Is your retail business on the hunt for a reliable 3PL partner? When you begin the search, you’ll quickly find dozens of options.
Many of them will seem great – but the truth is, some will drop the ball. Your goal is to properly vet each 3PL and become aware of the common mistakes to avoid, before making a final decision. Be sure to prevent getting stuck with a logistics provider that doesn’t deliver what your company needs.
How to choose your 3PL with care and caution
Here are 4 mistakes to avoid when evaluating a 3PL.
1. Hiring based on price.
Choosing a 3PL provider based solely on price is common but a big mistake. Yes, price is important, but it is not the only factor to consider. It’s common for some 3PLs to provide pricing much lower than its competitors to entice sellers into uninformed decisions. The result may be that you just chose a provider with a poor track record of service quality–or lacks the capabilities to meet your needs.
Another issue is hidden costs. A low-cost 3PL provider may charge hidden fees, which add up quickly and negate that initial “low price.” Be sure to know the 3PL’s pricing structure, then run specific calculations and projections to get the real cost of service. Beyond the hard costs are the real horrors: a 3PL causing delayed shipments and inaccurate orders, both of which can result in bad customer reviewed and Amazon account suspension. It’s not worth the risks, even with lower warehousing and fulfillment costs.
In addition to running the numbers, choose a 3PL that has proven service quality, reliability, order accuracy and warehousing/distribution capabilities. Make sure the 3PL provider meets the specific needs of your business. In the end, select a 3PL provider that serves you as a strategic partner and supports your logistics operation. Focus on what the 3PL provider offers beyond price. It ensures your long-term success.
2. Expecting clear communications and a single point of contact.
Who are you going to call when there’s a crisis? While communicating with a 3PL is essential, many providers don’t get this right. An 800 number and call-center “agents” doesn’t work. Choose a 3PL that offers you a dedicated account manager. This person is your single point of contact–the person who makes it happen, helps you and has knowledge about you and your business. This primary agent helps you avoid costly mistakes and handles mistakes if they do happen. When there’s an urgent shipment, a last-minute change to a batch of inventory or just making sure the fulfillment team sorts, prep and packages properly, the dedicated account manager is critical.
3. Assuming every 3PL uses advanced technology and systems.
In today’s fast-paced global marketplace, technology plays a crucial role in lowering costs and improving efficiency. This can lead to lower transportation costs, faster delivery times, and improved logistics performance – which is ultimately the role of a 3PL.
Don’t assume your 3PL is using advanced technology. Know the 3PL’s type of warehouse management system (WMS) or transportation management system (TMS).
A WMS helps manage warehouse operations, from inventory management to order fulfillment , and improves day-to-day warehousing operations with real-time updates on inventory levels. It reduces the risk of stockouts and overstock.
A TMS automates and optimizes transportation operations, including carrier selection and routing. It improves shipping capabilities by optimizing the transportation network. It selects the most efficient carriers and routes and leverages data analytics for more informed decision-making.
In addition, make sure a 3PL provider uses technologies such as barcode scanning and RFID to track inventory. Ask provides about WMS and TMS. Be sure to review the provider’s technology. Ask them if their technologies can handle complex jobs–and upticks in seasonal demand.
A good 3PL has quantifiable answers.
Ignoring the 3PL’s location
The location of a 3PL provider can impact major supply chain factors, such as:
- Delivery time
- Shipping costs
- Inventory management
- Proximity to customer base
Selecting a 3PL provider with a location near your target market can help ensure that products are delivered quickly and efficiently – keeping customers satisfied and enhancing your company’s reputation. For example, more than one third of the U.S. population is on the east coast, with the majority of Americans in the eastern half of the country. A 3PL provider with distribution facilities near the east coast speeds up delivery times and reduces costs.
In the end, how do you choose a 3PL and know you made the right decision? Start by avoiding these four mistakes. Then, ask other sellers and business colleagues. Do your research. Prioritize doing “your homework” to ensure a strong supply chain and finding a 3PL vested in your success. Finding the right 3PL partner will help achieve critical supply chain and fulfillment KPIs.
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