How to Choose a 3PL Provider
Explore the benefits of partnering with a third-party logistics (3PL) provider and discover everything your business needs to know before investing in 3PL.
When done right, partnering with a 3PL provider offers businesses of all industries and sizes the opportunity to streamline their distribution and broaden their network at lower costs.
However, choosing the right logistics provider for your company is increasingly challenging due to the competitiveness of the market and the breadth of options available.
In this blog, we explore the challenge of choosing a 3PL provider, including how to decide if a 3PL is right for you and uncover valuable insights into the vital factors you need to know before trusting a third party with your business.
Do I Need a 3PL?
Choosing a third-party logistics (3PL) provider can greatly enhance your company's operations, especially with the rapidly expanding global ecommerce market and the surge in international trade. As a result, demand for 3PL services is increasing exponentially, with global industry revenue predicted to exceed the trillion mark in 2024.
Before making this critical decision, consider the following factors:
- Business scale and order volume: 3PLs are ideal for companies of any size, but they are especially viable for those shipping at least a few dozen orders daily. For startups or smaller operations, it may be more cost-effective to handle logistics in-house until you’re ready to scale your business.
- Cost effectiveness: Analyse if the combined costs of shipping, storage, packaging and labour managed through a 3PL are lower than handling these elements in-house. Consider the regular costs associated with partnering with a 3PL to determine if the investment makes economic sense for your business.
- Operational challenges: If your company is facing challenges such as insufficient storage space, excessive time spent on inventory management, or delays in processing and shipping products, a 3PL could provide a solution. A 3PL can help manage increasing product demands and enhance order fulfilment and supply chain optimisation, particularly during busy seasons or periods of high growth.
- Strategic goals: Your decision should align with your company’s unique goals, production needs and owner preferences. Evaluate whether a 3PL can support your long-term business objectives and operational requirements.
By considering these factors, you can better determine whether investing in a 3PL provider is the right move for your business at this time.
How to Evaluate 3PL Providers
Once deciding to partner with a third-party logistics provider, it’s time to determine which one might best fulfil your needs. Here are a few key questions you should always ask:
How Much Do Your Fulfilment Services Cost?
You want to be partnering with a company that is completely transparent about their fees and gives you insight into their costs.
Every 3PL provider will offer a different balance of services, so make sure you find one that ticks all the boxes for your company’s needs while offering a fair price.
What Technology Do You Use?
Ideally, partnering with a logistics company that utilises accessible, flexible software helps make the outsourcing process as easy as possible for you.
Also, you need to ensure that the 3PL you pick exhibits accurate inventory management and provides you with the necessary insights to streamline your fulfilment process, like real-time tracking.
What’s Your Approach to Customer Service?
Depending on how involved you would prefer to be with logistics management, it might be worth asking each 3PL about their approach to customer service.
Before partnering with any company, you need to know what to expect from them and what level of support they are willing to offer you.
For example, if you prefer discussing queries with a person, you might want to choose a provider that assigns a manager to your account, as opposed to one that simply uses AI and chatbots to deal with customer queries.
How Do You Deal With Reverse Logistics?
Returns are inevitable. It’s vital to be partnered with a fulfilment company that can handle the additional shipping costs, re-packaging process, and inventory amendments seamlessly.
Your company will have a unique set of 3PL selection criteria for picking the best provider. Dedicate time to deciding which services are most important to you before finding a 3PL that can perform these services as successfully as possible.
What to Consider When Choosing a 3PL Provider
Alongside asking questions that support your company’s unique MO, some factors of logistics provision are non-negotiable.
Below, we’ve prioritised a comprehensive list of factors to look out for in a 3PL, helping you explore your options with conviction and confidence.
1. Capabilities
Although it might seem obvious, before signing with a 3PL, you need to have a clear understanding of exactly which services they provide, and how well they provide them.
As you’re looking for a 3PL provider to undertake logistics tasks more effectively and efficiently than you can, look for one that has perfected its supply chain management. This means that their solutions are integrated seamlessly, and they can provide you with an efficient service from start to finish.
Capabilities of a 3PL encompass kitting, packaging, storing products, shipping, order fulfilment and everything in between.
2. Reviews
When choosing a 3PL provider, don’t forget to do your homework first. A look into their reviews and customer satisfaction ratings, as well as their own case studies, will tell you whether you’re dealing with an expert or a cowboy.
Sites like Google Reviews, Yelp, and industry-specific sources will help you determine a company’s reputation and track record in your niche.
3. Pricing Model
When comparing the fees of competing 3PLs, it’s important to relate those costs to their suitability to your company’s needs. You may have to spend some time on cost analysis before you find a provider that delivers these services at a fair price.
Shop around before signing on the dotted line, as the competitive nature of the industry and increased demand for logistics services means that many providers hike up their fees without improving their services.
In particular, be wary of hidden or complex fee structures! It’s common for 3PLs to charge separately for receiving inventory, storing products, processing orders, picking, packing and shipping. It’s not always easy to calculate how this will impact your business at the outset, which is why we prefer a simple pay-per-order pricing model.
4. Accuracy
One of the most important capabilities a 3PL should provide is order fulfilment accuracy.
Essentially, order accuracy is the company’s ability to correctly fulfil customer orders, ensuring products are delivered on time and error-free.
Order fulfilment accuracy directly impacts your customer satisfaction and company reputation, so try to choose a 3PL with a proven track record of operational efficiency.
3PL providers with integrated contingency planning and a clear understanding of risk management are far more likely to achieve fulfilment accuracy across the board, even under unexpected circumstances.
5. Customer Service and Consumer Experience
Part of the logistics journey is the experience. One bad interaction can put someone off your brand for life.
It pays to put yourself in the consumer’s shoes when imagining what might elevate their experience with your business and its 3PL.
For example, we know that today’s consumers are heavily invested in the environmental sustainability of the companies they invest in, so choosing a 3PL that is environmentally responsible might up your chances of success in today’s market.
We also know that consumers like to be in control of their orders, so opting for a provider that offers shipment tracking and responsive support to resolve issues can only benefit your operations and reputation.
6. Technology
As we’ve already touched on, technology plays a big role in logistics management.
Depending on your preferred involvement in the logistics process, you might require a 3PL provider that offers detailed shipment tracking and real-time tracking so that you and your consumers can always stay updated with your products’ movements.
When interviewing 3PLs for your business, ask them about their warehouse management systems (WMS), transportation management systems (TMS) and supply chain management software. Companies that are well-versed in the utilisation of advanced software are far more likely to achieve supply chain optimisation for your business than ones that aren’t.
7. Responsiveness
Responsiveness is not only about a company’s ability to perform excellent customer service, but it also entails their dedication to you as a client.
Third-party logistics services aren’t cheap, and it’s important to know that the 3PL you invest in will provide you with the tailored support you need when you need it.
Something that places our business above large competitors like Amazon FBA is our direct, human approach. We focus on quality of service for a smaller number of clients rather than scale, which means there is always someone on hand dedicated to helping you deal with any issues or to answer any question.
So, if you’re looking for a partnership that prioritises communication and consistent support, it’s wise to invest in a 3PL that assigns human managers instead of relying on support portals and AI chatbots!
8. Scalability and Adaptability
The scalability of a 3PL is essentially their ability to expand operations as and when your customer demand increases.
We all want to dream big, so make sure that your 3PL has the resources required to seamlessly adapt to an increase in production.
An established 3PL will offer the flexibility to vary its operational scale depending on fluctuations in demand. The right technology will also help them to predict growth and seasonal patterns.
9. Stability
When evaluating the stability of a 3PL, dig a little deeper into various elements of the business.
Firstly, investigate their financial security. You can do this by checking Companies House, exploring their existing clients and industry experience, as well as asking them questions about crisis management, their current customer base and plans for growth.
Secondly, it’s always worth looking into a 3PL’s KPIs (Key Performance Indicators). These include their on-time shipping percentage, shipping accuracy and order accuracy. A well-established, stable 3PL should be delivering strong and consistent results.
10. Customisation
Many 3PLs will customise their services to maximise their ability to achieve your company’s unique goals.
Depending on the scale and demand of your company, 3PLs can customise technology integration, packaging services, shipping locations, delivery timeframes and more.
The more a 3PL can customise your logistics experience, the more likely you are to achieve your company goals, order fulfilment and customer satisfaction.
Likewise, the more they can understand your company, the easier it’ll be for a 3PL to customise their services to meet your needs. So, choose a 3PL that is keen to communicate, understand and adjust to the specific requirements of your business.
11. Omnichannel & Ecommerce Expertise
Depending on your business, it’s critical to choose a 3PL that offers services that integrate well with your most important sales channels, including your own website or ecommerce platforms like Shopify, BigCommerce or Etsy.
With 80% of sales interactions between buyers and sellers set to take place online by 2025, it’s especially important to select a 3PL with a strong understanding of ecommerce.
Here at Tap’in, we have developed dedicated ecommerce logistics solutions to deliver a personalised, well-integrated ecommerce fulfilment service that supports growth and protects your cash flow.
12. Industry Expertise
Logistics challenges often vary by sector, so a 3PL with strong experience in your industry or with similar clients may anticipate issues and provide proactive solutions. In some cases, you might need tailored support that can be delivered best by a logistics provider with related experience.
However, we wouldn’t rule out a 3PL on this basis unless your industry has very specialised concerns. An adaptable 3PL with strong operational competence and the latest technologies should be able to deliver great results across industries.
13. Locations
Although many larger 3PLs can operate on a global scale, it’s worth considering whether their location impacts their suitability for your business.
It’s tempting to pick the biggest possible 3PL with the largest network of warehouses, but you should consider whether this dilutes their expertise in your most important markets. In many cases, we’d recommend choosing a 3PL with local experience that understands and can best serve your current or target markets.
For example, at Tap’in, we have a deep understanding of London and its major and minor transport routes, enabling us to streamline our logistics operations and provide a better, more cost-effective service than many global 3PLs.
14. Safety & Security
One of the most important elements of a successful relationship between a 3PL and a client is trust. You need to feel reassured that your business is in good hands and that your partnership will only augment your success.
Building trust with a 3PL relies on a clear understanding of their safety and security measures.
Safety and security concerns to investigate include:
- Facility access: your 3PL should have strict guidelines on who can enter their facilities, which can be enhanced by identification badges and a zero tolerance policy on unauthorised access.
- Surveillance and physical security: to ensure your products are in safe hands, choose a logistics provider with effective surveillance and other security measures, such as fencing, secured loading docks or fire suppression systems, to prevent breaches and loss of inventory.
- Regulatory compliance: a 3PL provider should adhere to relevant national and international regulations regarding security and safety. If concerned, you can ask for more information on how compliance is handled, including policies around GDPR for data protection or customs regulations for cargo handling.
- Cargo screening procedures: ensure that the 3PL you choose has screening procedures guaranteeing the integrity and safety of all parcels going through their operations.
As with any partnership, make sure the 3PL you choose is committed to protecting your business and putting you at ease.
Choose a 3PL Service You Can Trust
Here at Tap’in, we understand how hard it can be to trust any critical touchpoint with your customers to a third party.
That’s why our experienced operations team is dedicated to listening and creating tailored solutions that suit your unique goals and help maximise your company’s success.
If you want a third-party logistics partner you can rely on, we’re committed to delivering a bespoke service and developing lasting relationships that you can depend on.
To learn more about our ecommerce logistics services, get in touch with our friendly team today and find out how we can help your business grow.