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How a 3PL (Third Party Logistics) Provider Can Help Your Business

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5 Questions to ask a potential fulfillment and distribution partner

5 Questions to Ask a Potential Fulfillment and Distribution Partner

With an extensive global economy, fulfillment encompasses much more than shipping and receiving. A good fulfillment partner will help your business with a variety of operational tasks including customer service, billing and finance, warehousing and inventory tracking, internet marketing, analytics, technical support, and more.
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Third party logistics providers offer a valuable service for your company as your order volume begins to
scale up. When your core business does not revolve around supply chains and logistics, it can be difficult
to put together the infrastructure that you need to properly support your company. When the customer
experience is so important to how you're perceived as a brand, the last thing you want is for a lot of
people to wait too long for their shipments. That's the type of mishap that has led to companies
ultimately failing because of unexpected growth.


When you partner with a 3PL, they handle part or all of your logistics and supply chain. The primary
difference between a 3PL and other types of logistics provider is that a 3PL provider works directly with
your ordering system through integration. The typical workflow is that a customer orders a product
through your store, and that order then gets processed and passed over to the 3PL provider. They
handle the rest of the process, picking, packing and shipping the order to the customer. Warehousing,
distribution, returns, shipping, and delivery are all part of the services that 3PL providers offer.
Their supply chain and logistics experts focus on that aspect of your business, while you stay focused on
the core competencies that established you in the marketplace.

 

Advantages of Using a 3PL

 

You receive significant benefits from bringing in a 3PL to assist with your business operations. With
companies competing on a global level, especially as they move from small to medium size. Supply chain
logistics require a lot of specialized knowledge, infrastructure, and equipment to get orders from the
warehouse to the customer's door. The 3PL has all that available for your business, which leads to these
benefits:

 

  • Decreasing costs: You don't have to pay for the upfront fees associated with implementing
    supply chain logistics in your organization. Instead, you consolidate that into the fees that you
    pay the 3PL, which are typically much less.
  • Seamless scaling: Sudden order surges don't need to spell confusion or disaster. Instead, you can
    pat yourself on the back for your success and know that everything gets delivered on time
    thanks to 3PL providers.

  • Flexible delivery options: You can expand the types of delivery options and speeds that you
    offer your customers, so they can choose the right mix of delivery date and price that makes
    them the happiest.

  • Access to specialized skills and infrastructure: You don't have to maintain your own supply chain
    logistics department, as you can leverage the resources that the service provider already has
    available, such as a freight fleet.
  • Assistance with domestic and international compliance: Maintaining compliance is difficult
    enough when you're only dealing with domestic concerns. When you start to look at a global
    shipping marketplace, you run into a lot more complexity. The 3PL provider already has
    familiarity with these regulations, as they're part of the business' core competencies. They can
    ensure that you don't accidentally break any regulations when you send out orders.
  • Continual supply chain improvements: The 3PL company is always improving operations on their
    end, which results in a benefit to your company too. Whether they're upgrading to the latest
    solutions or partnering with more shipping companies, they can stay right alongside you with
    their innovations.
  • Flexible warehouse space: Use as little or as much of the warehouse space as you need, without
    dealing with the expenses associated with unused space.
  • Control overhead costs: If you did everything in-house, you would have to plan for your
    maximum order capacity, rather than your average. The unused infrastructure still needs to be
    staffed and maintained so that it is ready during high-demand periods. When you work with a
    3PL, you take these expenses off the table.
  • Take advantage of favorable rates: The scale of the 3PL provider typically means that they have
    access to improved shipping costs and other rates.
  • Improved customer experience: Bad customer reviews add up fast, and you don't want to find
    yourself in a PR disaster because hundreds or thousands of orders were a month late. 3PL
    providers save you from that dire situation and keep your customer experience good and
    consistent.

Supply Chain Management

 

A 3PL can manage the entire supply chain or the parts that you struggle with the most. They can also
offer consultation services if you prefer to handle things in-house, or directly manage your systems as a
service. When you bring in a highly experienced supply chain expert, they can advise you on ways to
optimize the system, monitor it for any problems, properly train employees, and keep everything
running smoothly.

 

Warehousing, Transportation, Distribution


These are the three areas that 3PL providers help with the most. You can choose to outsource all of
these functions to the 3PL company or leverage their infrastructure to complement your own resources.
Warehousing is particularly attractive to companies as they start to scale up, as you can rapidly run out
of space to store inventory. Maintaining warehouse space and staff gets expensive, fast, and it's difficult
to scale rapidly if you run into huge spikes in demand.


The 3PL has plenty of warehouse space available, and since they work with multiple clients, you can
scale your needs up and down as required. Even if you have a lot of storage space available at your
headquarters, you can take advantage of the warehouse locations in high-demand areas to speed up
your shipping and to handle expedited orders.


Distribution and transportation 3PL services involve moving inventory and shipments around. This
includes shifting inventory between warehouses, picking up inventory at your place of business, and
getting orders to your customers.



What to Look for When Choosing a Provider


Financial Stability


You don't want to wake up and have your 3PL provider go under overnight. Look into their financial
stability and ask to see supporting documentation that shows that they're a reliable company. Supply
chain logistics is one of the most important aspects of your business operation, and you don't want to
trust something so critical to just any company.


Number and Location of Warehouses


Compare the warehouse capacity and locations against the typical order numbers that you see. You
want to have warehouses that are convenient to your most commonly shipped locations to speed up
delivery in those areas.


Specialty Industries


Has the 3PL company worked with organizations in your industry? How about in the same market that
you operate in? That kind of hands-on knowledge can make a big difference in the quality of service you
receive, especially if you have specialized shipping requirements for your inventory.


Compatible Operating Hours


You don't want to try to work with a 3PL whose primary hours are completely opposite of yours. Make
sure that communication won't be an issue during standard business hours for your company.


Delivery Speed


How fast can the 3PL provider get orders to their destination? Do they offer two-day, next-day, and
same-day delivery? Look at the commonly requested shipping speeds for your orders when you
determine the delivery options you want to offer through the 3PL provider.


Shipping Capacity


Is the 3PL company capable of supporting your maximum order capacity? How quickly can they scale up
to the increased demand level?


Support for Your Ordering Workflow


Before working with a 3PL provider, make sure that their backend systems work well with yours. Having
a properly integrated and synched system means a much smoother workflow and less confusion when it
comes to out of stock inventory, whether an order has been processed and shipped, and other details.

 

References and Referrals


Check any provided references and try to get referrals from your colleagues to get leads on good 3PL
providers for your area.


Estimated Costs


Finally, how much does the 3PL charge to provide the requested services? This estimate is typically
broken down into multiple sections to show you how much everything costs. If you're uncertain how the
company came to the price that they quote, ask them to break it down further and explain the
calculation. You don't want to have hidden fees popping up in the middle of an order surge, after all.
Some areas to ask about include what gets included with the provided quote, add-on services, shipping
rates, returns management, package insurance, when orders need to be in to the warehouse, pick-and-
pack fees, the monthly expenses associated with using their warehouses, transportation fees, service-
level guarantees, order minimum volumes, and set-up fees.