When evaluating 3PL providers, many omnichannel brands tend to focus on cost more than any other factors. Brands are always looking to protect their margins, so when they gather together, the RFPs of new 3PLs bidding on their business, the lowest monthly quotes usually float to the top.
On paper, the cheapest option may look like the best decision. But brands often overlook the fact that there are costs associated (especially long term) with using this as the only indicator of best fit. Cheapest isn’t actually the smartest financial decision.
Looking for a New 3PL: The Lowest Bid Trap
Fulfillment pricing rarely exposes every single cost and line-item. There are nuances and hidden fees can show up quickly. Not to mention the operational costs and long-tail effects of signing a contract based on the lowest bid. Often budget-friendly upfront costs also come with a catch: likely poor service levels, quality issues, lack of scalability, or limited reach, can quickly turn cost savings into lost revenue and customer frustration.
What brands need to be asking “Who delivers the best long-term value?” Instead of looking for the cheapest option.
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Actual Costs of Choosing the Lowest Cost 3PL
Hidden Cost #1: Operational Errors That Hurt Revenue
The number one metric brands should be worried about with their 3PL is order accuracy and operational errors. This is the best signal to determine how well your provider will support your brand.
Common issues:
- Mis-picks and shipping errors
- Late shipments
- Inventory inaccuracies
- Retail compliance failures
- Poor returns processing
Financial impact
- Chargebacks from retailers
- Customer churn from poor delivery experiences
- Lost repeat purchases
- Increased support tickets and internal firefights
What to look for: Common issues arise in fulfillment all the time, but operational efficiency and error reduction are controllable. Look for a 3PL with high quality standards and rigorous quality control at each step of the fulfillment process.
Hidden Cost #2: Surprise Fees and Billing Complexity
When it comes to fulfillment, shipping, and logistics, there are so many factors that contribute to the total monthly cost of hiring a 3PL. Your team will surely comb through each cost, but there may be hidden charges that will come out later, after the contract has been signed.
Brands may not know the right questions to tease out these hidden costs upfront. Seasoned operators will know what to ask. Here are some areas to ask hard questions about to ensure you won’t be caught with any new surprise fees six months into your contract.
Questions to ask to uncover common hidden fees
- Do you have storage overage costs? How do you calculate?
- Are there added fees during peak season? For labor, overtime, or added customization?
- Do you ever charge packaging material markups? Do you have a cost sheet of all packaging materials?
- Are there labeling fees for manual vs. automated workflows?
- What are your kitting charges, and are there any times when surcharges are layered on top?
- What does it cost to do a rush order? During peak season?
- Do I have a limit to account management conversations? Are there overtime fees for support or service?
- How many licenses do we get for each technology platform? Are there additional access fees?
What to look for: A low base rate can mask unpredictable monthly invoices that will upend your forecasting and margin planning. Transparent billing and upfront pricing help brands forecast confidently and protect margins.
Hidden Cost #3: Limited Scalability During Growth
A tell-tale sign of a low-cost 3PL that doesn’t have the capacity to help you scale is if they primarily work with startups and small businesses. Other tip offs include leasing only partial warehouse space or are PE/VC backed (which means they aren’t always making decisions for their customers, but rather for the market).
Space is a premium cost, as is labor. A 3PL with capacity to scale will have a long-term capacity strategy to absorb some of these costs and ensure you have the resources to grow your business.
A 3PL that promises capacity without the operations to back it up will break under the following:
- Retail expansion
- Seasonal volume spikes
- Overnight viral order growth
- Product launches or SKU additions
- International expansion
- Omnichannel complexity
What to look for: When your startup outgrows a low-cost provider, you’ll face an expensive turning point: operational issues, customer complaints, brand perception problems, and an expensive re-evaluation process to find a new 3PL.
A 3PL that works with true omnichannel brands, will have the capacity to meet the needs of your startup, and flex with your needs as your brand grows.
In today’s omnichannel world, brands need to be able to pull back or push forward on the sales channels that are working in the moment. This may be influencers, retailers, or creative sales activations. A 3PL with stability and structure will be better suited to meet your brand’s needs for the long-term.
“It’s so nice to have a 3PL that you can grow with and see a future with.”
Hidden Cost #4: Weak Technology Creates Manual Work
Modern technology tools are imperative for modern brands. A 3PL with premium tools and fully integrated systems will give you resources to work smarter not harder. Having the right systems will ensure you have a proactive approach to inventory accuracy, order visibility, and more.
Because the 3PL landscape is fractured, and there are many closed, proprietary tools they use, it can be hard to discern what a good tech stack looks like.
Common signs that your 3PL’s technology isn’t up to par:
- Limited inventory visibility
- Static reporting
- Manual EDI workarounds
- Poor integrations with Shopify, Amazon, retailers
- Lack of actionable data
With limited visibility and slow or outdated data, your team will have to work harder to get up to speed on daily actions.
The impact on your brand will be lost revenue and lost customers. Whether individual consumers, retailers, or marketplace vendors, none of them will put up with slow response times, storefront issues, or backordering. Your team will become the operational stop gap, which wastes time and resources to fix what your 3PL should handle.
What to look for: Technology that saves you time and creates a smoother way to communicate between team. Your operations team shouldn’t have to spend hours sifting through data to tell marketing if they can extend a promotion. Your 3PL should have the tools to give you full visibility into inventory, orders, returns, reporting, and forecasting.
Hidden Cost #5: Inexperienced Service Team
Service is what you are paying for when you outsource fulfillment to a 3PL. Your provider is the last touch before your products get to your customers. A great 3PL will interface with some of your most important supply chain partners. They should be resourced and staffed with experienced account management teams because they will be your advocate with shipping carriers, retailers, marketplace vendors, manufacturers, and your customers.
A low-cost 3PL contract won’t have the resources to fully staff your account with dedicated people who know your business like it was their own.
Common pain points of low-cost fulfillment:
- Slow responses, no matter the issue
- Constant account manager turnover
- Generic support models like call centers or AI-chat only support
What to look for: A transactional vendor creates more work for you while a strategic partner solves problems before they become expensive. Looke for a 3PL with tenured staff, dedicated account teams, and a high-touch service model. While it may seem like you’re paying a premium price upfront, that will translate to premium fulfillment in the long run.
Next Steps: What Smart Brands Actually Evaluate
Move away from price as your determining factor for your next 3PL or fulfillment provider.
Here’s what to look for instead:
- SLA performance – a very key indicator of a quality 3PL. Ask to see real data from peak and non-peak time periods.
- Operational maturity – how long have they been in business? How long have they been supporting the channels that matter most to you?
- Scalability – do they have the capacity to take on your business now, and your business in five years?
- Technology visibility – get a demo account of their tool, ask to gain access before you sign anything.
- Long-term partner stability – talk to other customers of theirs! It’s not unheard of to ask for referrals; make sure they are similar businesses to yours.
Bottom Line: Cheap Is Expensive
What is at stake if your 3PL can’t keep up with your growth or your customers needs? The cheapest 3PL often becomes the most expensive partner once hidden costs show up.
The best fulfillment partner protects revenue, supports growth, and helps you scale without operational chaos.
This post was written by Maureen Walsh, Marketing Director at DCL Logistics. A writer and blogging specialist for 20 years, she helps create quality resources for ecommerce brands looking to optimize their business.
