For many e-commerce companies, outsourcing parts of the fulfillment process and using third-party logistics (3PL) is a no-brainer. 3PL partners cut shipping costs and let e-commerce companies spend more time on other areas.
After all, time and money are important to competitive businesses and are the reason why the 3PL market is expected to eclipse $1 trillion by 2024.
Unfortunately, 3PL partnerships don’t always work out. An e-commerce business you’ve heard of, or possibly even your own e-commerce business, may have had trouble with outsourcing logistics in the past. When this happens, finding the accountable party is difficult, and the bad taste left could deter e-commerce companies from finding new 3PL partners.
Here’s the good news: Every e-commerce business can take steps to make sure they have a successful 3PL partnership.
To ensure that you’re getting the most out of your current or future 3PL relationship, here’s a checklist of steps you should follow.
Know Why You’re Outsourcing Logistics
This might seem obvious. You’re outsourcing logistics to save time and money, right?
But what are your goals for your business and how does 3PL fit into them?
You need to ask yourself why you’re choosing 3PL over alternatives, such as drop shipping or running the process in-house. If you choose to outsource your logistics but don’t have the size or scale to justify it, you’re bound to have a poor relationship with your 3PL partner.
3PL businesses also have connections with suppliers and are experts in their field. They can negotiate for lower costs, settle any compliance issues, and take care of your reverse logistics. Of course, all of this is at a cost to your business.
Be certain that outsourcing logistics is the most logical option.
Outline Your 3PL Expectations
Prior to searching for a 3PL partner, you should generate a list of the services you’re looking for and the expectations you have. Yes, every e-commerce business would prefer that their 3PL partner work overtime and hire additional staff around Black Friday. But is the associated cost worth it for your business?
Here are some expectations to consider:
- Size and scope of services
- Range of costs
- Expected handling times
- Expected benefits
- Expected growth
Some e-commerce businesses are also looking for specific services such as kitting or just-in-time (JIT) delivery. But not every 3PL provider offers these services. If you’re expecting to grow, these services could also become important to your future supply chain model. This could rule out potential partners that don’t offer enough services for you to grow into.
Knowing exactly what you’re looking for will save you time once you start your 3PL search.
[Related: Emerging Technologies in Supply Chain Management]
Research 3PL Partners That Fit Your Business
Your e-commerce business adds a specific value to the market, and so does every 3PL provider.
Through your own research, you should be able to find a few 3PL providers that match what you’re looking for based on your business’s current and future expectations – particularly with regard to fulfillment.
After you’ve found some potential 3PL partners, you need to conduct a background check. Most of this should be easy to do online. First, check for any case studies, references, or reviews. These should be available either on their site or on review sites. Next, check to see how long they’ve been a business and if they have any long-term clients. A long-standing business with long-term clients is proof of success.
Also, find out if they will integrate smoothly with your current systems. You don’t want to disrupt your current supply chain only to find out that your new 3PL partner isn’t the right choice.
Before you decide to settle on Fulfillment by Amazon, keep in mind that more affordable options are available, and these options are often just as reliable, if not more.
Come to an Agreement
Coming to an agreement is more than just signing paperwork and moving forward. You and your 3PL partner should be in complete agreement on your process so that no confusion arises down the road (particularly with order fulfillment, since that’s a high priority).
At this point, you should also work with your new 3PL partner to determine a workable timetable. You’ve set your expectations prior to your search for a 3PL partner, and you should ensure they’re on the same page.
Maintain Your 3PL Partnership
In a perfect world, the partnership between you and your 3PL will be mutually beneficial and have no bumps with regard to order fulfillment. Of course, that isn’t always the case.
If you ever feel that the relationship is no longer benefiting your business, your first reaction shouldn’t be to cut your partner loose. Instead, you should try to find common ground again, get reassurance, and fix any gaps in communication.
Be Open to Negotiating
Goals change, and your 3PL service should be able to scale and adjust properly to align with your new objectives. That’s why it’s often best to find a 3PL partner that has more tools than you currently need.
Your 3PL partner should also be open to discussing your current supply chain strategy and finding the best solution. While some e-commerce businesses outgrow 3PL partners, others just need to renegotiate the scope of services.
You and your 3PL partner should always be aligned, and the only way to ensure this is through open communication.
This is a partnership, so you should feel free to bring up any concerns or qualms you have with the current or future supply chain strategy. A good 3PL partner should be able to receive that information and either adjust the strategy or show you why the current model works.
Ever wanted to see where your inventory is going?
On-site visits are healthy for both sides of the partnership: You get the added security of seeing your supply chain in action and your 3PL partner gets to show off the great work they’ve been doing.
Visits are also an excellent time for a face-to-face meeting, which is still superior to phone calls and video conferences.
Measure 3PL Success
Determining whether or not you have a “successful” 3PL partnership is tough. This term changes meaning from business to business, and your e-commerce business could see the definition change throughout the year.
Your 3PL partner may not always be perfect, but as long as they consistently meet and sometimes exceed your expectations, provide every service you expect, and work with you to adjust your current supply chain strategy, you have nothing to change.