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How to Pick a 3PL Partner

Ecommerce and the global economy allow businesses to expand into new markets never before thought accessible. Keeping up with supply chain logistics becomes an entire job by itself, and before you know it, your attention spreads way too thin.

Instead of handling all of your transportation and logistics needs in-house, third-party logistics (3PL) partners relieve that burden so you can focus on growing your business. Third party logistics providers offer outsourced solutions to your supply chain management, transportation and warehousing needs. Basically, 3PL providers handle all of your logistical needs, top to bottom. Their professional capabilities leave their clients with peace of mind.

Finding the right 3PL partner takes time and effort. Without the proper knowledge, the task can easily become overwhelming. Keep these crucial tips in mind to find the right 3PL partner for you and your business.

Location

Like many businesses, the 3PL company’s proximity to your own directly impacts whether or it makes sense to work with them. However, location in logistics carries extra weight. Obviously, you need a 3PL partner that operates within the area in which your supply chain and distribution occur. Your ideal partner should already have existing facilities, operations or experience and connections aligned to the geographies of your business’ supply chain. Maybe on-site inspections or quality testing where materials are sourced is important, facilities that feed into manufacturing sites should be proximate to those operations and/or your 3PL should operate warehouse facilities near your destination markets to ensure agile response to changing demands and quickly available product inventory in-market for distribution. This means that they are familiar with standard and alternative routes to keep your product and raw materials moving swiftly between your manufacturing points and the markets.

Additionally, should you require warehousing for your goods, check that the 3PL provider maintains facilities that can easily facilitate your storage needs. Shorter is better in supply chain management: shorter lead times, shorter distances when possible and shorter turn times mean quicker response capabilities for your companies in its markets. It also reduces variables.

Well-Defined Key Performance Indicators (KPIs)

‘We manage what we measure.’ When your business sets forth clear and measurable goals it becomes easier to track your performance. Key performance indicators (KPIs) act as the points of comparison to ensure satisfactory performance. It’s critical that you take the time with your third-party logistics provider to define those factors which are truly ‘key.’ Is it per cent on-time delivery? Cost of transportation, warehousing or would total landed cost, an expression of the cost encompassing both, be more meaningful? Consider what is actionable and be sure to emphasize what truly matters.

Scalability

As your business grows, so does the demand and pressure on your logistical operations. To provide for future growth, select a third-party logistics partner that can scale up their operations with ease to match your growth. Logistical delays kill ambitious projects in their infancy. Without steady and consistent supply lines your business could lose out on potential revenue.

In the event that your business experiences a boom, your 3PL partner needs to keep up with the increase in demand. Check for examples of successful scaling and mutual growth with customers in the past. Has the 3PL you’re evaluating invested in systems, facilities or capabilities to support new product lines or volume expansions for other companies? Do they tend to retain customers over the long term? In a time of constant, pressing change in the very nature of business, you want to be working with a company that knows how to flex, support and grow with your business, in new ways.

Backtracking to find a new partner capable of handling your increased demand takes time. So, make sure you find a 3PL company capable of scaling up to save time and reduce stress.

Check Out Several Companies

Shop around when selecting any business partner. The greater your grasp and understanding of the logistics industry, the better your final decision. By exploring and interacting with several 3PLs, you create a pool of candidates to choose from and a reference pool of what is possible. The desire to select a company quickly to get started sooner leads many businesses to work with a company not well suited to their needs.

But don’t go overboard in your search by selecting too many potential partners and inviting ‘analysis paralysis!’ An ideal candidate pool contains about three to five companies. Any fewer does not give you enough of a spread to ensure a good match. Too many and your decision process takes too long. Keep the pool small, yet with enough options for a confident decision. You can always look for more options if you cannot find a worthy partner.

Compare the services offered and look into the way they do business. You might find through your research that a 3PL company may be using outdated practices, systems or equipment. Gaining such information requires a good deal of understanding regarding logistics companies, so exploring the industry gives you the wherewithal to make a well-educated decision. The more you understand logistics, the better you can make an objective, informed decision.

Avoid Long Term Contracts

You need a 3PL company in the first place because of a substantial shift in demand or the markets you serve. Tying your business down to any one 3PL could keep you from adapting when necessary. As demand shifts, either up or down, your logistical needs shift as well. Signing into a long-term contract with a 3PL company reduces your ability to respond to those shifts effectively.

In the event that demand decreases, your contract keeps you paying for unnecessary services, which further hurts your business during a recessionary period. If your demand increases and the 3PL company cannot keep up the increased pressure, you are stuck at their mercy until they can adjust.

Work with your 3PL to find a win-win situation. You do not want to be hampered down by a long contract that hampers your ability to do business. But you do need a contract term sufficient to allow for learning, and performance improvement as your companies adapt to each others’ requirements and respond to changing demands in the market. A good 3PL will discuss your options and take time to understand your operational needs and considerations. If they insist on a longer-term contract without taking into consideration your operational needs, walk away.

You Get What You Pay For

Logistics and supply chain management keep your business flowing. Without proper movement between your production and distribution points, revenues stall and your business suffers. When you choose a 3PL partner, you need a company that goes above and beyond to ensure you obtain the materials necessary for production and that your customers have access to your product.

Selecting the cheapest 3PL company for a low price alone could keep your business from fully achieving its potential. Keep in mind that ‘low price’ doesn’t always mean lowest overall cost. Paying a little bit more for a better-managed system, working with a partner that is agile and adaptive to the needs of your business, brings greater access to a functional distribution network and greater scalability would be factors that ultimately reduce the time and monetary costs of failure in day to day business. Sometimes the best 3PL option happens to have a lower price. But, do not let that low price dominate your decision-making process. Make sure your 3PL partner provides all of the services and features you need them to.

Check references and find out how they are to work with. There is significant value to that intangible factor – ‘easy to work with’ when time is precious and business is moving fast.

Ask About Their Methods

Speak with the 3PL company to understand the way they do business. Ask about their standard operating procedures, degree of automation and extent of technology innovation they’ve adopted to run their business. Look for a company with a thoroughly outlined set of practices, as this demonstrates professionalism and attention to detail. Are processes documented, people trained, and paperwork minimized? Are there systems for managing inventory, warehousing and transportation? Is there remote access to the data 24/7? Are personnel trained in using the systems, updated regularly and committed to continuous learning and improvement? Most technological updates for any industry entail some sort of learning curve. You want a company that stays up to date, takes the time to understand a new system before implementing it and invests in continuous learning and improvement.

Avoid companies that lack a clear sense of organization and cannot provide up-to-date information regarding the products and materials you trust them with. Transparency demonstrates confidence and creates trust which is essential to good partnership relationship.

Visit a Fulfillment Center

Visiting a distribution or fulfillment center gives you a firsthand look at how a 3PL company operates. You do not have to visit each and every potential partner on your list, but visit at least one to get an idea of how 3PLs operate. Also, visit the company you wish to work with before reaching a final decision. Account managers always try to make good impressions on potential clients like yourself. A direct visit allows you to see the working conditions and status of the employees who actually perform the tasks you entrust to them.

Pay attention to how well the impression from your visit correlates with the image the company tries to give you. The more accurately the impression matches the image, the more trustworthy that company is.

Take Your Time

Be sure to take the time to thoroughly vet a potential partner and only go forward toward an agreement when you have sufficient confidence. Do not let 3PL companies pressure you into making a decision prematurely. Research the logistics industry, especially if you have never worked with a 3PL company before.

If you need a third-party logistics partner, take a minute and get a free quote from Prism Logistics. The sooner you begin your search for a 3PL partner, the sooner you can continue reaching for your business goals. Prism Logistics operates nearly 2 million square feet of warehouse capacity in Northern California and is a member of logistics networks serving the entire USA as well as international markets.

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