How to choose a 3PL partner for your ecommerce business

Your ecommerce business is up and running. Your order book is looking healthy. So how can you make sure you fulfill every order on time and keep your customers awesomely happy? Answer: do it yourself or (better answer) find the right 3PL partner. Here’s a guide to what you need to look out for.

Do you need a 3PL partner?

Consider the amount of time and resources your team dedicates to order fulfillment – packing, labeling, and shipping. What could you achieve if these resources were redirected towards growing your business, like enhancing marketing efforts, sourcing better products, or providing superior customer service?

In an era where ecommerce giants like Amazon have set high expectations for rapid fulfillment, it’s crucial to recognize that your business’s value lies in what makes it unique – your products and customer relationships. If fulfillment logistics are consuming significant time and effort, it might be time to consider a 3PL partner.

Recommended steps for finding the right 3PL partner

The following are our recommended steps for ecommerce businesses looking to choose a 3PL partner. You are always welcome to get more advice from 3PL Center.

Identify your unique fulfillment needs
Make sure you have a crystal-clear view of the logistics and fulfillment services you need. Think about your overall supply chain, how many parcels you ship, peaks and troughs, types of packages, and how much flexibility you need.

Research 3PL companies
Search through 3PL offers online and check out independent reviews. Speak to people you know who use 3PL services. Network with businesses facing similar challenges. There’s nothing wrong with contacting non-competitor businesses to see if you can get any advice or insights.  

Make a shortlist
Which 3PL companies are the likeliest candidates for your business? Do they work with businesses of your scale, with a similar number of products and package types? Do they work in the areas where your orders come from? What range of services do they provide?

Get in touch
Start talking to your shortlisted companies. You’ll get a further idea about whether they’re right for you from the way they handle your enquiry. Talk through what you want and ask about how they’ll achieve the goals you set them. Now’s the time to get a clear quote, and to delve into terms and conditions.

Evaluate
You’ll need to make comparisons of all the information you gather. Check off the services they provide, see how pricing looks, and, ideally, seek references direct from actual clients. Before you sign, make sure you are comfortable with what you’ll pay and the agreed terms.

What problems can come with 3PL?

If you make the right choice for your business, you can look forward to a mutually beneficial relationship. But if you make the wrong decision, there can be a whole lot of pain points. That’s why you need to be critical about what 3PL providers say, and to dig into how they’ll deliver on their promises.

When we talk to ecommerce businesses, the kind of problems we hear about cover all the following.

3PL supplier can’t handle growth in your business
Your 3PL partner can handle logistics for your business as it stands, but doesn’t have enough capacity, knowledge and experience for your business as it grows.

Looks after their biggest customers at the expense of smaller ones
If you’re a smaller client, you don’t want to lose out on how you’re treated because your logistics partner is focused on their main clients. That’s simply not the deal.

Makes promises they can’t meet
It’s easy to make promises, but they need to be backed up by evidence that everything on the table is realistic. Over optimistic promises can apply to performance and to price.

Makes errors
You won’t know whether your chosen 3PL partner gets things wrong until you try them out. If they are guilty of mistakes, they need to be sorted straightaway, with clear remedies put in place. 3PL providers should be able to demonstrate that they have strong quality control.

Doesn’t produce and share accurate data
If you’ve given responsibility to an outsourced 3PL company, you need easy access to accurate, relevant data on performance. Lack of data can hamper not just your logistics, but your entire business.

Lack of transparency
If your 3PL partner doesn’t openly share the way they are working for you, you’ll be kept in the dark. You’re paying for their services, and you need to know what they are doing and how they are doing it. You need to know for the sake of your business, as well as your peace of mind.

Falls short of service level agreements
Each 3PL agreement should include a clear commitment to measurable service levels. Shortcomings in performance must be addressed and, if applicable, you need compensation. 

Doesn’t have good enough technology
Effective logistics and fulfillment depend on systems which provide information from all stages of the supply chain including tracking, order management, algorithms for shipping routes, reporting and analysis. If your supplier’s systems aren’t good enough, you’ll be in a world of frustration.  

Lack of innovation
3PL is fast moving, with new approaches and refinements arriving all the time. If your provider doesn’t look ahead and keep improving the way they handle logistics for you, your business will fall behind your competitors.

Doesn’t operate in the right parts of the country
Your chosen partner must have warehousing and fulfillment centers in the right places to receive incoming shipments and to get orders through to customers. Location matters for delivery efficiency, speed and costs.

Beware of low-cost providers
If prices are significantly lower than other providers, be aware that the quality of service, staff and technology may not meet your 3PL requirements. You are also at risk of being landed with unexpected extra costs. Lowest prices rarely, if ever, mean best value.

Checklist for your 3PL partner for ecommerce

When you’re choosing a 3PL partner, you need to agree terms covering your ecommerce fulfillment and logistics. There’ll be different requirements for different businesses, but this checklist provides a framework for major issues which need signing off.

Warehouse capacity
Number of pallets and/or cubic feet of warehousing space available.

Dropshipping capabilities
For many ecommerce businesses, warehousing doesn’t matter if they ship direct from a transport hub to customers. The dropshipping model saves on warehouse costs and steps in the supply chain, which can be good for you and your customers.

Number of SKUs
Minimum and maximum number of unique stock-keeping units.

Number of orders
Minimum and maximum number of orders each week/month.

Size and weight of units and packages
Physical dimensions and weights for warehousing, handling and trucking.

Types of end client
Logistics ability for direct-to-consumer online retailers and business-to-business operations

Carrier network
Listing of national and local networks available through 3PL provider, including details of areas covered and service standards.

Fulfillment center locations
Proximity to customers for efficient, cost-effective shipping.

Systems integration
Ability to integrate 3PL provider systems with client systems and shopping channels.

Start dates and timelines
Agreed dates and periods for working together, including reviews and contract renewals.

SLAs
Documented SLA (service level agreement) to be signed off by both parties with agreed penalties/compensation for underperformance.

Operations
Detailed commitment to operational standards and services provided including:

  • order cut-off times
  • time to fulfill orders
  • exceptions for holidays and peak trading
  • returns/exchanges handling
  • drayage
  • kitting and assembly
  • pick and stick
  • pick and pack

Pricing
Full details, no surprises.

Onboarding
Assistance and training ready for day one.

Support
Expert help throughout the time working together

Compliance
Certification in line with national and state laws.

Now get ready to pick a 3PL partner

Outsourcing fulfillment for your ecommerce business might feel like you’re letting go of the reins, but if you choose the right 3PL partner, you’ll see it makes sense. Just make sure you are taking into account where your business is today, and where it’s going. We’ve never met an ecommerce business that isn’t aiming to grow – but don’t forget that more customers and more products means more complexity. Keep focused on finding a 3PL partner you can trust to get you where you want to be.

Do you want more info? Get in touch with 3PL Center.

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