Splitting your inventory across multiple fulfillment center locations, known as distributed inventory, can offer many advantages to an ecommerce seller.…
Tips to Help Startups Choose the Right Third Party Logistics (3PL) or Fulfillment Partner
You’ve spent countless months, even years, developing and building your product. From the ideation phase to design and ultimately, to the manufacturing line. It’s likely that very little thought has been put into getting your product into your customers’ hands — retailers or individuals — and that’s okay. Finding the right third party logistics (3PL) company can play an integral role in your company’s ability to scale and deliver a positive experience for your customers.
There are a lot of good logistics companies to choose from, but finding the right one for your business can be difficult if you don’t know what you’re looking for. This article will explain some of the key elements that you should look for when evaluating third party logistics companies and the impact they can have on your business.
99% accuracy or uptime is the bar set by most technology companies, so why should logistics be any different?
The answer: it shouldn’t be. Delivering your products quickly and accurately is part of the customer experience. With over 100 million Amazon Prime subscribers, Amazon has set the bar for fast and accurate delivery.
While almost all logistics companies will tell you that they are fast and accurate, there’s no way to validate these claims. However, there are some key areas that can provide some assurance that their operations are solid and efficient.
- ISO 9001:2015 certification is the international standard that specifies requirements for a quality management system (QMS). While it’s not a requirement to be ISO 9001:2015 certified and most logistics companies aren’t, you can be assured that the ones that have the certification meet some of the highest quality control standards, as deemed by accredited certification bodies.
- Understanding and negotiating your shipping cutoffs should always be included in your proposal and contract. Do they ship on the weekends? What are their holiday hours?
- Control of the facilities and processes. The best way logistics companies ensure operational efficiency is to create and maintain the facilities and processes themselves. However, there’s been a growing popularity in 4th party logistics companies (4PL’s) where logistics companies outsource their business to other logistics companies. Essentially, 4PLs act as a broker, maintaining the business relationship, while the other logistics companies works behind the scenes to manage your products. This may not be ideal for startups as it creates another layer between themselves and the fulfillment and management of their products.
- Ask your logistics partner about their redundant systems in all their warehouses. Like your company’s servers, there should be a backup plan in case of some unforeseen power outage or internet failure.
Dedicated Customer Service
Your own benefits as a customer are often overlooked. Remember, the primary purpose of a 3PL is to take the chaos out the supply chain process and it’s important that you have a strong customer service team at the 3PL to be there with you at every step.
The responsibility of the customer service team is to help keep things in order, proactively communicate with you, tackle and fix problems on the fly, and most of all, keep your customers (buyers) happy. Think of the customer service team as an extension of your own team and company. Here are some things to consider when evaluating a logistics partner’s customer service:
- In-house versus outsourced. Often times, logistics companies outsource their customer service departments. The customer service group works in a separate office, sometimes in a completely different country, do not have physical access to your product, and may only be partially trained on the 3PL’s processes. While this may reduce some costs (for them, not you), it can create a whole host of issues.
- Dedicated account manager and response times. It’s important you work with an individual and/or team that knows your business and has account manager advocates located in the facility in which your product resides. It’s been recent trend that many 3PLs will have account management teams located in remote locations outside of the Distribution Center in which they are operating your business. Whether it’s troubleshooting, proactively identifying problems, or providing updates on your inventory, it’s key to have someone accountable for your business and a single point of contact.
Real-time Data and Business Intelligence
Real-time access to information about your business is imperative to stay competitive and successful. It’s important that your logistics provider understands this and provides you with the necessary tools to get information to help inform decisions regarding their supply chain.
Some 3PLs use their warehouse manage systems (WMS) to provide customers with information and send you raw data in excel or similar formats. While all the necessary data may be in there, it’s up to you to analyze and format the information that you’ll need. Also, a lot of this information is sent infrequently and by the time you receive it, the data is outdated. Can you imagine if Google Analytics operated in this fashion? Here are some questions you should ask when evaluating their business intelligence capabilities:
- What tools will we have to manage our inventory?
- What information is included in those tools?
- How frequently is the data updated?
- How frequently is the data sent?
- Can I pull and view the data myself?
With the explosion of e-commerce and the diversification of sales channels, the number of logistics and fulfillment technology companies to manage the growth and to connect all the services has grown exponentially. From EDI connections to retailers to shopping cart platforms, it’s critical that the 3PL you choose can properly connect and maintain the various services with their own.
During the evaluation process, it’s important to know which logistics and fulfillment technology services the 3PLs support and if they align with your own technology needs. They should be able to walk you through the setup process, layout any associated fees, and the time it will take from start to finish to execute the integration. In the case that they don’t support the services you need, they should be able to clearly articulate how they will do so.
Additionally, you’ll need to understand the level of technical support the 3PL can provide. Some 3PLs outsource their technical integrations and support to 3rd party services while others have dedicated in-house technical teams. For more complex setups or if you think the number of integrations and/or complexity of integrations will grow, it’s advised that you work with a 3PL that has an in-house team as they’ll be more suited to meet your daily needs.
Flexibility and Scale
Startups have the common goal to grow and build a lasting business. The 3PL partner you choose should align with your goals by having the ability to scale and provide flexibility to adapt to your business and operational needs.
There are two main factors when it comes to scale. First, you’ll want to know if the 3PL has the physical space to store your products now, and into the near future. They should provide you with details of existing capacity at their fulfillment facilities and how they’ll address expansion plans when your storage needs increase. Second, a 3PL should be be able to scale their operational output to match incoming customer and retail demand. A gradual increase in demand is one thing and can be managed with relative ease, but you want to work with a 3PL that has experience in managing hockey stick growth, seasonal spikes, and large promotions.
Most startups are constantly adapting strategies and tactics to meet customer and market changes. The 3PL you choose should have a similar mentality and be flexible to meet your business needs. Whether it’s integrating with a new e-commerce platform to making last minute changes to your packaging, the ability for a 3PL to be flexible can be critical to your business.
Here are some questions to ask your 3PL on the topic of flexibility and scale:
- What is your current capacity at the facility or facilities that my product will be stored and fulfilled at?
- Do you own or lease the facilities? If you’re leasing, when does the lease expire and what are your plans for space after that?
- Can you give me examples of clients that have had exponential growth and how you kept up with demand?
Finding the right 3PL company to manage your logistics and order fulfillment is one of many critical decisions you will need to make to ensure the long term health of your business. The right 3PL partner will properly support your businesses’ growth, help you navigate the complexities associated with logistics and supply chain, and ultimately, keep your customers happy by getting your products in their hands quickly and accurately.
While it may seem like a daunting task, it shouldn’t be. With proper preparation and asking the right questions, you should easily be able to identify the 3PL partner that’s right for you. Hopefully, these tips will help you with your preparation and decision making process. If you have further questions, contact our support team here. We’re happy to help you make the best decision for your business.