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How to Choose a 3PL: A Guide

 How to Choose a 3PL: A Guide

Ecommerce retailers are tapping into the benefits of partnering with a Third Party Logistics (3PL) provider. Some are re-evaluating current solutions, because there are benefits to choosing a capable 3PL for your business. With a range of providers and costs, how do you choose? Here’s a guide to choosing the 3PL partner that’s right for your business.

Organize your 3PL selection research

You may be starting with referrals from others, a Web search, or an online directory. It helps to start with a list of questions that you can apply to each 3PL candidate. Comparing answers across the board will highlight differences and distinctions among 3PLs—and you may find many.

Here are some useful questions you use to understand how a potential 3PL partner aligns with your needs, understands your products, fits your needed geography, supports you with technologies, adapts to your sales channels, and offers you the support you need.

Alignment with your needs

Your order fulfillment costs should align with the level of service you require. Order fulfillment services are by no means one-size-fits-all. Consider these questions:

  • What are the options and tradeoffs between costs and service levels?
    A great 3PL partner will explain your options in terms for cost vs. service. Be sure you’re in apples-to-apples mode when you begin comparing 3PL service costs.
  • Will this be a transactional or long-term partnership?
    It’s valuable to have a dialogue with a potential 3PL partner; you can pay attention to what questions they ask you, too. Their willingness to learn about your business and really talk through your needs with you “can be a good indicator to see if your priorities match and will help you better evaluate a long-term 3PL partner,” according to 3 Downsides to a 3PL RFP. And, what to do Instead. A partner can help your business adapt and succeed through dynamic business cycles.
  • Is the 3PL well established with a history of proven success?
    Consider how long they’ve been in business, what case studies they can offer, and what industry recognition they have received.
  • How flexible is the 3PL relative to your needs?
    Will they offer specialized services for you, or will you need to adapt to their systems? An effective 3PL partner will build exactly the solution you need.
  • What do their performance metrics look like?
    It’s not just about shipping out orders; it’s about getting it right every time and earning customer loyalty. You may be considering things like order cycle time, which is important relative to customers’ expectations. The most important metric is order accuracy rate, which you can expect to be at 99.9%.

Product & industry insights

Selecting a 3PL who has experience with your products and industry can be valuable. The benefits may be reducing the learning curve and reducing costly delays or mistakes in getting your order fulfillment up and running. An experienced 3PL partner may be best equipped to set up the processes and procedures needed to optimize the operation. For example, an order fulfillment solution for health and wellness products and dietary supplements may need to meet unique requirements for lot and inventory control, and may require an FDA registered facility. It is not unusual for fulfillment of personal care products to call for specialized processes and technologies as well. Consider these questions:

  • Does the 3PL have experience with your product categories?
  • Do they meet any specific regulatory or operational criteria required?
  • Can they provide specialized services you may need, such as kitting?
  • How will the 3PL train warehouse workers according to your handling specifications?
  • How flexible is the 3PL in building the warehouse and fulfillment solution you need?

Geography: locations

Whether your business operates within a small or expanded geography, location for an order fulfillment partner is crucial. Plans for future growth can factor into this thinking as well.

  • Does the 3PL offer a network of multiple warehouse locations to address a national marketplace?
    The option to ship close to your target market can have a massive impact on shipping costs, as well as speed to the customer. For example, some national retailers use some combination of West coast, East coast, and Midwest fulfillment centers.
  • Are the warehouses strategically located, e.g., near major transportation hubs for fast and economical service?
  • Can the 3PL scale your solution according to your growth plans?
  • Can the 3PL support international ecommerce if desired?

Core technologies 

Robust technologies adapted to fit your business needs help you ensure high-level customer service while managing costs—with full visibility into order fulfillment activity and inventory in real time. “Order fulfillment technologies can give your ecommerce and retail fulfillment business a competitive edge,” as explained in Order Fulfillment Technologies for an End-to-End Solution. Consider these questions:

  • Does the 3PL offer technology capabilities to meet your operational needs?
  • Is there a robust warehouse management system (WMS)? 
  • Will you have a secure, private portal with the visibility and reporting you need?
  • Can the 3PL readily integrate to other applications you use, such as an ecommerce platform? 
  • What is their experience with these external applications, and what are the upfront integration costs

Sales channels

  • What sales channels does the 3PL support?
  • Do the channels the 3PL supports align with your current sales strategy and growth plans?
    Take a look at your overall business model. Do you have fulfillment needs beyond B2C ecommerce orders? If you do now or anticipate that you may in the future, choosing a provider with full-service D2C, B2B and omnichannel capabilities could help you orchestrate all channels of your supply chain management.

Dedicated support

A best-fit 3PL provider will get to know your business and apply experience and expertise to your needs. Here are some questions that help you explore the value of support:

  • Will you have a dedicated account manager?
  • How is customer service set up and staffed?
  • Can you expect proactive communications from your partner; will they innovate solutions with you?
  • Will the 3PL provide regularly scheduled business reviews?
  • How does the 3PL hold itself accountable to you?
  • Is there a continuous improvement system in place?

Do you want a 3PL provider or a true partner? The best 3PL partner will apply experience in order fulfillment processes and technologies, industry expertise, and actionable insights. It will deliver processes and technologies that help you save costs and advance your business.

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