How to Choose the Right Third-Party Logistics Provider for Your Business

Using a 3PL logistics service can help you to streamline your warehouse operations, improve customer satisfaction levels, and scale your business.

By outsourcing your shipping and/or warehouse management you will cut down on costs, improve efficiency, and speed up your supply chain management.

For these reasons, many stores and ecommerce businesses are turning to third party logistics to handle shipping and fulfilment. Leaving their staff, time, and resources free to be devoted to other areas of the company.

In the article below, we will look at 9 factors you need to consider when choosing the best third party logistics solution for your business operations and customers.

1. Strong Reputation and Industry Standing

When looking for a 3PL service, you should first of all check their reputation. You need to be confident that the company have the staff, experience and equipment required to support your shipping levels and scalability aims.

You should ask the company for their performance metrics for their 3Pl warehousing service, a real time estimate on how quickly they can ship a product and any industry awards or certificates they can show you.

You should also research their previous customers, ask for testimonials, and do you own research via online reviews.

Doing your due diligence at this stage will help you to weed out third party logistics services which are not well suited to your shipping needs.

Along with investigating the reputation of a 3PL logistics company, you should also consider whether you feel comfortable trusting them with such a core part of your business.

2. A Good Company Culture

As well as looking purely at results and certificates, you should investigate the company culture and whether their goals align with your own company.

You need to have confidence in the operations of the warehouse, the treatment and organisation of staff, and the priorities of management.

Getting an understanding of the work environment, staff turnover, and other key factors will help you to decide if the company is a good fit that you can trust with your business.

If you are happy with the reputation and company culture, another key component to consider is how the 3Pl warehousing service approaches communication.

3. Effective Communication

If you are going to enjoy a positive relationship with your 3PL provider – good communication on both sides is essential.

You need to know how often the service will touch base, that they will make you aware of inventory and supply issues quickly, and that any potential problems will be communicated immediately.

You also need to check what customer feedback procedures they have in place, so that problems and delays are quickly identified and rectified.

Check who you will liaise with at the company and make sure that your communication expectations are going to be met. This should help you to avoid delays, miscommunication, and disappointment later down the line.

Along with communication, you need to make sure that the company has the capability to customise their service to your business needs.

4. Service Customisation

Consider exactly what shipping and inventory management service you need from a third party logistics company and assess what services are on offer.

Does the company have the capabilities, staff size and equipment to tailor a customised approach to your product shipping. Compare and contrast the types of services companies offer, their price models and any additional services that they offer.

Rather than choosing the cheapest bid, consider if the company truly are capable of providing the level of service and shipping numbers you need.

Closely connected to their ability to customise services, will be what equipment and technology the company uses.

5. Technology and Equipment

One key factor when deciding to use a 3PL service, is to check that their technology is compatible with you own. You need a seamless way of communicating new orders to the warehouse to make sure that customers are not disappointed.

You should also look into the data analytics of the warehouse, so that performance levels and shipping times can easily be accessed whenever you need them.

The company should also show that they are committed to innovation and implementing cutting edge systems which will further improve their service. Do they have the technology and systems in place to provide an omnichannel service?

6. Omnichannel Expertise

Take a detailed look at exactly how the warehouse and shipping management works, what departments are available, what systems are in place and how they are connected.

How do the ecommerce fulfilment department work with inventory management and warehouse operations to ensure that the best service is provided every time? How successful will this setup be when dealing with a last minute delivery or sudden influx of orders?

Along with these operational considerations, you also need to consider the location of the 3PL warehousing company.

7. Location

If you pick a third party logistics company which is far away from both your business and most of your customers, this can lead to delays and disappointment.

Choosing a 3PL company which can quickly transport and replenish stocks, move packages, and can arrange person to person meetings will be beneficial for both your business and customers.

Local this party logistics providers will also be aware and compliant with the laws and regulations you need to adhere to.

You should also check about what the company size and reach is to make sure that all of your customer base is covered.

Along with their location, a key factor to check is whether you are happy with their security set up.

8. Security Set Up

Your inventory is one of the most valuable aspect of your company and needs to be protected. What security systems does the 3Pl logistics service have in place to ensure your products are protected from theft and damage?

Check their insurance coverage and whether your finances will be protected if anything does happen to your inventory while it is on their premises.

You also need to be aware of the data protection procedures and what encryption software they have in place to keep your customer’s details safe. You should also ask about their backup and recovery systems in case of data losses.

Finally, you need to think about how committed each 3rd party logistics company is to innovation and improving their service offerings.

9. Continuous Improvements

Ecommerce and online shopping is developing fast and the expectations of customers have never been higher. So, you need to make sure that the company you hire is committed to continual research and development, implementing new technology and industry-leading processes.

If a company is unwilling to move with the times and implement cutting-edge technology, your customer satisfaction levels will begin to suffer.

As you can see there is a lot that goes into choosing the right 3rd party logistics provider. This is an important decision which can make a huge difference to the productivity and profitability of your business.

Now let’s find out the benefits of using 3PL.


How to Find 3PL Providers to Shortlist as Partner Candidates?

When seeking to shortlist potential 3PL (third-party logistics) providers as partner candidates, leveraging various resources can be beneficial.

Start by exploring business directories and online listings specifically catering to the logistics industry, as these can provide a comprehensive overview of available providers and their service offerings.

Additionally, utilise search engines to identify 3PL companies that align with your specific requirements and geographic reach. Attending industry exhibitions and conferences can also be valuable, as you can directly interact with potential partners, observe their presentations, and gather insights.

Furthermore, seeking referrals from trusted business associates, industry experts, or even existing 3PL clients can provide invaluable firsthand experiences and recommendations.

By tapping into these diverse sources, you can find potential 3PL providers as candidates, facilitating a thorough evaluation and selection process.

What Are the Benefits of Using 3PL?

Using a third-party logistics (3PL) provider offers advantages that drive cost efficiency, operational flexibility, and enhanced customer service. According to Cleo, a global company known for its ecosystem integration platform, 3PL also supports companies with scalabilities.

Key benefits of using 3PL include:

  • Increase Shipping Efficiency – 3PLs leverage high-volume transportation optimised routing technology to reduce freight expenses versus overseeing in-house. Consolidating loads, avoiding LTL shipments, and ensuring trucks travel fully-cubed leads to substantial per package savings.
  • Improve Business Flexibility – Fluctuating market demands, promotions, and inventory needs create challenges for internal logistics teams and infrastructure to stretch and adapt accordingly. 3PL services deliver custom solutions and staffing/assets on-demand, avoiding over or under-investment. The outsourced variable cost model increases enterprise agility through the ebbs and flows.
  • Support Company Scalability – As organisations grow revenues and territories covered, supply chain complexities multiply even faster if managed internally. 3PL providers readily scale distribution networks, transportation routes, technology functionalities and warehouse/yard capacities to align with sales trajectories. It keeps service quality high while minimising incremental investments.
  • Enhance Customer Satisfaction – With 3PLs managing inventory flows, order fulfillment and last minute delivery, companies can tighten shipment SLAs and provide superior purchasing experiences for their clientele. The supply chain focus creates bandwidth for brands to hone brand building while relying on logistics experts to enable back-end excellence.

How Much Does 3PL Cost?

Calculating total costs with a third-party logistics (3PL) provider requires tallying various services that may be outsourced.

Key categories influencing pricing include:

  • Receiving Costs to intake and putaway inbound goods
  • Storage Costs for occupying warehouse space, usually per pallet/month
  • Picking Costs to select and prepare items for orders
  • Packaging Costs for materials and labor
  • Shipping Costs encompassing freight and transportation management.

By leveraging economies of scale and specialisation, 3PLs can optimise each function more cost-effectively than shippers can handle themselves. And bundled together, outsourcing multiple supply chain activities to an integrated logistics services partner commonly yields over 10% in baseline expense reductions.

When evaluating 3PL cost models, the entire spectrum of receiving, storing, processing and shipping activities under management should be assessed fully against comparable in-house operations.

For more information about 3PL logistics solutions in Melbourne, contact Effective Logistics today. Our experience and knowledgeable staff will be happy to help you find the best third party logistics solution for your business.

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