How to Choose a 3PL Provider

Every business has a core competency, whether it’s manufacturing computers, assembling furniture, or baking cookies. These businesses are experts in production, focused on providing their customers with the best possible experiences. However, there are some aspects of running a business that, while no less important, fall outside of a company’s core competency. One of the biggest examples of this is logistics.

A well-managed supply chain is critical for the success of most businesses.  From fulfilling orders to managing warehousing space to coordinating with carriers, logistics can be incredibly complex, making it difficult to balance the demands of running a business as well as managing growing logistical operations. Rather than splitting focus and resources to handle all of these responsibilities in-house, many organizations choose to work with a third-party logistics (3PL) provider.

A 3PL company specializes in outsourced logistics services. These can include:

• Inventory management
• Warehousing and storage
• Order fulfillment and distribution
• Transportation coordination
• Value-added services such as assembly, cross-docking, kitting, and labeling

An experienced, capable 3PL partner can take much of the supply chain burden off a company’s shoulders, allowing businesses to focus on their customers and core operations. But that only works when the provider is the right fit. Finding the right 3PL starts with knowing what to look for. Here are several key considerations to guide the process.

Step 1: Determine the Business’ Needs

There’s no such thing as a one-size-fits-all 3PL strategy. Every business is unique, with its own distinct customer base, order volumes, peak seasons, and key performance indicators (KPIs). Before starting research on 3PL providers, businesses should take stock of their specific needs. This often includes determining ideal transit times, any special considerations for perishable or fragile items, optimal inventory levels, and fulfillment strategies. Finding the baseline for success will be critical for the next steps.

Step 2: Find 3PL Providers

Choosing the right 3PL can be challenging in an increasingly crowded market. Alongside traditional 3PLs, newer companies offer flexible service models that are tailored to e-commerce operations.

To narrow their options, businesses should begin by exploring 3PL providers within their immediate service areas. Working with a nearby provider can make logistics easier to manage and facilitate communication and coordination. However, proximity to the business is only one consideration. Businesses should also evaluate the location of a 3PL’s fulfillment facilities relative to their customers, as strategically located facilities can help reduce shipping distances and improve delivery times.

Step 3: Evaluate the Services and Technology

Not every 3PL offers the same capabilities, so businesses should consider whether a provider’s services and technology can meet their specific operational needs. Depending on the products they sell, businesses may have unique requirements for warehousing, handling, or other fulfillment services.

They should also determine whether a prospective 3PL partner can integrate with the systems they already use, enabling seamless sharing of inventory levels, tracking information, data analysis, and more.

Step 4: Assess Scalability and Flexibility

Growth should be a key consideration when evaluating a 3PL partner. Businesses need to know that their provider can keep up as their needs grow and change. A provider with just enough capacity to meet current needs may not be equipped to support that growth a year from now. It’s also important to consider services the business may require in the future, not just those it needs today. The right 3PL partner should be positioned to meet both current demands and anticipated needs as the business evolves.

Step 5: Compare Pricing Structures

Pricing structures can vary significantly among 3PL providers, so businesses should look beyond the quoted price and understand how each provider charges for its services. Some providers may charge based on storage, order volume, fulfillment services, or other factors, while others may use a combination of fees.

Businesses should also pay attention to contract terms, minimum commitments, and any additional fees that could affect the overall cost. Reviewing the full pricing structure can help businesses identify the option that offers the best overall value for their needs.

Step 6: Build the Relationship

Once a company chooses a 3PL partner, it’s important to stay in contact with their 3PL company in order to ensure that everything continues to run smoothly. In addition to establishing clearly defined KPIs to evaluate performance, companies and their 3PL providers also should agree on a schedule for reviews. Regular communication helps keep the relationship strong, creates opportunities for improvement, and makes it easier to address issues or adjust as needs change.

Making the Right Choice is Critical

Partnering with the right third-party logistics provider can ease the demands of supply chain management while helping businesses deliver a better experience for their customers. A good third-party logistics company brings services that match the client’s needs, are scalable enough to grow with the client, and provide the best possible fit overall.

Midwest AWD is a leader in Milwaukee and throughout the Midwestern region, providing extensive warehousing and distribution capabilities that help our customers meet their logistics challenges and grow their operations. If you’d like to learn more about everything Midwest AWD can do to help you as your 3PL partner, reach out and start the conversation with one of our experienced team members today.