Outsourcing supply chain operations to a third-party logistics provider (3PL) can significantly help businesses scale, save money, increase efficiency, and improve customer service. Most importantly, it allows businesses to focus on their core development and goals without getting bogged down by the day-to-day challenges of managing a supply chain.
Choosing a 3PL provider isn’t an easy decision. It’s also a critical one to get right. A 3PL partnership is a substantial investment that can take months to implement, so it’s worth investing the time to ensure the provider is the right fit. Doing so can save significant amounts of time, money, and headaches later on.
There are nine key considerations businesses should keep in mind when evaluating a potential 3PL provider. While this is by no means an exhaustive list, it provides a good starting point. Each business situation is unique, and additional research and vetting can always go deeper. However, these considerations will guide you in choosing the right 3PL provider.
How to Choose a 3PL Provider
Know What to Look For and Ask the Right Questions
There are numerous 3PL companies out there, each offering different services, expertise, and specialisations. Important characteristics that set some above the rest include reliability, handling times, inventory management, scope of services, carrier relationships, small parcel rates, current clients, and specialisations.
Businesses should carefully evaluate different aspects of their operations and ensure that a 3PL provider can accommodate any specific needs — whether it’s Fulfilment by Amazon (FBA), food-grade warehousing, fulfilment centre locations, or e-commerce fulfilment. Ideally, a 3PL provider should not only be able to handle a business’s unique needs but also have a proven track record of doing so in that business’s specific industry.
Take an In-Depth Look at a 3PL’s Technology
Whether a business uses an off-the-shelf shopping cart system or a custom-built ERP inventory management system, the ability for a 3PL provider to seamlessly integrate with existing technologies and processes should be a core consideration.
A 3PL provider’s technology should make operations easier and more efficient while increasing visibility across the entire supply chain. This visibility should go beyond basic metrics and provide actionable data to inform timely business decisions.
Quality data makes all the difference, especially in industries that experience peak seasons and dramatic fluctuations in demand. The better the data, the better the decisions, and vice versa.
Evaluate Scalability
Assuming everything goes well, outsourcing to a 3PL provider is a long-term commitment with substantial investment behind it. The needs of a business today may not be the same tomorrow. Growth is almost always part of the plan, and businesses will want to choose a 3PL provider that can scale along with their growth curve.
Much of scalability comes down to a 3PL provider’s capacity, where more is almost always better. The greater the capacity, the better the ability to accommodate business growth and manage unexpected surges in demand effectively.
Evaluate Stability
A steady supply chain is a profitable and successful one. Economic fluctuations happen, and when they do, businesses with a steady supply chain have a much better chance of coming out on top.
A newer 3PL provider may be able to handle fluctuations, but there’s no substitute for a proven track record. Veteran 3PL providers will have more experience to back up their sales claims. Even then, it’s still a good idea to put in extra due diligence.
If possible, businesses should ask for a prospective 3PL provider’s current customer list to use as references during the selection process. This will help ensure that a potential 3PL provider has a history of reliable methods, practices, and relationships.
Look at Capabilities and Specialities
Every industry has its own unique set of warehousing, transportation, distribution, and fulfilment needs. Most 3PL providers handle a variety of industries, but some are more specialised in certain areas than others. Businesses should strive to choose a 3PL provider whose core competencies and abilities align with their specific industry.
Here are some examples of industry-specific considerations: Is a 3PL provider familiar with the industry’s peak seasons and can they handle surge volumes? If it’s an industry with a high rate of returns like apparel, how well can they manage reverse logistics? If kitting, assembly, or light manufacturing are required, can they meet those needs efficiently? Can they ship internationally? And can all those capabilities be scaled to meet business growth or sudden fluctuations in demand?
These are all important questions to ask during the vetting process.
Consider Brand Image and Customer Service
Brand image is another crucial factor when choosing a 3PL provider. Partnering with a 3PL provider means more than moving freight; it involves trusting them with brand representation, often at the customer service level.
Outside of retail locations, a customer’s most tangible interaction often ends with the 3PL provider — whether it’s a package sitting on a doorstep or a truckload pulling into a receiving dock. The right 3PL provider should care about a business’s brand image and support the level of service provided to customers, if not improve it.
Customer service, responsiveness, and communication should be among a good 3PL provider’s highest priorities. The best 3PL providers will practice continuous improvement and suggest and implement best practices to help businesses stand out from the competition.
Ask About Customisation
In most cases, businesses will already have technologies and processes in place before they choose a 3PL provider. Part of finding the best 3PL provider fit means finding one that can help a business leverage their existing technologies, industry experience, and processes to optimise what’s already there.
Shiny, new technologies and flashy warehouse management systems are great and have their place, but they can also be expensive to implement and take more time to get up and running. Finding a 3PL provider that offers custom software solutions that easily integrate with a business’s existing technologies helps everything get off to a better start. The more custom a 3PL provider fit can be, the better.
Look for Omnichannel Expertise
In modern commerce, consumer demand is fluid and dynamic across a variety of retail channels. Omnichannel distribution and fulfilment have become the new industry standard, and businesses need to be able to meet their customers at the right place, at the right time, while delivering the best possible customer experience.
That means finding a 3PL provider that can handle everything, from D2C order fulfilment and B2B retail distribution to subscription box fulfilment, and everything in between. An omnichannel 3PL provider should understand the nuances of a business’s distribution channels, adapt quickly between all of them, and deliver top-notch customer service every step of the way.
Ensure Continuous Improvement is a Priority
This is one of the most important factors to look for in a 3PL provider. Once a partnership has been established, a 3PL provider becomes an extension of the business they are working with. A third-party logistics partner committed to excellence and continuous improvement will use proven solutions and new data to constantly review, refine, and improve their processes. These improvements benefit the businesses they work with in the form of better results, enhanced customer service, and cost savings.
Finding the Best 3PL Provider
At Compare3PLs.com, we help businesses find the best 3PL providers on the market. We are the number one way to find your new 3PL provider. By comparing 3PL providers for you, we save you hours, if not days, of work. You can then filter the 3PL providers by what matters most to you, ensuring a perfect fit for your unique business needs.
We understand that hoosing the right 3PL can seem daunting, but Compare3PLs.com makes it easier by helping you find trusted 3PL providers that align with your business needs.
Partnering with the right 3PL will provide reliable logistics systems, enhance customer satisfaction, and drive business growth. Use Compare3PLs.com to find the best 3PL for your business on our free to use online portal and let the 3PLs come to you.
