As your eCommerce business grows, managing order fulfilment in-house becomes increasingly challenging. To scale effectively, outsourcing your logistics to a third-party logistics (3PL) provider is often the best solution. But what exactly is a 3PL provider, and how do you choose the right one? This guide will help you navigate the process and select a 3PL provider that aligns with your business needs.
What Is a 3PL Provider?
A 3PL provider is a company that manages logistics and fulfilment services for other businesses. This includes receiving inventory, warehousing, picking and packing orders, and shipping them to customers. Some 3PL providers also offer additional services like returns management, custom packaging, and international shipping.
Choosing a reliable 3PL provider is critical for the success of your eCommerce business. Even if your product and marketing are exceptional, poor fulfilment can undermine your efforts and harm your reputation. Your 3PL provider should be more than just a service provider; they should act as a true business partner, supporting your growth and operational efficiency.
Key Factors to Consider When Choosing a 3PL Provider
1. Shrinkage Allowance
Shrinkage refers to the difference between the stock you send to the 3PL provider and what’s available for shipping. This loss may be due to damage, theft, or misplacement. Most 3PL providers have a shrinkage allowance—the percentage of loss they deem acceptable before reimbursing you. Aim for a provider with a low shrinkage allowance to minimise potential losses.
2. Performance and Accuracy Guarantees
Errors in order packing or shipping can cost you time, money, and customer trust. Some 3PL providers offer performance guarantees, compensating you for mistakes like incorrect packing or late shipments. Providers that prioritise accuracy and timeliness are essential for maintaining customer satisfaction. This will be covering under you service level agreement.
3. Returns Management
Returns are an unavoidable part of eCommerce. Efficient handling of returns ensures that products are quickly inspected, restocked, and made available for resale. A good 3PL provider will streamline the returns process, preventing delays that could impact your bottom line.
4. Compatibility With Preferred Carriers
Switching to a 3PL provider shouldn’t mean changing your shipping partners. Ensure that the 3PL has existing contracts with your preferred carriers and supports the shipping options your customers expect. Additionally, consider whether the provider can handle international shipments and manage the necessary customs paperwork.
5. Integration With Sales Platforms
Your 3PL provider should integrate seamlessly with your eCommerce platform, whether it’s Shopify, Amazon, eBay, or another system. Ask about software and the warehouse management system (WMS) they use and confirm compatibility with your technology stack. Integration streamlines operations and reduces the likelihood of errors.
6. Support Options
Responsive customer support is critical when partnering with a 3PL provider. Evaluate their support channels, such as phone, email, live chat, or ticket systems. Understand their response times and availability to ensure they can address your concerns promptly.
7. Cut-Off Times for Same-Day Dispatch
Fast delivery is a key expectation for eCommerce customers. Confirm the cut-off time for same-day order processing to ensure your customers receive their orders promptly.
8. Clear and Transparent Pricing
Logistics costs can add up quickly if your provider charges separately for services like receiving, pick/pack, and warehousing. Look for a provider with an all-inclusive pricing model to avoid unexpected fees. Ask specific questions such as:
Do you charge separate fees for receiving, pick/packing, warehousing, and shipping?
Are there any flat fees per order or additional billable items like stock counts?
9. Value-Added Services
Some 3PL providers offer extra services such as kitting, custom packaging, or branded inserts. These value-added options can enhance your unboxing experience and build brand loyalty. Confirm whether the provider supports customisation, such as branded tape or labels.
10. Shipping Options
Ensure the 3PL provider offers multiple shipping options, including domestic and international carriers. Additional features to look for include:
Shipment email confirmations with tracking information.
First Expiry, First Out (FEFO) capabilities for products with expiration dates.
11. Minimum Order Volumes
Some 3PL providers require a minimum monthly order volume, which could be problematic for businesses with seasonal fluctuations. Understand these requirements upfront to avoid penalties during slower periods.
12. Scalability and Flexibility
Your business needs will evolve over time. Choose a 3PL provider that can scale with you, whether through expanded warehouse space, advanced technology, or additional services. A provider that adapts to your growth ensures a long-term partnership.
13. Customer Service Capabilities
Some fulfilment centres offer customer service support, such as handling inquiries or providing real-time tracking updates. This can improve the customer experience and reduce your team’s workload.
Questions to Ask Potential 3PL Providers
Before committing to a 3PL provider, ask the following questions to ensure they meet your requirements:
What is your shrinkage allowance?
Do you offer performance guarantees? If so, what are they?
How do you handle returns, and what is the turnaround time?
Can you integrate with my sales platform?
What support options do you provide, and what are your response times?
What are your order cut-off times for same-day dispatch?
Do you charge separate fees for receiving, pick/packing, and shipping, or do you offer an all-inclusive pricing model?
What value-added services do you provide?
Do you offer branded packaging or customisation options?
What shipping options are available, including international carriers?
Is there a minimum monthly order volume?
Can you support my business as it grows?
Do you offer customer service support? Download our free full Compare3PLs.com 3PL questionnaire below to help assist you on your next 3PL enquire meeting. This handy check list is your ideal companion in screening your next 3PL provider.
Why Choosing the Right 3PL Provider Matters
A 3PL provider isn’t just a logistics partner; they’re an extension of your brand. Their performance directly impacts customer satisfaction, which in turn affects your reviews, reputation, and repeat business. Choosing the wrong provider can lead to inefficiencies, lost sales, and customer dissatisfaction.
Tips for Making the Right Decision
Research Thoroughly: Use comparison websites like Compare3PLs.com to evaluate providers based on over 150 data points.
Start With a Free Trial: If possible, test a provider’s services before committing to a contract.
Plan for Growth: Select a 3PL provider capable of scaling alongside your business.
Conclusion
Choosing the right 3PL provider is a critical decision that can make or break your eCommerce business. By considering factors like shrinkage allowance, integration capabilities, and value-added services, you can find a provider that aligns with your needs and supports your growth.
Don’t rush the process; take the time to research, ask questions, and evaluate your options. With the right 3PL provider, you’ll not only streamline your operations but also enhance your customers’ experience.
To simplify your search, visit Compare3PLs.com to find the perfect match in just five minutes. Let’s set your business up for success with a 3PL provider that’s truly a partner in growth.
