting major manufactures.

This experienced transition team not only had the right tools, but the wisdom to know how and when to apply them. The required approach was similar to helping a triage patient when the immediate focus is to stop the bleeding, then stabilize, and then implement a recovery plan designed to help the patient not just survive but thrive. However, in this case, the patient isn’t one person, it’s a complex warehouse operation composed of over a hundred individual people who need to work together towards the same goals. In this case the recovery plan is dependent on a culture change and is the start to an ongoing continuous improvement journey that will lead to transformational change – but it will require training, dedication, patience, consistency, and buy in from everyone involved.

The Unwavering Commitment and Inspiring Support of Sunland’s Leadership

Multiple seasoned industry veterans who witnessed this transition have said that it was one of the most challenging they’ve seen in their careers. Despite inheriting many complex and surprise challenges from the previous 3PL provider, Sunland’s executive leadership team remained committed to the manufacturer’s success.

The members of Sunland’s team responsible for the transition could be transparent with their executive team if a problem arose because they knew they were committed to helping support their team. They responded quickly and provided resources when needed.

One of the most inspiring ways Sunland’s executive leadership team showed their support was by not just visiting the site, but their willingness to roll up their sleeves and be put to work alongside their team members on the floor when help was needed. It didn’t happen overnight but eventually the team members who had worked for the former 3PL and had been skeptical of new management began to feel Sunland’s servant leadership culture and trust their leaders.

Throughout the transformation Sunland’s executive leadership remained committed to ensuring the right site leadership was in place and that they embodied the Sunland culture acting as servant leaders committed to the emotional and physical safety of their people while delivering results for their customer and driving continuous improvement.

The customer trust earned through the transparent partnership approach to the relationship

Sunland’s approach to relationship management was one of the reasons they were initially selected to be the manufacturer’s new 3PL partner. With a multi-day Advanced Quality Planning Session, multiple relationship owners established from both organizations to ensure strong connections, and a series of consistent communication touchpoints from daily reviews to quarterly business reviews; the relationship was intentionally designed to create a transparent and collaborative partnership with a foundation of trust.

While a new relationship may start with some initial trust, it is understood that a strong foundation of trust must be earned, and it is normal for new relationships to go through challenges. During the Advanced Quality Planning session, Sunland’s team helped manage expectations for the relationship by sharing the psychologist, Bruce Tuckman’s theory on the stages of group dynamics which include forming, storming, norming, performing.

Sunland earned the trust of their customer during the transformation by not being afraid to have the hard but necessary conversations and following through with their commitments. With mutual transparency and strong communication channels established, Sunland and the manufacturer were able to work through the transition challenges together, get past the storming stage, and move into the norming and performing stages of their relationship.

Using the input components of the Sunland Management System as a framework, the following highlights some of the key elements and activities instrumental to the success of the transformation:

High Performance Team:

• Worked with customer to approve sign-on bonuses and retention bonuses to ensure business continuity.
• Discovered wages paid by previous 3PL were under market, so Sunland adjusted wages to market and added shift differentials.
• Went from 7- day operation with a 3-shift pattern to a 5-shift pattern to help improve work-life balance and team morale.
• Focus on reducing headcount after operation stabilized
• Administered team engagement surveys, held town hall meetings, and introduced quarterly ICARE program with Team Member Engagement Activities
• Established Training & development program

Process Leadership:

• Leveraged site leaders from across Sunland’s network to help drive process discipline and culture during go-live.
• Focused on cycle counting & empty bin audits
• Inventory Triage Team deployed
• Created 5S work areas and functional areas
• Developed SOPs, work instructions, and training matrix for all functions
• Full physical inventory & warehouse material slotting
• Focus on Continuous Improvement by putting lean tools in place including Visual Daily Management boards, Leader Standard Work, A3 problem solving, and 2 Second Lean Videos.
• Collaborated with customer to optimize order drop schedule
• Enhance picking efficiency with improved Warehouse Slotting & Zoning design
• Repack layout optimization for improved safety & efficiency
• Layered process audits in place
• Aligning on annual savings targets and planned CI projects

Advanced Technology & Innovation

• Reset of systems based on full understanding of material flow
• Implementation and integration of Tier 1 WMS
• System driven picking strategy optimization
• Repack application for system trackability
• Pick ticket and RF efficiency enhancements
• Task driven cycle counting
• On demand receipt labels
• Automated lot assignment
• Inventory control dashboard
• Picking quality controls in System
• Customer Success Portal with real time visibility of contractual and operational KPIs