There are many reasons to outsource logistics and supply chain management instead of handling it in-house, whether you are a large manufacturer or a small ecommerce business. Even if you’re a startup or small business, there are 3PLs who can help support your growth.
However just as there are hundreds of 3PLs (third-party logistics providers) to choose from, finding the one that suits your requirements can seem daunting.
One of the first things you will need to do is define your objectives clearly. Why do you need a 3PL provider? Who on your team will be the point person to manage communicating with your 3PL? Do you want them to handle a particular product, region, or location?
Once you clarify all your needs, it will make choosing a third-party logistics company much easier.
The following list of must-haves should help you choose the right 3PL service provider for your business.
Advanced Technological Capabilities
Your 3PL should be able to provide insights for you and connect the many software systems needed to follow an order through the supply chain.
They should have the necessary technology to automate and integrate into your order routing and storefront warehouse management and inventory management software. Questions to ask a potential 3PL:
- How do you invest in technology? Have you developed a new application to improve your systems? Or do you only maintain legacy systems?
- Are you keeping up with the latest technological developments in the 3PL industry?
Make sure the technology is sophisticated enough to handle your product flow, and also user-friendly for you and your team to quickly adapt. Their technology solution should be able to scale as your business expands, when demand rises during the holiday season, or when new industry technology is introduced.
What drew me in to work with DCL is that the team is staying ahead of the curve, they have a multi layered structure of technology and systems and core business processes—it’s clear they are speaking from experience on everything.
Data Transparency
Your 3PL should be your partner in logistics operations, and be willing to share necessary data about the supply chain with you. This kind of transparency is the best way to establish trust. Data will be helpful for you to make decisions when issues arise, or when your business goes through inevitable changes (like sales growth!). For example, a 3PL will be privy to a shipper carrying fragile goods at a lower cost, as well as the percentage of damages along the freight route.
Your 3PL should inform you of difficulties such as carrier errors, transportation delays, faulty reporting, data irregularities, and product return claim abuse. This proactivity is more important than cheap 3PL costs. Make sure you ask hard questions about they type of data your potential 3PL collects and openly shares with their clients.
Strategic Location
It is optimal for shipping cost reduction to choose a 3PL close to the location of your target consumers. Their fulfillment centers will shorten the length of the shipping route, providing transportation cost savings. They will also have a better understanding of local traffic fluctuations and seasonal changes in transportation availability, resulting in accurate and on-time delivery.
If you plan to need to visit your warehouse space often, however, choosing a 3PL with facilities closer to your office is likely going to be best. Any extra shipping cost accrued for shipping across the country will likely be worth the peace of mind you have by being close to your product.
The more strategically-placed warehouses and fulfillment centers that a 3PL has, the more cost-effective they will be on shipping. Strategic placement means being in major cities (for population density) or close to accessible transportation routes (ports, airports, major highways, etc) . However, you can’t compromise the location with the quality of service. The carrier still needs to provide you with on-time performance, lower product damage, billing accuracy, and fewer delivery irregularities.
Reputation and Experience
You shouldn’t overlook the reputation and experience of a 3PL. Once a 3PL starts handling your logistics, your reputation goes into their hands. Plus, it’s a long-term commitment that requires considerable investment of both time and resources. It is better to know in advance of signing a contract what a 3PL’s reputations is.
How to research a 3PL’s reputation:
- Do they have positive reviews online?
- What kind of clients have they worked with before?
- Seek out other companies and brands who use that provider. Ask them how they are treated.
- If you are in conversation with a 3PL ask if you can speak to a few employees. Are they happy with their job? Are they treated well?
- Are there any reviews of crisis issues? How do they respond? Which regions do they cover? Do they own the land where their warehouses are?
- Do they have established long-standing relationships with carriers and freight forwarders?
- Are their rates competitive?
- How good are their safety ratings and insurance?
Get answers to all these questions before taking the next step. It is always preferable to work with a 3PL that has a stellar reputation in your niche. It should also have at least a couple of years experience. Thorough research is key here.
It’s been helpful to have a partner who can handle the warehouse and logistics side of our business for us. I think the team is very knowledgeable. They bring experience fulfilling to different retailers that has made this a very steady area of our supply chain, from launch until now.
Bottom Line
Outsourcing logistics services to a 3PL can lead to overall cost reductions as well as improve your customer service. However, you need to make sure that the 3PL you partner with is capable of providing all the necessary functions discussed in this article. The search for the right 3PL should start by clarifying your needs, and include thorough research.
If you’re looking for help with outsourcing your order fulfillment, send us a note to connect about how we can help your company grow. You can read DCL’s list of services to learn more, or check out the many companies we work with to ensure great logistics solutions.
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