This article was written by Matthew Hertz, founder of Second Marathon, a full service 3PL matchmaking service, helping ecommerce brands of all sizes find their first or next 3PL. He takes great pride in finding a good cultural fit between brands and 3PLs.
For the last seven years I have been wholly focused on solving one problem: helping brands and 3PLs establish long term partnerships.
Why is this a problem that so many brands experience? While the answer is most nuanced, it comes down to two important factors:
- Brands are poor at both discovering and qualifying 3PLs
- 3PLs are ineffective at differentiating themselves
As you can deduce, these factors are related. This is where I have been able to create value in the ecosystem by determining how to present, or personify both the brand and 3PL, and consequently make effective long term matches.
Brands are poor at both discovering and qualifying 3PLs
Let’s start with the first problem.
Why is this? Well, for one, there are many, many 3PLs. By our estimation there are over 10,000 in the United States alone. It is a highly fragmented market. Further, unlike many fragmented markets (think pizza places), there is no dominant player (e.g. Domino’s, Pizza Hut). No one player with even 5% market share. All this makes for a difficult task in sifting through the options to find the right partner.
What makes matters worse is that brands are not good at vetting, or qualifying 3PLs. They do not know the right questions to ask (which is exacerbated by 3PLs not knowing the right questions to ask of them).
Far too many brands believe that finding their 3PL is like finding a hotel for the weekend. Something that can be done very quickly, at any hour of the night, by Googling two or three common statements, such as, “Best 3PL in New Jersey”, or “Best eCommerce fulfillment company”. Finding your 3PL is very similar to the dating phase leading up to marriage. Just like most couples date for a period of time, ask many questions, get to know one another in great detail (even if the initial match was made digitally), so too should brand and 3PL get to know each other.
Unlike finding a place to stay for a weekend where a quick perusal of images on a website is sufficient, the sourcing stage of finding one’s 3PL should be much more thorough and thoughtful. Afterall, like marriage, the expectation most brand owners have entering a relationship with their 3PL is that it will last for a very long time.
So what questions should be asked during the Brand x 3PL dating phase? For starters, using volume, SKU count, and sales channels as the primary screening criteria is insufficient. Using the dating analogy, that’s like relying on age and physical attraction as the primary factors in finding a partner. Undoubtedly these are important factors (volume and SKU count, as well as age and attraction), but if one relied on those two factors alone, the likelihood of a long-lasting partnership is slim. So which other factors are important?
Beyond the hard data questions covering everything from a brand’s order volume to SKUs, product category, and sales channels, a brand must focus on what’s holistically most important to their day-to-day operations. The culture of your operations should take a front seat when vetting a 3PL. How do you like to communicate? Do you want email updates, to jump on a phone call, or connect via Slack? What does account management look like to you? And how often do you anticipate using your account manager? Have you visited the facility and met the team on the ground?
If I had a nickel for every time a brand asked who’s the best 3PL in X, Y, or Z city or state, I’d have more than a few dollars in my pocket. It’s not the best way to seek out a 3PL partner because it’s too strong of a filter on the market. But it’s an easy mistake to make and I understand why it’s so common. I recall in my early days leading Supply Chain at Birchbox, selecting a partner that was physically close to our HQ in NYC seemed of high importance. Our team felt we needed to visit at a regular cadence. Why did we need to visit regularly? Because of poor operational performance. It wasn’t until we removed this filter that we were introduced to many more 3PLs, who could perform to our standards, and negated the need to be a short commute away.
If brands limit their search by geography, they are vastly limiting the number of qualified partners. A more important guide to follow is which value-adds and core services does the 3PL offer and how does that match my brand needs?
3PLs are ineffective at differentiating themselves
Now onto the second problem.
Why is this? Well, having visited hundreds of 3PL websites I can tell you that they all pretty much look the same and say the same things: “We do ecommerce Pick and Pack…. We can store your inventory….We offer inventory management.” Well, of course you do! That’s like a hotel’s website stating they offer toilets in their rooms or there is elevator access to get to the 8th floor. In addition to all the stock imagery of associates (usually men) holding clipboards standing in front of pallets. There are very few websites that are actually inspiring and informative.
But then there’s the actual sales cycle and the inefficiencies there. The lack of clear, consistent, and timely communication are nefarious flaws. Back to the dating analogy—if you start seeing red flags with a 3PL early on, it’s probably not the right fit. Say a brand asks their salesperson or account manager certain follow-up questions, but the 3PL sits on them for a few days. This could signal that the 3PL doesn’t view the brand and its partnership as important or that they’re too busy to provide the service a brand expects.
It’s on 3PLs to create the trust and honesty that brands desire. From what I’ve experienced over the years, brands don’t like talking to a salesperson trying to close a deal. We find the most successful calls between brands and potential 3PL partners include a diverse group of people. In successful calls we often see a salesperson along with a representative from solutions or operations, and, depending on the size and scale of the 3PL, an executive. This shows brands that they truly matter regardless of the size of their operation.
Thoughtful communication is an equally important piece of finding and vetting the right 3PL for your brand. It’s okay to say, “Hey, I don’t have the answer, but I’ll get back to you.” Hopefully a 3PL isn’t saying that too often, but it’s refreshing to know that they’re seeking out an answer that they may not have immediately at hand. Relationships are often hindered at the start due to poorly managed expectations.
There’s no question working with the wrong 3PL can be catastrophic for brands. It can cost them customers, future sales, and a lot of money. And the cost of switching providers and barriers to exit are extremely high. Brands should do their due diligence and find a 3PL partner that prioritizes communication that’s timely, transparent, honest, and consistent.
The best strategy for both 3PLs and brands to ensure a successful partnership is to remember it is a partnership—a two-way street. Ask questions, communicate openly and often, and familiarize yourself with each other’s businesses. More specifically, sign up for a brand’s marketing emails, or follow your brand or 3PL partner on their social media channels. Have conversations with the operations lead but also have standing calls with a brand’s marketing team to gain a clear picture and understanding of their promotional calendar and what they’ll need from their logistics team to be successful throughout the year.
Also, brands would benefit from thinking of 3PLs as an extension of the brand, not a separate entity. Often, that’s why partnerships fall apart. Brand leaders should visit their 3PL’s facility. They don’t have to go weekly, but depending on the size and scale of the business, they should go monthly or quarterly to check in on operations. Many brand leaders never set foot in a warehouse. But by visiting their 3PL, brand leaders can gain a deeper understanding and empathy for the logistics work being done.
Finding the right match is difficult, time-consuming and can be frustrating, and it is not a decision that should be corner-cut. While the market is huge and fragmented, there are many providers that may be right for you. Take the time to vet, qualify, and evaluate your prospective partner in order to stack the deck in your favor in having a mutually advantageous and long lasting relationship.
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Tags: Expert Advice & Tips
