How to Choose a 3PL Provider

Throughout the United States and other industrialized countries, there are thousands of 3PL providers. With endless choices available to business owners, how do you differentiate and choose the one that offers all the right services for your company?

Here are a few things that you should do before you make the jump into a new partnership.

Take a Hard Look at Your Business
The first step any business should take when beginning the process of outsourcing to a 3PL is to make sure that your team is ready. Understanding your budgets, the opportunities available, and if your company is financially stable are all considerations. Outsourcing your logistics is a major step and can have benefits that will allow your business to grow, but you need to establish current and future objectives to make sure you are making the most informed decision. A good question to ask your team is: “When we are sitting around this table a year from now celebrating the success of this decision, what things will have changed?”

Collect Basic Information
Develop a RFI. These are questions that all 3PL providers should be able to answer quickly that may narrow your selection down.

Information to ask for in your RFI include:

  • Size and location of facility(s)
  • Number of employees
  • What is their disaster recovery plan?
  • Number of current clients
  • Brief history of company
  • List of coverage services they provide
  • Insurance
  • Industry expertise
  • Whether they are an asset based, management based, or an integrated provider
  • EDI and RFID capabilities
  • Case studies of problem solving within similar industries to yours
  • Do they have 24/7 coverage?
  • Financials

Narrow and Develop a RFP
Next, develop a RFP. Spend time on this, and be as specific and detailed as possible. In some ways, this is the first draft of a contract and will allow you to weigh the pros and cons of each service provider.

Here is a short list of what you should include:

  • Scope of the contract (timetables, locations, and facilities)
  • Information on what you will be shipping and the amount (include seasonality and product variables)
  • Tasks you will need performed
  • Any special tasks needed (fulfillment, value added, security)
  • Rate quote

Once you send out your RFPs, create a checklist of how you want to compare the results. Sit down with a small team from all departments in order to create a well-rounded list that covers all areas of this potential relationship with the new 3PL provider. What does everyone want from this relationship? How will it help internal departments develop and grow? What value will this 3PL provider bring to your company? Ask lots of questions and get lots of feedback.

Meet with the Final Candidates
The next step in the 3PL selection is to sit down face to face with a few of your chosen finalists and interview them. Ask them about their company history, philosophy, client satisfaction, technology, and problems that they have helped solved for clients. Take a tour of the facility and talk to the different departments. Look at their equipment and make sure it will meet your needs. Ask about their quality processes and how they handle problems.

Always choose a provider that can give your company the best experience and service. It’s best not to focus on cost as your main criteria in the selection process. Focus on what is going to bring the most value to your company, customers, and new 3PL partnership. You get what you pay for, and at the end of the day, your 3PL provider will be the last touch before your product arrives at your customer.

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