As your business scales you will eventually need to answer the question of whether you should run distribution operations in house or utilize a third-party partner. 3PL (third party logistics) partners are an excellent solution for firms that have little to no supply chain or operations experience.
The right partner can help expand your order fulfillment operations, so that you can focus on the core function of your business. Seldom are e-commerce companies experts at supply chain and order fulfillment best practices. A 3PL can act as a trusted partner to guide your business through seasonal order volume spikes, pick/pack optimization, and carrier rate discounts.
Let’s take a look at several factors a firm should consider when selecting a 3PL partner.
- Trust- Regardless of the amount of square footage or cutting-edge order fulfillment systems a 3PL has to offer, the most important component of a successful client/3PL relationship is trust. You will expect your 3PL to receive and put away purchase orders, ship customer orders, and conduct inventory counts within the service level agreement you put in place at the beginning of your partnership. Your 3PL will expect your firm to provide accurate order forecasts, correct purchase orders, and consistent order files. The easiest way for your firm and your 3PL to have a successful relationship is to approach the day-to-day business in a transparent and routine manner. Daily or weekly check in calls to discuss operational goals and routine site visits will allow for open and honest communication which will help to build a solid business foundation rooted in trust.
- Reputation- When selecting your partner it is incredibly important to speak with the 3PL’s current and former clients. No business is perfect and if you receive nothing but five-star reviews that should raise a red flag. The best way to judge a 3PL’s performance is not on how well they perform when the operation is running well. You need to understand how they attack problems, communicate said problems, and work to implement corrective actions. Supply chain and operations management are difficult industries, so it is important to have a complete understanding of how your potential 3PL partners work with their clients when things do not go according to plan.
- Scalability- Before selecting your 3PL partner you need to have a clear understanding of your current order volume, and what that order volume will look like in one to three years. This can be difficult to establish, especially for new startup firms, but it is a necessary step to ensure that you are selecting a 3PL partner that can grow along with your business. You will need to take an honest look at your cash flows and growth projections and be able to present your futures order goals to potential 3PL partners.
- Customization- Your customer will most likely believe that their order is being shipped to them directly from your company. A 3PL’s ability to customize the order process and pack out to your criteria will help to provide your customers with the best possible order experience. Many 3PLs have specializations such as kitting, customized gift cards, or gift wrapping. Look for the partner that will best be able to meet your customer experience needs.
Choosing a 3PL partner is a large step in the future success of your business. It is important to remember that cost should have little to no impact on which 3PL you select. There will always be cheaper options that will claim to be able to meet your company’s needs, but these options may end up costing your business more in the long run. Instead focus on a 3PL’s reputation, collective experience, trustworthiness, ability to scale, and overall reliability.
