Introduction To The Guide
When selected carefully, a Third Party Logistics partner (3PL) has proved critical for monitoring cost control, maintaining inventory, improving customer experience, and so much more. In order to receive positive results from a 3PL partner, there are many factors involved in making sure you have selected the right 3PL for your business requirements.
This guide will help you identify critical areas to factor as you begin to make your selection for a 3PL partner.
Step 1: Understand the common types of 3PL providers
Even within the industry, the term “3PL” has different meanings to different people. When embarking your search, it’s helpful to understand the common types of 3PL providers you will encounter so you’re informed on which route you should take.
Below are four of the most common type of 3PL you will encounter on your search:
|Standard Providers||Niche Providers||Modern Providers||Freight Forwarders|
|Usually do everything from storage and fulfillment to inventory management and transportation. They have many industry certifications and can handle just about any task that a client has for them.||Focused on a certain area of the logistics process. They complete specific tasks for many different clients. Niche services can include services such as: Refrigerated/Freezer space, Haz-Mat certified space, Foreign trade zone, and more.||In addition to everything a ‘standard provider” offers, a modern provider incorporates a technology infused warehouse to increase order accuracy, inventory accuracy, and streamline the entire fulfillment process.||These companies act as the middle man from manufacturers to retailers. They do not tend to own their equipment, and broker the business to other logistics companies. Freight forwarders can be considered 4PLs by some.|
Step 2: Internal requirements gathering
Once you are aware of the different types of 3PL providers, it’s time to collaborate internally to create a requirements gathering checklist. Focus on the three areas below to get started.
Institute an internal 3PL evaluation team
This team must include representation from the supply chain/logistics, information technology, sales/marketing, purchasing, and finance departments. Doing this ensures you have done your due diligence to holistically outline business requirements, ultimately guaranteeing corporate-wide buy-in for your final decision.
Establishing this team will also shed light on the impact logistics has on the broader business, providing ROI insight that will be represented in the ultimate agreement.
Determine the number 3PL providers needed
If you have a world-wide presence that ships from ports all over the globe, you may need to partner with a few 3PL providers in the key geographies your company sells to.
If you have a large presence in North America, find a 3PL partner who can fulfill your delivery needs – at scale.
Define a clear process for interfacing with potential 3PLs
One of the greatest frustrations of evaluating anything, let alone something as critical as evaluating 3PL providers, is that too often a defined process of criteria to evaluate has not been determined. This guide can absolutely be the to your requirements gathering, but it is important you take the time to continue to add more requirements once you assess your own business needs.
Step 3: Begin evaluating 3PLs
As mentioned in the previous step, there will be an array of specific requirements your company must take into consideration before selecting a 3PL provider to partner with. Utilize some of the key areas we’ve outlined for you below as you begin to make your own checklist.
Understand all of their service offerings
When you begin to speak with each 3PL provider, it’s important to inquire about all of the services they have to offer. While certain services are top of mind as they may be required for your business (e-commerce fulfillment or refrigeration), other additional services may also provide immense value to your brand that you were unaware of prior to the call, including business intelligence platforms and customer care.
EvaLuate their financial stability
Having your 3PL suddenly fall apart could be one of the most devastating challenges your company faces. While evaluating your top 3PL providers, ask for a list of partners and enquire about their history with the provider. Have they consistently made payments? Has there ever been disagreement or lack of follow through from the company? How a 3PL handles their partners will be a good indication of how they will handle your business.
Establish they have a proven track record with your specific industry
Going beyond the finances of a potential 3PL provider, is it important to have an understanding of how their overall track record looks. Are they known for being a state of the art company? Do they have multiple long-term clients? As a service oriented business, the reputation of a 3PL provider will speak volumes as to the efficiency and reliability that you can expect.
Determine if the 3PL is able to grow with your business
First and foremost, you must be certain your 3PL provider will be able to efficiently scale their operations to fit your changing needs. You need a 3PL provider that can handle sudden spikes in demand without skipping a beat.
Find a 3PL that already has a list of customers, both larger and smaller than your organization, to ensure they will be able to accommodate your changing business needs.
Understand the 3PL’s base fees
This will vary by each 3PL provider, but finding out if a 3PL is the right fit for your business ultimately comes down to math. When asking about pricing, each 3PL usually incorporates the following base fees:
Storage – how much space your products will take up in the warehouse
Learn about their company culture
The culture of both companies is one of the most important (and overlooked) factors to having a successful partnership. Trust, communication, values, and expectations are key to maintaining a strong and successful business partnership.
OceanX offers a Modern Fulfillment solution (and so much more!) to help direct-to-consumer brands grow and scale their businesses with zero order delays and 99.8%+ order accuracy. If your business is in the market for a Modern 3PL provider click on the button below to request a quote.