What are some of the most critical mistakes people make when outsourcing their logistics?

Any outsourced service needs to perform as if it was your employee/facilty/operation. By creating a seperation in process, data and transparency between your in-house and external operations a company is bound to struggle and the likelihood of failure increases. Figure out a way to make their operation act like yours and your reduce the disconnect that results in so many problems.

I think that a common mistake is done when the integration between the customer ( you ) and the supplier is not achieved.This could take many forms , like droping on suppliers shoulders any mistake that your own people do , asking them things that you have never done or are not achievable and in the end when you discuss about prices tell them ( to supplier ) that , hey , you deserve less money because you have not done your job.

Instead I would propose ( and this is something that some companies have realised ) a clear partnership with rules and targets SMART and a win-win relationship based on the mutual support. All these sound a little distant , but they can be done and when is done their is befit for both sides.

I believe that most of the problems incurred on the relationship between the company and the 3rd party logistics provider are better resolved if clear goals and KPI's are set on the beginning of the operation. The clear set of principles and standard procedures will provide a common plan field that any issues can be addressed on a proactive way with he benefit to all parties involved.
This common ground will also ensure that the blame game is not part of the operation’s culture.

Well , Outsourcing of Logistics is good at all in the terms of recovery of loss. And the big mistake " they teach and learned" to the outsourced but didnt think that he can left as result operations hamper when move out. Also the KPI fails. Although the new one can manage at all but it is the subject at the time of takeover. All around it is always in doubt untill the show of his best performance.

The best way to do this is to do by company itself hired by dedicated managment and with the insurance.

Great comments so far. Some additional thoughts:

* Be clear about the reasons why you're going to outsource. Be realistic about the expectations.
* Know you're chosing a partner for the long term - you don't want to go changing logistics service providers every year. So make your choice based on the right criteria.
* There needs to be a match in company culture, and a match between persons. You need to become partners, not customer / supplier.
* Agree upon the expected service levels before you sign a contract, write down the service level agreements, specifying what you expect from your logistic service provider, but also what he can and can't expect from you.
* Agree upon KPI's. Specify what you want reported, and how to measure. Don't allow any confusion on the definitions of these.
* For both previous points (SLA's and KPI's), be sure you know what these are now that you're still doing it yourself, so you don't have unrealistic expectations for your logistics service provider. They cannot do miracles, so don't expect them to.
* Be clear, and agree upon the way you want them to report on these KPI's, and in what frequency.
* Agree (in writing) about how you will treat all exeptional requests / services, and how the costs of these will be dealt with. In this way you'll avoid unpleasant surprises.
* It may be worthwhile to think about, discuss and agree upon penalties for non performance. You'd better agree upon this while you're still friends (at the time of setting up the cooperation) rather then discuss at the moment issues arise.
* Last but not least, appoint someone internally that will do the follow up, that will be the liaison. Make sure that person (or persons) is and stays knowledgable, so he or she can keep challenging your partner.

1- Outsource thinking only in cost.
2- Not define clear KPI and targets.
3- Check not only actual accounts working with the 3PL,most important are accounts that they lost and why.
4- Check IT department and equipment (technology).
5- Know-how with similar products and people experience.

I think that outsourcing logistics - or any other key operations - is often done for the wrong reasons. With increased focus on cost reduction companies select service providers based on price - without considering the fact that this is in fact an opportunity - beyond mere dollars and cents! Logistics is not necessarily a core competence for manufacturing companies - while it certainly is for those who specialise in this area. When selecting a provider consider how their expertise could save time and money in areas that add time and waste - versus just looking at operational cost reductions. This is a win win proposition that adds value to both the manufacturer and the company providing the services. In her recent book Vested Outsourcing - Kate Vitasek described this in many ways - all of them with a compelling value proposition.

Great input here, covering most of issues faced in outsourcing processes.

I would like to add project management on customer's side and senior management support.
Project management is slightly mentioned by Tom, but more as a contact person than a contract manager.
The more important the service outsourced, the more important the knowledge, the sense of accountability/ownership and the level of leverage within own business of the Project Manager.
Often suppliers fail because they do not get the right support from their customer.

Senior management should clearly communicate the importance of own organization's contribution in the success of any outsourcing initiative. The mentality "I outsource not to have any work here" should not be allowed. Accountability stays, at the end, with customer's organization. It is still your CEO who needs to explain to shareholders why an initiative failed or exceeded budget. The supplier will not be in the room to be blamed.