Choosing the right Third-Party Logistics partner

Young businessman taking a decision with arrows and question mark above his head

A scrupulous evaluation of a potential Third-Party Logistic partner is crucial. Take your time to do it right.

Third-Party Logistics provide personalized attention & service to customers. But, what do customers expect from them? The answer is quite simple: fast, low-cost delivery. A study found that 45% of the clients consider a fast delivery within 2 days and 35% within 3-4 days.

Which 3PL is right for your busines?

There are two types of Third-Party Logistics. Here are some fundamental givens of each one:

Small regional 3PL

Market size: 1000’s

Locations: One or two in the USA

Benefits: They are highly customized to your needs due to manual and automated processes; they tend to be operated by individuals or small corporations. Small regional 3PLs also afford lots of add-on services and flexible starting points

Consequences: They lack of geo-diversity as a result of the few locations and are less likely to own a SFP certification (Seller Fulfilled Prime)

Large/Global 3PL

Market size: 100’s

Locations: More than 3 locations in the USA and other parts of the world

Benefits: Customers probably get the package faster due to more flexibility and highly automated services providing a better experience.

Their technical capability is going to be substantially improved if we compare it to a small regional 3PL. Offering a faster return system is an excellent example of this tech savviness. Furthermore, they use seller fulfilled prime in Amazon.

Consequences: Their service is less cost competitive. Hence, they require a higher volume of orders

 

Did you know?

Amazon introduced the Seller Fulfilled Prime in 2015 when they targeted a few select businesses as a way to reward their higher performing merchants the option of fulfilling orders with the same benefits of Amazon Prime.

 

How do you realize if you are ready or not to partner with a 3PL?

 

If you are:

  • Running out of space in your business
  • Spending too many time on shipments
  • Spending too many time on returning products
  • Not outsourcing products within 2 days

Don't waste anymore time and get in touch with a Third-Party Logistic that is more suitable for your company!

But, If:

  • You have highly customized products
  • Customers ask for special handling requirements
  • You have insufficient capital for investing
  • You sell products that aren't speed dependent

Then you should wait before approaching a Third-Party Logistic.

Evaluation Criteria

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3PLs have a ton of additional services; it's not just storing and shipping products. Many of them specialize in a few services. Others claim there is nothing they cannot do. We believe you are better off selecting providers who have proven track records in those services most critical to servicing your customer. The right partner should be able to develop any reasonable remaining services necessary to handle your needs.

When deciding which 3PL is the right for you, ask about their capabilities.

  • Do they have similar customers like my company?

It’s critical to know the experience the 3PL has in handling products similar than yours.

  • Ask for key performance metrics

They should be able to show you a map of the USA and tell you exactly what kind of delivery expectations their particular location can achieve coast to coast.

  • How do they manage the return of a product?

Some 3PLs return products, some do not. You should orientate to the one who uses this Reverse Logistics in order to establish a better experience for your customer. If the client wants to return a product, there should be a communication chain with your fullfilment point.

  • Ask about their customer service

For example, if the customer wants to know the status of the product he purchased, you have to be able to answer him. Always keep track of products. Including a shipping label with a barcode in the good a customer bought that is linked to their account is the best way of letting your clients know the status of the item(s) they bought.

  • Ask about technological matters

The right technology eliminates the risk of the human error – and the right partner increases productivity! Asking the right questions about how these things get done will let vendors know exactly which 3PLs are good at what. Does your 3pl provider have a connection to the channels in the platform you are working with? Are they working directly with Shopify, Magento or any of those platforms? The more sophisticated the Third-Party Logistic provider is, the tighter integration that he has with each one of these platforms, and you ensure a great customer experience in terms of information flow.

  • Ask about reporting

Reporting on inventory movements providing financial and accounting services it’s essential. It’s not just shipping a package out the door and putting a label. There is a whole lot more.

  • Ask about cross-border capability

Cross-border is an increasingly tremendous business opportunity for US sellers willing to asset markets like the UK, Germany or China; it really makes the difference regarding expansion for your company.

You might also want to ask about costs.

  • Ask about cost per shipment

Cost per shipment is one of the matters you must take into consideration to know if you are able or not to work with a 3PL. Weight sensitive is an element that conditions your decision making. If you have a product that contains certain material that limits your work with a Third-Party Logistic, then you don't want to handle that product anymore.

  • Ask for the cost of storing at their warehouses

3PLs tend to be more cost efficient for storage as they have a more relaxed model when it comes to charging for it.

  • Ask about the cost of returns handling and cross-border handling

It’s important to know how much they charge for returns in order to decide which 3PL suits better with your company, always taking into account your capital for investment.

Important considerations
  • Evaluate within 30-60 days if it's convenient for your company that you partner with a 3PL
  • Round down to 2 candidates and perform an onsite visit to their fulfillment facilities so you can see how they run their business. Take the time to meet your potential 3PL partners. Nothing can replace spending time learning their history, their experience, what they do well, what they don't, and, most importantly, their culture
  • With who are you going to be working ? You are going to have an account manager assigned to work with your company, turning into an extension of your business - establish a good relationship with him!

Knowing some of these ins-and-outs of the logistics industry can make choosing the right Third-Party Logistic for your business a little bit easier. Don't forget to take your time to set the proper expectations before you seal the deal and, remember, you will succeed if you persevere.

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