How to Choose a Fulfillment Provider


Choosing a fulfillment provider (aka a “3PL“) is like choosing a car. You might be drawn to the make, model and color, but it’s what’s under the hood that keeps the car running smoothly. Pick the wrong partner and you are surely in for a bumpy ride. Choose the right 3PL and you will get to your destination smoothly.

Dave Tu, President of DCL Logistics, shares his insights on what he believes are the important considerations in choosing the right partner. Dave’s mission is to provide his customers with “Hassle Free Logistics so You Have Peace Mind”, which means relieving his customers of the pain and high cost of managing their own operation.

1. Pricing

A fulfillment center’s cost structure is usually a combination of inventory storage fees plus per-order charges such as pulling, packing and shipping. Make sure to get all pricing in writing and make sure payment terms are clear. It’s a good idea to model your pricing on a typical monthly invoice that outlines the number of orders, units per order, number of pallets locations, etc. This makes your fulfillment expenses more predictable and allows you to compare your proposals apples to apples.

2. Service Levels

Compare service level agreements (SLAs) for all aspects of your fulfillment program including receiving inventory, processing orders and shipping. Does your prospective fulfillment provider offer same-day shipping? What are their cut-off times? How many days does it take them to receive and put away your inventory? Ask potential fulfillment partners to provide statistics on the percentage of same-day shipping orders, order accuracy and inventory shrinkage.

3. Warehouse Locations

Warehouse locations are key to reducing transit times and shipping costs. Seventy percent of the U.S. population lives East of the Mississippi, so shipping from an East Coast or more centrally-located facility might make sense. However, if your product is manufactured in Asia and your goods are predominantly sent via ocean freight, then a West Coast solution might have merit. Shipping from two locations could also be a viable solution, although there made be added costs and complexities to weigh. Your potential partner should be able to help you analyze the best solution based on your unique requirements.

4. Integration Technologies

A fulfillment provider that uses state-of-the-art technology will make your life a lot easier. Look at their current technology and inquire about their future technology initiatives that both drive their operation and help enable you to do things easier. You don’t want to be anchored to a partner that is unwilling to invest in this area. Instead, you’ll want access to a robust customer portal, a platform with strong EDI capabilities, as well as an API for real-time shipping and inventory data. Not having this option results in managing your business through a rear view mirror.

5. Customer Service

Having an Account Manager who can walk the warehouse floor and act as your company’s advocate is a huge benefit to the success of your operations. This will be the most critical relationship you will have at the fulfillment center. Is this person dedicated to your account? Ask for references and customer service case studies. Speak to others who have done business with the fulfillment provider. In addition, you might want to search for unsettled complaints lodged with the Better Business Bureau to help in your decision making.

6. Flexibility

How do you fit in terms of customer size at the organization? Are you too small or large for their typical clients? Is your potential partner able to expedite an order or provide other special services like checking for defective products, repackaging an item, etc.? Flexibility, another component of good customer service, is hard to measure. Nevertheless, you will want to validate your fulfillment partner’s full scope of services by touring the warehouse, checking existing customer feedback and speaking with a few of their customers directly in the form of a recommendation.

7. Longevity

Choose a fulfillment provider with many years of experience in the business. A long track record indicates the company has effective leadership in place and the company is able to weather economic downturns. The last thing you want is a provider who closes their doors, giving you little time to transition your product to another fulfillment warehouse. This can be costly and puts you at risk of not being able to meet order commitments.

Bottom Line

Picking the right fulfillment partner is critical to your company’s time, reputation and bottom line. Choose the fulfillment provider with the longevity, locations, technology and customer service you seek.

Tags: ,