How to Choose a 3PL Provider: What Capabilities to Consider For Your Business

How to Choose a 3PL Provider: What Capabilities to Consider For Your Business

how to choose a 3PL provider

Your 3PL provider can help your eCommerce business in various ways, from improving your customer service to increasing efficiency to reducing shipping costs. 

When choosing a third-party logistics (3PL) provider, there are several capabilities you will want to consider before you make your decision.

Let’s take a closer look at what you need to know before choosing your logistics partner.

Things to do When Choosing a 3PL

Before you choose your eCommerce business’s logistics provider, you’ll likely want to consider the following:

Do Your Research

Whether your eCommerce business will be working with a 3PL for the first time, or you already have experience in all a logistics partner has to offer, you’ll want to consider whether a provider is a good fit for your company’s specific business model. 

Do they have the ability to integrate with the systems and platforms you already use? 

What resources can they offer to your eCommerce business?

Establish a Partnership

For you to make the most out of your partnership with your 3PL, you’ll need a high level of data sharing, coupled with a great deal of communication.  

Your logistics partner should fully understand your values and priorities throughout the supply chain, including your needs and preferences regarding inventory handling and customer service.

Look for a Range of Offerings

The more your 3PL can offer your eCommerce company its capabilities, the more scalable your company’s growth will be.  Your logistics partner should be able to customize a variety of solutions to meet your company’s specific needs. 

Does your company need kitting, subscription box services, multi-channel fulfillment, or reverse logistics?  What will you need as your eCommerce business grows? You need to be certain that your majestic partner can handle your business’s ever-changing needs. 

Additionally, the various elements of your supply chain will work together more seamlessly when you have all of your logistics needs handled under one 3PL.  Plan now so you’ll be ready for your eCommerce business’s growth later.

Consider Getting Outside Help

While you fully understand the ins and outs of your eCommerce business’s logistics, you may not be familiar with exactly how a 3PL can help you scale and grow your business while reducing costs. 

Getting outside help while choosing a logistics partner may help simplify the process and minimize your own staff’s time commitment. 

You’ll want to seek out someone highly knowledgeable in logistics with a wide range of experience dealing with various 3PL providers.

Consider a Maximum of Three 3PLs

Because choosing a logistics partner is one of the most critical decisions your eCommerce business will make, you will want to conduct extensive research on your potential logistics partners.  

There are multitudes of moving parts in logistics, and it will be extraordinarily challenging to do a deep dive into a long list of potential partners. 

This is why once you’ve completed a basic evaluation and narrowed down the choices of logistics partners that fit your eCommerce businesses requirements, you’ll want to choose the best three and conduct an in-depth assessment.  

Define a Clear Process for Evaluating Potential 3PLs

When evaluating potential logistics partners, you’ll want to be clear on your eCommerce business’s needs.  

First, gather all the information about your business you will need.  Next, write down all of the questions that you may have about what a potential logistics company can offer. Then, get clear on the variety of services you are looking for a logistics partner to provide. Finally, compare your best 3PL options against each other head-to-head.

Questions to Ask Yourself

  • What are your company’s shipping, packaging, and marketing priorities right now?
  • Will these priorities be the same in three years, or do you anticipate them changing?
  • What qualities are most important to you in an eCommerce fulfillment partner?
  • Does your eCommerce company have special needs (eco-friendly packaging, special inventory conditions such as refrigeration) that must be considered?
  • What are your plans for scaling your business?

 

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3PL Capabilities to Look For

While researching potential logistics partners, it’s important to consider the capabilities you will need for your business.

Your prospective logistics providers must be experienced in the specific areas your eCommerce business requires.  Some 3PL’s excel in certain areas but are lacking in others. 

You’ll want to ensure your fulfillment company’s abilities satisfy both your business’s short and long-term needs. Otherwise, all of the onboarding and integration work your business will need to start with your logistics partner will have to be repeated when your eCommerce business outgrows your 3PL.

Technology

When researching potential 3PL partners, be sure to ask them about their Warehouse Management System (WMS).  

The technology your logistics partner utilizes handles every aspect of order fulfillment, so you’ll want to ensure your provider has enterprise-level technology. 

This sophisticated tech will streamline every process throughout your supply chain, from customer order to doorstep delivery. The technology should integrate with all your shopping cart platforms and order management systems, in addition to providing your eCommerce business with a real-time dashboard to allow you to make quick and accurate decisions in real-time.

Scalability

Can the 3PLs you’re considering efficiently scale their operations to fit your changing needs?

The right logistics partner will help your eCommerce business to grow seamlessly.  

Will your 3PL be able to handle increased sales volume, inventory, recalls, and customizations your business will need?  It’s just as important that your 3PL be able to handle your future business needs as it is for them to have the capabilities to manage your present-day logistics.

Another factor to consider is bi-directional scalability.  Why? This significantly impacts how efficient your supply chain will be. 

While your eCommerce business is growing, every company has ups and downs. Demand for your products can contract for a variety of reasons. While it’s important that your 3PL  handle sudden spikes in demand, they also need the ability to scale down during slow periods rapidly. 

A scalable logistics partner will continually make incremental adjustments as your eCommerce business requires.

Find a Provider That Commits to Continuous Improvement

Logistics is a rapidly changing industry, with innovations emerging all the time. 

3PL providers committed to excellent customer service and quality management are continually improving their technology, processes, and problem-solving to provide their customers with the best possible results.

Look for a Provider That Offers Omni-Channel Expertise

As your eCommerce business likely already knows, omni-channel retail is expected by your customers. 

You’ll want to choose a 3PL service provider that fully understands how to deliver the high-touch service experience your customers expect from your company. 

In addition to omni-channel expertise, you’ll want a logistics partner who has experience within your industry, business size, and business type.

Choose a Partner That Maintains a Network of Locations

Your logistics partner should take a strategic approach to their distribution center network to achieve optimal efficiency for both your current and future eCommerce business needs.

Seek Stability

Ask potential 3PL partners how long they’ve been in business. Because logistics is a rapidly changing industry, you’ll want a partner experienced in adapting to both new market conditions and industry innovations. 

Whether your eCommerce business’s supply chain is simple or complex, you’ll want to select a 3PL with both a history and a reputation for stability.

One clue is to determine how many long-term clients the 3PL has.  A logistics company with a roster of long-term clients has a lot going for it, while a 3PL with high client and employee churn is a red flag.

Safety and Security

Your 3PL must continually stay up-to-date with the latest safety initiatives to ensure the protection of your assets as well as the safety of personnel.  

You’ll want to ensure that your logistics partner has PCI, FDA, and DEA certifications and HAZMAT shipping certifications and that they stay up-to-date with the latest safety initiatives.   

Your logistics partner must take security seriously to protect your company’s data and safeguard your financial information.

Reputation

Your logistic partner’s reputation is built on the satisfaction of your delighted customers, in addition to their hard-earned reputation over time with their customers, shipping carriers, suppliers, and employees. 

Ask yourself these questions:

  • How do they treat their employees and vendors?
  • Are their online reviews generally positive?
  • How long have they been in business?

Ideally, your 3PL should be highly respected within the industry because when issues arise, your logistics partner will need to rely on the relationships they’ve built within the industry, with carriers and other vendors, and their in-house team.

Customer Service

What kind of service and attention will your eCommerce business receive once you’ve signed that contract with a 3PL provider? 

The ability to quickly identify problems and resolve issues with ease is the indicator of an effective logistics partner.  In addition, your ideal 3PL should provide your eCommerce business with solutions that can help you to calculate savings, track your orders and inventory, and other important features.

Ask the 3PLs you are considering for references, preferably from other eCommerce businesses with similar needs. You’ll want to look for consistent excellent customer service over a span of time.

Finally, don’t waste your time on a 3PL that can’t provide you references from clients who rave about their security, reliability, and flexibility.

Customization

No two businesses are alike, which is why your 3PL partner should be able to offer customized solutions based on your particular eCommerce business’s specific needs, seamlessly integrating throughout your supply chain.  

Your ideal 3PL partner should act as an extension of your eCommerce company, providing the same attention to detail and quality customer service your customers expect.  

From omni-channel capacity to branded shipping boxes, your logistics partner should have the capability to customize your business’s experience throughout your supply chain.

Accuracy

The accuracy of your inventory, shipping, and orders are all determined by your logistics company’s internal processes. 

The service and satisfaction of your customers should be a top priority for your 3PL partner.  

If orders are wrong, your customers will be disappointed, and returns will negatively impact your bottom line, costing you money and customer goodwill.  

Your 3PL’s accuracy rating should be 99.9%. Anything lower will be costing you money.

Responsiveness

Does the 3PL you’re considering prioritize responsiveness, customer service, open lines of communication, and constructive problem-solving?

You can often gauge a person or a company by how they respond when things inevitably go wrong.  A high level of responsiveness is critical in the event of disruptions to your eCommerce business’s supply chain or other problems. 

Before partnering with the logistics company, you’ll want to know how they handle difficulties as they arise.  You’ll also want to be familiar with how they respond to changes in your eCommerce business. 

In the event of a product recall, how do they track items which have already been delivered to customers? How will they handle changes in your company’s order volume, inventory, and destinations?  

How a 3PL answers these questions and plans for challenges can give you strong insight into how they would manage the logistics operations for your eCommerce business.

Final Thoughts

If you are thinking about outsourcing your fulfillment services, there are various factors to consider. 

However, if you do your research, working with a 3PL partner can streamline your eCommerce business, lower costs, and position you for future growth.

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