3PL Logistics - 5 MUST DOs When Considering A 3PL Provider
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A 3PL, also known as a “TPL,” is a third-party logistics provider. A 3PL helps you and your business by providing expertise and best practices to support your supply chain. A 3PL specialises in various services including warehousing, pick and pack, cross-docking, carrier relationships, inventory control and technology. It provides these services to increase your operational efficiency, help control your costs, and improve your customer experience. All in all, opting for a 3PL expands the global reach you can offer customers.
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Here at CBIP, we offer a full range of 3PL services and capabilities that will take your business further. But before you embark on your 3PL journey or consider changing from your existing provider, there are important considerations to make. Here are 5 MUST-DOS before you select your 3PL provider.
MUST DO 1: DEFINE WHY YOU NEED A 3PL
Before deciding on what 3PL provider you want to use, it’s important that you outline why you need one in the first place. There are a number of reasons as to why a company might opt for a 3PL provider.
Is it due to growth? A desire to service customers in more locations? Do you need to improve stock control & visibility? Reduce internal headaches? Or do you not possess the right skills—or, just as importantly, time—within the company to do it all yourself?
Outsourcing part or all of your business to a 3PL means you can maximize efficiency and improve your profitability, especially if you find the right fit for your business model. While outsourcing to a 3PL might work for some, it may not work for others. How would you decide if a 3PL is right for your business?
Naturally, all businesses are different and any decision needs to factor in more than just cost. Seeking the expertise of a supply chain consultant could be beneficial, as well as identifying the pros and cons to your business and current operation.
(If you are an operator and have an existing provider, you need to review the 3PL’s success. Consider what has worked well, not worked well, and clearly define what your future needs are when thinking about a change, e.g. better geographical locations, cost improvement, enhanced technology or superior customer service)
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MUST DO 2: CAREFULLY CONSIDER ALL COSTS — NOT JUST WHAT IS PRESENTED TO YOU
Stay away from running a standard RFP process that simply focuses on functional costings. You must consider all “costs” that attract value, beyond a line item cost e.g. how much of your staff’s time is tied up managing your 3PL, or a 3PL that focuses on reporting key performance indicators that directly influences your bottom line, such as the speed of an order being fulfilled.
When reviewing a 3PL costing, try and bundle it into one format that works for you – each 3PL presents data differently and this can further add to the smoke and mirrors! We find it helpful when working with customers to break it down into the following sections:
- Bulk Transportation: moving products from your factory to your warehouse
- Inbound or Receiving: unloading products from your transportation provider to their warehouse
- Warehousing: usually a monthly fee based on the amount of space used and charged per CBM/Sqf or other metrics
- Pick & Pack: collecting units from shelves or bins and packing them for shipment, discounted for higher volumes
- Local and International Delivery: delivery of product to your end customer
- Account Management: account creation and software integration
- Account Minimums: minimum monthly spend is generally required
MUST DO 3: GET REFERENCES AND VISIT THE PROPOSED LOCATIONS
It is imperative that you request and check client references (at least 3), and double check that they have the capabilities to hand the specific needs of your business. For instance, if you have goods that require insurance on a large-scale, make sure the provider has worked on it before.
If the 3PL cannot provide references to you, this is a RED FLAG. It is equally important that you physically see the locations with your own eyes. Don’t let a video or pictures fool you — if they don’t have the necessary infrastructure in place, there’s no way to be sure they can handle your shipping needs effectively.
MUST DO 4: TECHNOLOGY, INTEGRATIONS AND TECHNICAL KNOW-HOW
Today, we live in the digital age. The right 3PL must be able to offer you an innovative and efficient technology solution. This should handle your growth and improve your company and customer experience.
Historically 3PLs have not progressed well in this area. The development of client software (e.g. ERPs) can be slow and expensive. Put plenty of weight on your decision when it comes to technology and 3PL know-how with digital capability. This could save you a lot down the line. If a 3PL uses technology right, it can help to propel your business into the future and keep growing.
MUST DO 5: ENSURE YOUR 3PL CAN DO MORE THAN JUST THE CORE!
While it’s important your 3PL does its core service well, be sure to make sure they have enough flexibility and can offer “value added services”. Common examples of these additional services include:
- The ability to provide extra services, e.g kitting/assembly/personalization/continuity plans
- Years in service and financial stability
- Contractual flexibility
- The length of the contract (ranges from 120 days to six months or more) and the flexibility of changing/adding terms of services (make sure to check on the task plan, time frames and responsibilities of all parties)
- Fulfillment flexibility and scalability
- The ability to schedule site visits — check the facilities being proposed to handle your business
Would you like to learn more about what a 3PL & 4PL solution might look like for your business? Get in touch today for a free and open consultation with one of our team. Check out more here.