Nov 10, 2015 in Fulfillment

We’re often asked what factors a company should consider in selecting a third party logistics (3PL) provider. There are a wide variety of factors to consider but we thought we’d address some of the factors or steps to take that are often less discussed when evaluating a 3PL.

It’s a Partnership – So Find a Good Fit

Using a 3PL for order fulfillment activities is a big decision and it transcends beyond a mere supplier/customer relationship. Order fulfillment reflects one of the final and most critical legs of your supply chain. It not only ensures that the right product is delivered to the right customer, on-time, undamaged and with the right paperwork, but it is essential to retaining and delighting your customers. It’s also a relationship that will ideally last many years so it’s essential to think of your 3PL as a strategic partner.

In the 2016 Thirty-Party Logistics Study authored by Capgemini Consulting and Penn State, 80% of 3PL customers surveyed reported they had daily interactions with their 3PL. The survey went on to point out the need for alignment between the 3PL and their customers on goals and objectives, roles and responsibilities and “the importance of openness, transparency and effective communications…” Given the 3PL is acting as your order fulfillment provider that makes total sense. So, the questions that should be asked at a minimum are:

  • Can you see yourself and/or your staff interacting with the 3PL on a daily basis?
  • Will there be a customer service representative assigned to your account and have you met this individual?
  • Does the 3PL have Key Performance Indicators (KPIs) that measure how well they are performing for you?
  • Is there a cultural fit with your organizations e.g., if your organization is committed to continuous improvement, does the 3PL employ continuous improvement program?

Check references

We generally recommend checking several references. Doing so, allows you to ask questions that will help validate the commitments you’re getting from the 3PL. Questions to ask include:

  • How long they’ve been working with the 3PL?
  • What is the nature of the work being performed?
  • Does the 3PL do what they say and say what they do?
  • In what time frame do they respond to questions?
  • When problems arise, and they always do, does the 3PL proactively address those problems and put corrective actions in place so they are not repeated?
  • How thorough and interactive was the on-boarding process?

Area of expertise

Third party logistics companies typically have areas of specialty: Cross-dock, pallet-in, pallet-out, e-commerce fulfillment, big box retail fulfillment (some even specialize in specific retailers), transportation management, value-added services, industry specialization, cold storage, and the list goes on. It’s important that you define your specific core needs going into the evaluation process and inquire as to the 3PLs capabilities and experience, especially if there are nuisances related to those activities.

In addition to determining if there’s a fit for the core business, often times a project will arise that will require special handling. Think relabeling, kitting, tagging, or other special projects. Since your 3PL will be storing your goods, it’s important to understand if they have the capability to service your special needs. And, it’s important to understand the cost of those projects up front. You certainly don’t want any unanticipated surprises.

IT capabilities and integration

In the 2016 Thirty-Party Logistics Study it was noted that “93% of this year’s shipper respondents agree that IT capabilities are a necessary element of a 3PL expertise and 59% agree that they were satisfied with the 3PL IT capabilities.” In other words, 41% were unsatisfied with their 3PLs capabilities.

IT should play a significant role in selecting a 3PL provider. Many 3PL providers can readily manage and process the physical movement of your goods; however, fewer 3PLs can process those transactions seamlessly and in an integrated fashion. Questions to ask include can the 3PL:

  • Readily integrate with your operating system?
  • Accept orders in the manner you want (EDI, flat files, API, web portal, etc.)?
  • Integrate with your shopping cart platform?
  • Provide a web portal with real-time access to receipts, shipments, tracking information that is downloadable without having to request the information?
  • Demonstrate experience with the current and newest technology tools available for order fulfillment?

Selecting a 3PL is a big decision and one that should be well thought out. You’re selecting a provider that will act as the final leg of your supply chain and help contribute to the success of your business. So approach the decision as you would if selecting a strategic partner and do everything you can to ensure that there will be a good working relationship with your 3PL and there is an ease of doing business.

XB Fulfillment can not only help you more efficiently manage order fulfillment needs but we’ll also do it at 30% less.

About XB Fulfillment: XB Fulfillment is a leading third party logistics company which works with you to design customized value-added warehousing and distribution solutions. Whether it’s direct to consumer, big box retail distribution centers or retailers with complex individual store distribution needs, XB Fulfillment works with you to efficiently manage, process, and distribute your products for significantly less than you pay today. Learn more at www.xblogistics.com