Choosing the right third-party logistics provider (3PL) doesn’t have to be difficult, but it does require some thoughtful consideration. After all, the 3PL you choose will have a tremendous impact on your organization’s costs, customer service, and supply chain for years to come. In this blog, we’ll explore ten of the most important factors to consider when determining how to choose a 3PL provider that’s right for you.
Before You Begin, Ask Yourself These Questions
Before you know how to choose a 3PL provider, you’ll need to do some corporate soul searching. To start, ask yourself these three important questions:
- What are your company’s shipping, packaging, and marketing priorities right now?
- Will these priorities be the same in three years, or do you anticipate them changing?
- What qualities are most important to you in an eCommerce fulfillment partner?
Choosing a 3PL no longer means simply transporting and warehousing goods. Most 3PLs have developed a host of services to meet the demanding needs of today’s modern manufacturers and consumer demand.
Whether they specialize in a specific vertical or are logistics generalists, most fulfillment partners will tout their sophisticated operations, good carrier relationships, and industry expertise. Since most fulfillment companies across the board possess these traits, you’ll need to look at these traits as foundational, not differentiators.
From there, it’s important to partner with a logistics service provider that’s able to help you scale your business and meet your goals, not just serve as a highly-functioning storage unit. Regardless of your industry, market, or location, there are ten factors to consider when choosing the right 3PL for your operation.
#1: Capability
Whether it’s kitting, fulfillment services, reverse logistics, subscription box services, or pallet displays, you want to ensure the third party provider you choose is flexible enough to meet your changing needs. A 3PL may perform well in one service area but lack the flexibility and expertise to meet your other requirements.
To keep up with the consumer demand driving modern storage and shipping, make sure your provider offers simple integrations with your eCommerce platform of choice. You also want to ensure they have a business intelligence interface that allows you to make real-time, data-driven decisions at the click of a button.
#2: Stability
3PL providers that have been in business for a while possess extensive experience in providing high-quality logistics and supply chain management services. Logistics is a constantly changing industry, so a 3PL with years of experience adapting to the changes in market innovations can help you stay ahead of the curve.
Look for a fulfillment provider who has staked out its place in the supply chain market, has multiple locations to decrease shipping time and increase national reach, and has a reputation for providing outstanding service.
#3: Reputation
In fulfillment and logistics, reputation is everything. A 3PL’s reputation is not only built on happy customers (although that’s the most important metric), but it’s also built on happy vendors, carriers, and employees.
It’s important to partner with a logistics company that’s well-respected, since reputable 3PLs can find solutions to challenges using their network, team, and industry connections. For instance, a 3PL can often save you money on shipping costs, as they’re able to negotiate bulk shipping rates with carriers that an individual business can’t do.
#4: Safety and Security
A 3PL’s approach to safety speaks volumes about its overall performance. With safety regulations undergoing near-constant change within the industry, it’s important to partner with a 3PL that stays up-to-date with the latest initiatives to remain in compliance.
Besides the protection of assets and safety of personnel, you also want a fulfillment partner that takes security seriously. Safeguarding financial information is not just important, it’s absolutely critical. Look for a provider that has PCI, FDA and DEA certifications, as well as a HAZMAT Shipping Certification.
#5: Customer Service
When determining how to choose a 3PL provider, service and attention are at the core of the relationship. Third-party logistics providers that invest in customer service know that service excellence and quality management extend both to the manufacturer and to your brand.
Effective 3PLs are able to quickly identify issues and effortlessly resolve them. An experienced 3PL will provide business solutions that help you calculate savings, track products, and easily identify delivery times. In short, they help make the logistics side of your business easier and less stressful for you, freeing you up to focus on what matters most to you — growing your business.
#6: Scalability
The right 3PL can help you scale easier if you’re already operating at scale. Can the 3PL you want to partner with handle the volume of products, recalls, and customizations necessary to maintain your operations and reduce costs?
When interviewing a potential logistics provider, be sure to ask them how much inventory they can handle, what their largest daily throughput is, and how quickly and efficiently they pick, pack, and ship products.
#7: Customization
When it comes to customization, third-party logistics can mean different things. If you’re involved in eCommerce, business-to-business, or retail distribution, you need a fulfillment partner who can provide you with customized solutions that integrate seamlessly with your supply chain.
For packaging and shipping, you’ll want a fulfillment company that can personalize the customer experience right down to the packing slip. The right 3PL can act as an invisible extension of your brand, providing the same personal service and attention to detail that your customers have come to rely on.
#8: Accuracy
One of the most important factors when considering how to choose a 3PL provider is accuracy. Inventory, shipping, and order accuracy are all determined by the internal processes your 3PL has put in place over time. If your 3PL doesn’t have accurate inventory, shipments, or orders, customers will be disappointed, and you’ll lose money on returns.
The National Retail Federations estimates the total cost of returns amounts to $101 billion, and around 10% of all returns are due to defective or “not as described” items.
When settling on a 3PL partner, ask them about their Warehouse Management System and their accuracy rates. If they’re not using the latest technology, or their accuracy rates are below 99.9%, you may want to look at other options.
#9: Responsiveness
In addition to how well things go during normal operations, responsiveness is measured based on how well things go when issues arise. In your research and consideration of 3PLs, be sure to ask these important questions:
- How do you handle supply chain disruptions?
- How do you respond to changes in order volume, destinations, or stocking levels?
- How do you track products in the event of a recall?
Answers to these questions will give you valuable insight into the kind of company you’re dealing with and whether they can handle your logistics.
#10: Technology
Technology underpins logistics sophistication. The 3PL you choose should provide enterprise-level technology that streamlines the process from order to delivery, which is crucial to fulfillment.
Make sure your 3PL utilizes the latest technologies and has the best support team available to meet your needs. This can take the form of integrating with your order management system, utilizing business intelligence to help you make quick informed decisions, or having an IT team that provides top-quality support.
The Benefits of 3PL Fulfillment Solutions
Logistics service providers offer significant advantages over doing everything in-house. The primary benefit is that they’re able to manage your inventory and shipping, freeing you up for other tasks. Other positives include:
- Increased capacity
- Higher efficiency
- Reduced delivery errors
- Enhanced visibility into supply chain operations
- Reduced overhead costs
No matter what kind of business you run—whether it’s a handcrafted eCommerce store or an online retail giant—your time is precious. Hiring your own shipping staff can seem like an attractive option for those who want to keep everything in-house, but a logistics service provider brings more value in terms of money saved and convenience gained.
How a 3PL Can Save You Money on Orders
Ordering in bulk saves you money. If you order enough from a single vendor, they’ll likely lower their rates for you. In some cases, you might even be able to negotiate special terms with your preferred vendor. Be sure to ask about volume discounts with your 3PL and see if saving money on orders is an option for you.
Are You Ready to Transition to a 3PL?
Again, knowing how to choose a 3PL provider starts with asking yourself why you’re considering making the move in the first place. The answer may be simple: maybe you’ve outgrown your current fulfillment capabilities or are finding the logistics process as a whole to be overwhelming. In any case, working with a 3PL might give you more time and energy for things like marketing and developing new products.
Once you’ve determined why it’s in your company’s best interest, the next step is to actually meet with the fulfillment experts at a 3PL warehouse to learn more about their approach and service expertise.
Ready to start exploring the ways a 3PL can help you? Contact us today to learn more and see if we can partner with you to help you grow your business.
This blog was originally published on October 3, 2019. It was updated on March 8, 2022.
