There are plenty of third-party logistics providers (3PL) out there, offering all sorts of different services. That said, it’s important to realize that not all third party logistics companies are the same. Choosing the right 3PL provider for your organization is one of the most important business decisions you will make. As a supply chain partner, they should help you increase efficiency, save time and money, boost customer service, and improve your overall capacity.
But how do you go about choosing between potential partners? The first step is to know what such a 3PL relationship implies. What are the key considerations that go into making this decision, and how will your third party logistics provider work toward your financial stability? Start your 3PL evaluation by getting a better understanding of what supply chain solutions and services you can expect from a 3PL company.
How Does Third Party Logistics Work?
Third-party logistics companies will help other businesses by outsourcing their Procurement, Transportation, Distribution, and Growth sectors. But while one logistics provider may focus on specific segments like product sourcing or inbound freight management, others may address multiple sectors, such as distribution and warehousing.
Nevertheless, having access to logistics solutions in all four sectors means that companies can tap expertise along every step of the supply-to-sale cycle. This opens the door for numerous innovation opportunities and a more data-driven organization. The biggest challenge will be to determine which logistics functions should be outsourced and which should remain in-house. You will then be in a better position to know which 3PL services will be saving time, which will be saving money, and which will increase your management team’s efficiency.
That said, here is a short rundown of what a third-party logistics provider can offer.
Procurement – As the first stage of the supply chain cycle, procurement refers to how you get the products that you sell. Some 3PL companies will focus their services on the procurement process by helping you develop, manufacture, and source goods to sell.
Transportation – Transportation management plays a key function for most 3PLs. Whether you need a domestic freight partner, an overseas supplier, or someone to handle your paperwork, duties, and transportation costs, your supply chain partner will be there to help.
Distribution – Driven, in large part, by the order fulfillment needs of eCommerce platform companies, the distribution sector is quickly becoming a core competency for most 3PL providers. It involves warehousing and inventory management, as well as last-mile and reverse logistics services. Companies can save on their shipping cost by taking advantage of the 3PL warehouse space and fulfillment centers, as well as their pick and pack services, temperature-controlled trucks, or other such similar functions.
Growth – Some 3PLs will also help their clients with their marketing and front-end sales, as well.
How Do You Choose Your 3PL Providers?
With a basic understanding of what third party logistics providers can offer, it’s time to take into account the following key considerations as part of your 3PL evaluation.
Examine Your Supply Chain and Your Potential Partners
Determining the areas of the supply chain where you excel and where you may need help will go a long way in finding a logistics partner. It’s for this reason why you should start by examining your own strengths and weaknesses in your supply chain management system and consider how a 3PL company may be able to assist you.
Once you have a better understanding of where you are, you will need to look for potential partners who are able to fill those requirements. It’s important to realize that, just like you have your own distinct strengths and weaknesses, so do most 3PLs. Some, for instance, may excel at warehousing and logistics management systems, while others may be better at managing the import/export process. A good 3PL relationship will, therefore, be defined by how well your combined strengths compliment each other.
Don’t be afraid to scrutinize each candidate by looking at their services, their rates, and the efficiency at which they are provided. You can go ahead and ask them about their maximum capacity, their financial stability, as well as what would happen if they can’t cover a load. Also, ask them about how long they’ve been in business, and whether they have the necessary space to make up for busier seasons.
Know Your Technology Requirements
Transportation management systems, inventory management software, inbound freight monitoring, advanced load tracking systems, and artificial intelligence, among others, are an absolute necessity. They will provide you with the necessary business intelligence to grow your organization and save time and money in the process.
Nevertheless, these advanced logistics technologies can also be somewhat expensive to buy and complicated to implement successfully. Great third party logistics providers will not only utilize these tools but will also help you integrate them into your systems. Similarly, these technologies will need to be compatible with your existing systems to provide a seamless experience.
Aim for Omnichannel Expertise
Omnichannel commerce is quickly becoming mainstream, so you’ll need to select a 3PL company that understands its nuances. Look for a logistics provider with a track record of performance and ample experience in your industry and type of business. This way, you will ensure an optimal customer experience.
Look for Scalability, Customization, and Continuous Improvement
One major advantage of outsourcing logistics functions is being able to take advantage of the 3PL warehouse space. You will be saving money by not having to invest in a permanent space, equipment, or personnel of your own. That said, a great logistics partner is someone who is able to leverage the needs of all of their customers, allowing them to scale their operations when needed.
An experienced 3PL will also leverage different postponement strategies to optimize their inventory. This, in turn, will allow you to build to order instead of stock, so you can cut down on your production, inventory, and shipping cost. Also, look for a provider that is committed to quality management and service excellence. These will typically be designing and utilizing proven logistics solutions that are able to keep up with the latest trends.
Multiple Fulfillment Centers
Lastly, look for a 3PL that takes a more strategic approach to their network configuration of warehousing space. They should help you determine the right distribution center locations for both your current and future business needs. Similarly, they should have a network of conveniently located fulfillment centers able to meet those needs.
In conclusion, it’s important for you to know your logistics requirements and understand what supply chain solutions your future 3PL partner needs to provide. Logistics Titans is a full-service 3PL that allows you to gain control and full transparency of your supply chain. Contact us today for more information!