How to Choose a 3PL Supplier

If you have never worked with a 3PL (3rd party logistics) provider before, you may be unsure about how to go about finding and vetting one. There are significant benefits associated with 3PL warehouse services if you find the right partner. Following are various factors to consider when looking for a 3PL with which to partner.

Why Should You Consider a 3PL?

Businesses who sell a tangible product can save money by using a 3PL provider. In fact, 3PL services are so common that, 80% of all Fortune 500 companies use them, even though they clearly have the financial resources to provide those services in-house. Not only does a 3PL provide better cost control and increase cash flow but there are many other benefits. Companies who hire 3PLs gain access to a knowledgeable team with superior equipment and IT systems. The size and capability of a typical 3PL fulfillment center allows you to scale up when needed. Businesses can stay focused on their core competencies while a 3PL company uses their tools, technology and management software for continual improvement. It’s no coincidence that top businesses use a 3PL. But how do you go about finding the right partner?

Choosing a 3PL

There are many companies to choose from that offer 3PL services, but few that will be the perfect fit for you. A 3PL should work as a seamless extension of your business and ultimately make your life easier, not more complicated. In doing so, trust will be a key component in the decision-making process. Below you will find key points to consider and tips when choosing a 3PL logistics company.

Do Your Research

Start to search online for what options are available to you and learn what makes each unique. Look for a company with proven processes and capabilities with a solid reputation.

Experience Level

Are they the new kid on the block or do they have a demonstrated track record of success? When navigating their website look for case studies and examples of industries served to better understand what the company is capable of. If they have served large clients as well as smaller ones, they are more likely to have the experience level you need.

References and Reviews

It’s always a good idea to check out online reviews to get an idea of the good and the bad being said about a company, but be sure to sort out those that are customer reviews from those that are vendors, e.g. cranky truckers that may have had to sit in line to get to the dock, as a busy dock can often be a good sign for the 3PL’s customers.  Also ask your 3PL contact for references to get a first-hand account of their reputation.

Technology Considerations

Start asking questions about what technology they use and how it improves efficiency. Make sure that their technology works seamlessly with your current business operations and/or that their IT department has experience with complex systems integrations.

Consider Scalability

Ensure that your potential 3PL partner has the size and ability to scale operations to accommodate your future business needs, i.e. do they have warehouse and assembly capacity?

Continuous Improvement

Talk to your prospective 3PL providers to understand what they are doing for their clients to continually optimize processes to achieve desired results. Find out if they have a formalized process for constant improvement.

Look for a Stable Partner

When you partner with a 3PL, you’re trusting them with your brand. It’s important to choose a company with a history of success. Find a stable 3PL company that has demonstrated a history of stability, who also invest in their team, facilities, equipment and systems, and a solid financial foundation.

Volume

Does the 3PL in question have volume capabilities necessary to support your current volume? Will they have the ability once you increase those volumes? Can they scale with your needs?

Consider Their Company Culture

The 3PL’s ability to reliably deliver exemplary service depends heavily upon the level of motivation, commitment and engagement of the team delivering that service. A company culture that encourages employee participation in process improvement at all levels and that has a good employee bonus program are signs of a healthy culture.

Consider Location

Centralized locations, as well as warehousing and distribution centers near or en route to your vendors, distributors or production facilities, can also produce major transportation cost savings.

Network Considerations

3PLs that take a strategic approach to network configuration will help determine the optimal distribution center locations to meet your needs.

Value-Added Services

The more help a 3PL can offer you, the more efficient your supply chain will be.  Some of the value-added service offerings to look for include: kitting, packaging, warehousing, distribution, sub-assembly, cross-docking, private branding, parts inspection, breakdown and consolidation, repacking, sorting, critical order fulfillment and complex assembly capabilities.

Customization

An experienced 3PL will be able to offer customized solutions that work specifically with your unique business challenges.

Visit the Facility

When it comes time, visit the 3PL warehouse you’re considering to see, in person, what they are capable of. This gives you the chance to build face-to-face relationships and for the 3PL service provider to truly demonstrate their capabilities.

Establish a Trusting Relationship

Since sophisticated logistics solutions requires communication and data sharing, it’s imperative that you trust who you’re working with. Creating a trusting relationship with a 3PL that has compatible values and culture will allow for open discourse and better understanding of your organization’s priorities and goals.

Don’t pass your products off to just anyone who offers 3PL services. Your products are the representation of your company and your customers have high expectations. Don’t lose customers because you chose to go with the wrong 3PL warehouse. Get to know who you are entrusting your products to and rest assured knowing that your 3PL suppliers are working as hard to improve your bottom line as you are.