If you're running a business that involves the transportation and distribution of goods, you've probably heard the term "3PL" (third-party logistics) before. A 3PL provider can handle everything from warehousing and transportation to order fulfillment and inventory management. Choosing the right 3PL is crucial to the success of your business. In this article, we'll discuss the factors to consider when selecting a 3PL provider.
For an eCommerce brand, shipping costs can account for between 50% to 80% of the product’s landed cost. The saying of “location, location, location” rings true even in selecting a 3PL. It’s a balance of cost and speed for your customers. Proximity to customers and suppliers is important when selecting a 3PL provider. The provider should have a strategic location that is convenient for transportation and distribution. They should also have a range of transportation options, such as ground, air, and sea, to meet your needs.
Where to select a 3PL? Given that shipping accounts for a majority share of a good’s landed cost, a 3PL in the center of the United States is typically the most cost-effective option. Why? There are 3 major parcel carriers in the United States and they command a premium for every mile a package is sent. The way around that is to use the full-truckload and LTL markets that are much more decentralized to ship larger quantities to your 3PL with a more central location which will bring down your overall costs.
As an example, Outbound Fulfillment which is an eCommerce 3PL in Chicago can reduce outbound shipping costs on average between 12 to 18% because of its central location.
When looking for a 3PL provider, it's important to consider their expertise and experience. A provider that has experience in your industry can provide valuable insight and knowledge about industry regulations and best practices. They will also have experience handling similar businesses and can provide solutions to common challenges.
Technology and automation are key factors in the success of a 3PL provider. A good 3PL provider will have a warehouse management system (WMS) that can efficiently manage inventory and orders. They should also have the ability to integrate with your existing systems, such as your e-commerce platform or order management system.
Your business may experience growth or changes in demand, and your 3PL provider should be able to handle it. Look for a provider that can scale their services to match your needs and has customization options to meet your specific requirements.
Good customer service is essential when working with a 3PL provider. Look for a provider that is responsive, communicates well, and has dedicated account management. They should be able to provide you with regular updates on inventory and order status and be able to resolve any issues quickly.
The quoting process is an important step in evaluating 3PL providers. You should identify your needs and requirements, such as order volume, shipping destinations, and special handling requirements. Ask potential 3PL providers questions about their expertise, technology, and scalability. This process will help you narrow down your options and find the right provider for your business. Furthermore, any 3PL should be able to quote out a monthly invoice for you as a part of your research. A company like Outbound Fulfillment, an eCommerce fulfillment provider, or Buske Logistics which is a full pallet and bulk distribution 3PL, can provide estimates as to what it would cost.
Contacting references and checking online reviews and ratings is another important step in evaluating 3PL providers. Ask for references from other businesses in your industry or with similar needs. Check online reviews and ratings on websites like Google, Yelp, and the Better Business Bureau. This will give you an idea of the provider's reputation and level of service.
Choosing the right 3PL provider is a critical decision for your business. Factors to consider include expertise and experience, technology and automation, scalability and flexibility, location and transportation, and customer service. To evaluate 3PL providers, use the RFP process, schedule site visits, and check references and reviews. Taking the time to find the right provider will pay off in the long run and contribute to the success of your business. Remember, it's important to do your due diligence and choose a provider that can meet your specific needs and requirements.