If you run an ecommerce business and find yourself drowning in order fulfillment tasks or burdened by logistics demands, you might want to consider partnering with a third-party logistics provider (3PL).
A 3PL is a company that provides expert supply chain solutions that fit the needs of your business. The biggest benefit of outsourcing logistics is the ability to allocate company resources most efficiently—that means your 3PL handles all-things logistics, and your time can be spent on sales, marketing, fundraising, manufacturing, or product development. That doesn’t mean, though, that you should blindly partner with the first 3PL you come across, particularly since a logistics provider typically has direct contact with your customer base. Outsourcing logistics support provides many benefits, but there are some key things to consider about how to choose the right 3PL for your business. Here are some of the most important do’s and don’ts to consider.
Advice to Follow When Choosing a 3PL
Consider Location
The location of your 3PL partner, and their fulfillment centers, should suit your overall distribution plan—it’s important that they are close to your high consumption area. The closer you are to your partner, the easier it will be for you to manage them and work together. The closer your products are to your customers, the more efficiently you’ll be able to ship to your customers.
Check the 3PL’s Ability to Scale
Consider your future when choosing a 3PL provider. If you expect your business to grow, you should work with the team that can handle the type of growth you plan for. If you predict massive order volume increases, can your 3PL partner handle it? Do they have the warehouse space and personnel necessary? Do they have online systems in place to keep orders organized and get things out the door as efficiently as possible?
Define KPIs
Develop a set of highly descriptive key performance indicators (KPIs) that include precise times, quantities, and other numerical measurements so that your team and your 3PL are both striving to accomplish the same goals. Being clear on your current and future business requirements is an important step in partnering with a 3PL.
Establish a Reporting Schedule
In addition to giving you consistent access to the measurements you value most, the consistency with which your 3PLs stick to this reporting schedule is another good measurement of their ability to meet your company’s needs.
Check Their Technological Capabilities
Does your prospective 3PL partner have a good warehouse management system? Is their material handling automated? Do they have the technology necessary to handle accurate warehousing processes? Does their system provide accurate inventory reports? Can they provide live inventory checks? It is important to work with a 3PL partner that uses the latest technology and equipment.
Take a Tour of Their Fulfillment Centers
By meeting your 3PL partner you will get a feel for the company culture and work ethic of employees. Tour the facilities too! You’ll have a much better understanding of what your products will look like on the shelves, and how they will move through your 3PLs systems. Talk to management about how employees are incentivized, and get a feel for their level of honesty, trustworthiness, and sincerity. Are they passionate about the business? Is customer service a priority? Ask these questions to get a better insight into how your business and products will be handled.
Limit the Number of 3PLs that you Consider
Give your 3PL search strict parameters. Instead of looking at all 3PLs possible, limit your considerations to providers who work specifically with companies like yours—whether that’s food businesses, consumer electronics, or international manufacturers. If you open your options too wide you may miss on the intricate details that you need to find the right fit. Keeping your list short will allow you to deeply evaluate each option and identify the partner most suited to your needs.
Things to Avoid When Choosing a 3PL
Don’t be Afraid to Compare 3PLs
Consider compiling a set of performance reports that rank all of your 3PLs based on the same metrics. Knowing how they stack up against the competition can be a powerful incentive for 3PLs to either improve what they’re doing or keep up the good work.
Don’t Bargain Shop
Be careful not to choose a 3PL provider solely because of their competitive prices. Although this is an important part of 3PL selection to consider, you should not compromise quality. If the 3PL provider does not have successful and quality processes in place, your business will suffer in the end.
Don’t Enter into a Long-Term Contract
If the service levels dip at all during your time with the 3PL provider you should be able to leave. This is why it is important not to fall into the long-term contract trap. If you are stuck with a company that can’t accommodate your growth, it might impede business growth. More and more ecommerce fulfillment companies are moving to month-to-month or a 3-6 month term for their contracts which may be a better option to consider.
Don’t Rush the Partnership
It is important to do proper due diligence of the 3PLs you are considering accordance to the unique needs that your business has. Check for important things like safety, scalability, flexibility, and quality standards. As the 3PL for references, connect with your network, and get honest opinions for outside parties. Sign on only when you are fully satisfied. Not only will this give you deep knowledge of your 3PL, it will begin to build trust in your partnership.
Bottom Line
There is so much to consider when choosing your 3PL provider. Making the best decision will mean weighing many pros and cons, but choosing the right 3PL for your brand will improve your business processes and help your company grow.
If you are considering partnering with a third-party logistics provider we would love to hear from you. Send us a note to connect about how DCL Logistics can help your company. You can read DCL’s list of services to learn more, or check out the many companies we work with.
Tags: KPIs & Metrics
