Ecommerce companies are always looking for ways to reduce costs and increase efficiency. Many companies have turned to outsourcing to a third-party logistics (3PL) provider to handle their supply chain needs. 3PLs offer a range of services such as warehousing, order fulfillment, and transportation.
While these services can be of great benefit to a company, it is important to properly evaluate any 3PL that you are considering to ensure that the benefits outweigh the costs. Here are 10 things you should do when evaluating a 3PL provider, whether you want to switch fulfillment providers, or not.
Quick Reference Criteria for Evaluating a 3PL Partner
| # | Evaluation Criteria | What to Look For | Why It Matters |
|---|---|---|---|
| 1 | Service Level Agreements | Clear terms on services, costs, and performance benchmarks | Sets the baseline for accountability |
| 2 | Cost Comparison | Total cost vs. in-house, including setup and tech fees | Confirms real cost-effectiveness |
| 3 | On-Time Delivery Rate | Historical delivery performance data | Signals reliability and consistency |
| 4 | Inventory Accuracy | Stock tracking precision, including in-transit inventory | Reduces delays and stockout errors |
| 5 | Order Fulfillment Speed | Average time from order to shipment | Drives customer satisfaction |
| 6 | Cost Savings | Direct and indirect savings vs. current operations | Validates the ROI of outsourcing |
| 7 | Complaint Resolution Time | Speed and quality of issue resolution | Protects customer experience |
| 8 | Employee Productivity | Orders processed, shipped, and delivered on time per worker | Reflects operational efficiency |
| 9 | Customer Satisfaction | Survey scores, reviews, and feedback trends | Measures end-customer impact |
| 10 | Revenue Impact | Additional revenue generated vs. 3PL costs | Ties performance to business growth |
Review Service Level Agreements
The first step in evaluating a 3PL provider is to review the service level agreements (SLAs). SLAs are legally binding contracts between the 3PL and their client that outline the services that will be provided and the associated costs. By reviewing the SLAs, you can get an idea of how well the 3PL is performing and whether they are meeting the agreed-upon service levels.
Compare Costs
The next step should be comparing their costs to those of an in-house operation. This will allow you to see if the 3PL’s services are cost-effective and if they are providing value for the money. Be sure to factor in any additional costs such as setup fees, technology fees, and transportation costs.
Analyze On-Time Delivery Rates
It’s important to measure the 3PL’s on-time delivery rates. This will give you an idea of how reliable the 3PL is and if they are meeting customer expectations. On-time delivery rates are especially important for companies that operate in industries where timeliness is critical.
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Track Inventory Accuracy
Another key metric to look for in a 3PL provider is inventory accuracy. This will give you an idea of how well the 3PL is managing your inventory and if they are able to keep track of the stock levels. It’s also important to measure the 3PL’s ability to keep track of inventory in transit, as this can be a major source of delays and errors.
Benchmark Targets by Metric
| Metric | Industry Benchmark | Considered Excellent |
|---|---|---|
| On-Time Delivery Rate | 95% – 98% | 98%+ |
| Order Accuracy | 96% – 99% | 99%+ |
| Inventory Accuracy | 95% – 99.5% | 99.5%+ |
| Dock-to-Stock Time | Under 48 hours | Under 24 hours |
| Complaint Resolution Time | Under 24–48 hours | Same-day |
Measure Order Fulfillment Speed
Order fulfillment speed is another important metric for measuring the ROI of a 3PL provider. This will give you an idea of how quickly the 3PL is able to process orders and get them out the door. This is especially important for companies that operate in industries where customer satisfaction is critical.
Calculate Cost Savings
Calculating the cost savings associated with using a 3PL provider can give you an indication if working with a 3PL provider is a good option for your business. This should include both the direct costs, such as warehousing and transportation, as well as the indirect costs, such as the cost of labor and technology. By calculating the cost savings, you can get a better idea of how the 3PL is helping your business save money.
Track Complaint Resolution Times
Looking at the complaint resolution times will give you an idea of how quickly the 3PL is able to resolve customer complaints and if they are able to resolve them in a satisfactory manner. This is important for companies that rely heavily on customer satisfaction.
Monitor Employee Productivity
Employee productivity is another great way to assess a potential 3PL provider. This should include the number of orders processed, the number of orders shipped, and the number of orders delivered on time. By monitoring employee productivity, you can get an idea of how efficiently the 3PL is operating.
Measure Customer Satisfaction
Customer satisfaction can be measured in a variety of ways, such as customer surveys, customer reviews, and customer feedback. By measuring customer satisfaction, you can get an idea of how well the 3PL is meeting customer expectations.
Track Revenue
Tracking revenue will give you an indication of how much additional revenue the 3PL is generating for your business. By comparing the revenue generated by the 3PL to the costs associated with using them, you can get a better idea of the overall ROI.
Bottom Line
Evaluating a 3PL provider is an important part of making the decision to partner with one, choose in-house fulfillment, or look to switch fulfillment partners. By following the steps outlined above, you can get a better idea of how well the 3PL is performing and if they are providing value for the money. With the right metrics in place, you can make an informed decision about whether or not to continue working with the 3PL provider.
DCL Logistics operates its own facilities rather than subcontracting fulfillment, which keeps the performance metrics a prospective client reviews tied to a single accountable operator. Its eFactory platform gives clients direct visibility into order status, inventory, and shipment tracking across all seven US facilities, and SelectShip typically returns 10–15% in shipping cost savings by shopping carrier rates at dispatch. The result is a partner whose order accuracy (above 99.8%), on-time shipping (above 98.5%), and inventory accuracy (above 99.5%) can be checked against live data instead of a sales deck.
Frequently Asked Questions
What benchmarks matter most when evaluating a 3PL partner?
The benchmarks that matter most are on-time shipping rate, order accuracy, and inventory accuracy. DCL Logistics maintains on-time shipping above 98.5%, order accuracy above 99.8%, and inventory accuracy above 99.5% verified through monthly cycle counts. Any 3PL under evaluation should be able to produce comparable figures with supporting data, not estimates.
How can a company verify a 3PL’s performance claims instead of taking them at face value?
Ask for real-time or historical reporting rather than a summary number. A 3PL with a client portal, such as DCL Logistics’ eFactory platform, gives clients direct visibility into live inventory counts, order status by channel, and shipment tracking across facilities. That level of access lets a company confirm accuracy and speed claims independently instead of relying on a quarterly report.
What technology should a 3PL provide for order and inventory visibility?
A 3PL should provide a unified platform covering order management, transportation management, EDI, and a client-facing portal. DCL Logistics runs this through eFactory, which combines OMS, TMS, EDI, and portal access in one system so clients can see order status and inventory across every facility from a single screen.
How much can a company expect to save on shipping costs by switching to a 3PL?
Shipping cost savings typically fall in the 10 to 15% range compared to managing carrier relationships independently. DCL Logistics achieves this through SelectShip, a carrier optimization engine that shops rates at dispatch based on origin, weight, and channel service requirements across both parcel and retail or B2B shipments.
What is a reasonable returns processing timeline for a 3PL partner?
A 48-hour disposition window from the time a return is received is a reasonable standard to hold a 3PL partner to. DCL Logistics processes returns on this timeline, which limits the amount of inventory sitting in an undetermined state and keeps restocking or disposal decisions moving without added delay.
Tags: Articles About Value Added Services, Omnichannel Fulfillment
