Selecting a Third-Party Logistics (3PL) provider is a critical decision that impacts your supply chain, customer experience, and long-term growth. Below is a comprehensive guide to help you evaluate and choose a 3PL partner that meets your current and future logistics needs.
Choosing a 3PL provider involves detailed research and a thorough understanding of your logistics needs. By systematically assessing each area—technology, location, financial stability, communication, and scalability—you can select a partner positioned to support your business’s growth and operational efficiency.
With that in mind, is your fulfillment running smoothly? Perhaps you haven’t checked in with your fulfillment center for a while after becoming complacent to their procedures. If you’re starting to notice a few things slipping in maintaining your delivery services, it’s time to visit the warehouse and ask some serious questions.
After you address these questions head-on, it’s important to maintain a good relationship to avoid having to seek another 3PL warehouse for logistics improvement.
Maybe you’ve solved the inventory problems, but what about the method of getting your products to customers? Are customers starting to receive those items later than intended? If so, it’s time to look into what’s happeHolding Your Fulfillment Warehouse Accountable
With that in mind, is your fulfillment running smoothly? Perhaps you haven’t checked in with your fulfillment center for a while after becoming complacent to their procedures. If you’re starting to notice a few things slipping in maintaining your delivery services, it’s time to visit the warehouse and ask some serious questions.
After you address these questions head-on, it’s important to maintain a good relationship to avoid having to seek another 3PL warehouse for logistics improvement.
Statistics show that 39% of all retail companies face problems with accuracy in delivering products to their customers. This falls squarely on the fulfillment center you work with, and you may notice too many errors lately.
After several order errors, it can quickly start to erode trust with the customers you’ve worked hard to acquire. While you’ve already invested a huge percentage of your budget into labor expenses, this extra cost is essential to make sure the fulfillment center gets things right.
It’s time to do an audit of the warehouse you work with if you see too many inaccuracies in orders lately. More than several in a week’s time should become a red flag.
Not being able to fulfill an order becomes even more of a frustration for your customers. The job of your fulfillment center is to make sure they relay what your inventory is so your cart inventory matches your on-hand inventory. Having to suddenly tell a customer your product is out-of-stock after they’ve placed an order is true retail anathema.
Getting your products sent to the warehouse from suppliers and manufacturers is another problem that might start to lag. Call your suppliers and find out what’s possibly occurring to slow down deliveries. Having constant low inventory immediately sends a message to consumers you’re not keeping your operations running optimally.
You always need a good return policy if you’re dealing in e-commerce. Your fulfillment center should deal in reverse logistics to make sure all returns go smoothly. The only way to make this happen is to assure the warehouse has the best technology to track information on inventory levels and to liquidate items.
Making sure fulfillment communicates this information to you helps you save money and time having unsaleable products stack up in the warehouse.
The contract that you originally signed with your 3PL provider may no longer suit your needs. As your business changes and grows, so must the contract that you have with your 3PL partner. You may also find that the fulfillment center isn’t meeting all of the initial expectations of the agreement – so it’s important to review a few times per year to be certain.
Your contract defines the terms of your relationship with your 3PL provider and lays out each party’s responsibilities. As you learn more about the logistics solutions your business needs and as you gain more experience in the 3PL industry, you’ll be able to negotiate more favorable contract terms over time.
When you do review your contract’s terms, keep in mind that contracts aren’t in place for the good times, they’re in place to protect both party’s interests no matter what happens in the future.
All too often contracts get renewed without making significant enough changes to meet the needs of the businesses who are signing them.
One of the most important things you can do to manage your relationship with your 3PL provider is to meet with them regularly. During these meetings you should be reviewing their metrics, evaluating their performance and discussing improvement strategies where needed. We recommend holding these meetings every month or every quarter.
By having pre-scheduled meetings with your 3PL provider, you’re able to stay on top of their numbers and performance before there’s an emergency.
When you hold your 3PL provider accountable in the short term, they’ll take your business more seriously and will be less likely to make mistakes when handling your goods.
Now, if you don’t know what metrics to talk about in your meetings or how to evaluate the 3PL’s performance, then read on.
Data and analytics reports are a standard in the modern 3PL age we live in today. This is a fantastic benefit for your business because you’re able to see the numbers and judge your 3PL’s performance based on facts, not feelings.
Reading metrics is essential for any company to get a 360-degree view of what’s happening. Don’t ignore the analytics in your fulfillment center since it can tell you so much. Especially look at their 3PL KPI’s (Key Performance Indicators) where you’ll see some clarity on what the warehouse is doing and what their performance outlook is. Accountability and performance are important aspects of any business relationship, but when it comes to your 3PL partner, they’re especially important.
Here’s what you should look for when you’re evaluating your 3PL provider’s capabilities:
Beyond the metrics and the numbers, your 3PL provider should be providing quality customer service to you and your team throughout the relationship.
In addition to the regular meetings you’ll be holding with your provider, your requests for information, phone calls and emails should be responded to promptly and professionally.
Logistics is about organization and execution. If your 3PL provider isn’t able to respond quickly with the data and answers you need, then their priorities and organizational skills could be called into question.
Even if you find one you think you can work with, the warehouse could have problems in the future. Sometimes it’s impossible to know whether a fulfillment warehouse is going to have issues until the time actually comes. They still usually show warning signs, which you can scope out in part during vetting. Then again, if you’ve already signed a warehouse contract in 2016, it pays to keep an eye on some red flags in the coming year. Conducting annual assessments with your warehouse usually helps find some of the most egregious issues.
Here’s some warning signs you’re with the wrong third-party fulfillment company so you can take heed and move on before becoming a bigger problem.
While this is a common issue, it’s something to still take seriously. Maybe you haven’t made an effort yourself to keep in contact with your warehouse for a while. Or, maybe you have, yet the fulfillment company hasn’t bothered to return your calls, emails, or texts.
If not, it’s an immediate sign they don’t take communicating with you seriously. When this happens, it’s a surefire sign your partnership isn’t going well. You can’t work with a warehouse and not have a good working relationship. They’re basically your other business half, and communicating every day is essential.
With this relationship, you need transparency, and any tendency to cover up things is an immediate sign to look elsewhere.
Any lack of organization in the warehouse could lead to improper billing that creates constant confusion between you and customers. Much of this has to do with technology weaknesses and using paper-based systems. Digitizing documents is important now to prevent discrepancies.
All it takes is a mistake in charging too much on shipping, or not properly addressing your own bills, to create major downtime finding errors. Because you’re already busy keeping your business afloat, you don’t want to waste hours or days locating where a mistake occurred. Your warehouse might not cooperate either, making things worse.
A 3PL (Third-Party Logistics) partnership involves a business working with an external provider to manage supply chain tasks such as warehousing, order fulfillment, transportation, and inventory management. This arrangement helps businesses handle logistics needs more efficiently.
A 3PL partnership is beneficial if your business is growing, expanding into new markets, or lacks in-house logistics expertise. By outsourcing logistics, you can focus on other business activities while receiving professional support for complex operations.
3PL partnerships offer cost reduction (outsourcing logistics reduces the need for additional warehousing space and personnel), access to technology (many 3PLs provide tools for tracking and reporting), and expertise (3PLs bring experience in logistics management, handling tasks like warehousing and shipping efficiently).
Possible disadvantages include loss of oversight (working with a third party can reduce direct control over inventory and distribution); upfront costs (initial expenses may be significant for smaller businesses), and communication and integration needs (partnering with a 3PL requires compatible systems and effective communication, which can sometimes be challenging).
Depending on your logistics requirements, alternatives include in-house logistics (managing warehousing, fulfillment, and distribution internally), shipping software solutions (using software to sync orders, manage shipping, and track deliveries), and using smaller fulfillment companies (some regional fulfillment providers offer more personalized services suited to smaller or niche businesses).
Evaluate your logistics needs, growth plans, and internal resources. A 3PL partnership can be useful for businesses prioritizing efficiency and professional logistics management, but it’s essential to ensure your goals align with those of the 3PL provider.
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