Getting products from the manufacturer to the end consumer is a complex process that involves several steps. Even the most straightforward supply chains have areas where things can go wrong, causing delays or mistakes that jeopardize customer satisfaction and business success. It’s critical for manufacturers and ecommerce companies to choose wisely when selecting their 3PL partner for fulfilling orders.
This resource is designed as a guide to help your team ask the right questions as you compare logistics and fulfillment providers to identify the best possible partnership for your needs. Every company will have different priorities and the answers to some of these questions may matter more, while you might skip others. This fulfillment questionnaire covers general factors to consider such as the logistics provider’s alignment with your needs, their capabilities, support and pricing, as well as some more critical areas like the provider’s guarantees and security.
Before setting meetings with potential 3PL partners, your inquiry team (including decision makers, or at least acting with their input) should go over some questions internally to set the stage for your interviews with fulfillment companies.
What are your fulfillment goals?
Is scalability most important, or do you have current challenges with fulfillment that you want to overcome? If your business is expanding into new territory and requires a physical footprint for inventory in order to minimize delivery times, you will want to look for a partner that has accommodating fulfillment centers.
What makes your products unique, and therefore, what special capabilities will your fulfillment partner need to have?
Compare your products to your competitors and consider their differentiators. Does their production or assembly require any special processes? Keep these in mind as you interview potential fulfillment partners, since this will be an important aspect of their supply chain.
Not only should you select your fulfillment partner based on their ability to meet your needs, but you should also make sure the partnership makes sense from a business compatibility perspective.
What is the fulfillment company’s ownership structure, and what are their long term goals?
The ownership structure of the fulfillment company would come into play if they are planning to sell or new ownership could be taking over in the foreseeable future. If the company is planning to grow long-term, it would be a better fit for a lasting partnership.
How are sales and performance metrics prioritized?
Does management focus more on getting as much new business as possible, or do they dedicate their energy toward finding the best kinds of client partners to ensure both parties’ success? Their priority with sales may indicate red flags or a good fit. With regard to the warehouse staff, how are they incentivized to meet performance metrics? Is the emphasis on accuracy, speed, or volume, and how do those priorities rank?
Does the Fulfillment company have debt, and if so, how much?
You don’t want to partner with a company that has a sufficient risk of going out of business, since they could take your inventory with them.
Do they require a long-term contract or agreement?
Long-term agreements may sometimes work in your favor, but most of the time, you’ll want to partner with a fulfillment company that will work constantly to keep earning your business year over year and month over month. Long-term contract agreements are only favorable with stable businesses that have proven processes and results, with minimal debt and risk.
When it comes down to it, you’ll need a fulfillment partner that can provide the capabilities to meet your most important areas of need.
Is there a monthly volume minimum for orders?
If you will have to meet monthly minimums for orders/packages, you’ll want to make sure that you can easily meet these minimums, even in your slowest season(s). If the minimum will be difficult to meet, you might consider negotiating a reduced threshold or be sure to analyze what the extra costs or constraints would be if you cannot meet it.
What are their shipping times?
Shipping times are one of the most important considerations of today’s consumers, thanks in large part to Amazon’s model. Most of your customers will expect delivery within two or three days of their order, so you’ll need a fulfillment partner that can accommodate this. You will want to know the percentage of customers that will receive their order within 2-day ground shipping, and whether your inventory will need to be located in multiple warehouse locations in order to fulfill this need (the fewer, the better). As a follow-up, you should also ask about the lapse of time between inventory arrival at the fulfillment partner’s warehouse and processing for fulfillment. How quickly will your inventory be processed to be ready for sale and shipment?
Does the 3PL company offer inventory management services in addition to warehousing and order fulfillment?
In some cases, you may need your 3PL partner to manage the breaking down of bulk product packaging into individual selling units, and if this is true for your business, it will be an important capability for any fulfillment partner. Do they have an Inventory Accuracy Guarantee of any kind? If they offer inventory management, how are shipments handled if they arrive at the 3PL partner’s warehouse already damaged?
Are other value-added services, such as kitting, packaging and reverse logistics offered?
You may want to have coupons or samples added to every order, or perhaps you need custom labeling or branded box packaging – many 3PL companies offer the full gamut of value-add services, and this may or may not be something to ask about.
If returns processing is an offered service, how quickly are returns processed?
Reverse logistics, also known as returns management and/or processing, is a necessary part of the fulfillment cycle. Whether the customer receives a damaged or incomplete order, or they’re just dissatisfied, you’ll want a fulfillment partner that can manage returns and refunds quickly. Ideally, they will inspect and restock the returned inventory when applicable.
Are there any order processing cutoff times, and what is the latest cutoff time?
Many fulfillment companies have an order processing guarantee, where they will fulfill and ship the order if it is completed by a certain day or within a specific window. For example, they might guarantee that orders will ship same day if they are placed before 5 p.m.
Does the 3PL partner offer automated email confirmations for order shipments?
One important feature of order fulfillment is automatic emails confirming orders and notifying customers when their order has shipped. If the shipping confirmation contains tracking information, all the better. You should also ask your potential 3PL partner about the notification process and when it occurs within the fulfillment cycle.
Will you be able to monitor your inventory and order statuses online or using a web-based dashboard?
You should be able to access general reporting at the very least, but the more detailed and up-to-date monitoring capacity, the better. Ideally, you’ll be able to check on real-time order statuses and inventory levels from any device.
What are the shipping options?
Can the fulfillment company ship via USPS and FedEx in addition to UPS and DHL? Do they offer international shipping? If they offer shipping for international orders, will you receive any shipping discounts or additional fees?
Is climate-controlled warehousing available?
This question would only be necessary if your business needs to ship food or other perishables, but it’s an important thing to ask if you do.
In addition to meeting your needs for operational capabilities in order fulfillment, you will want to find out whether the 3PL partner has guarantees to protect your customers and your business. These may include:
- Inventory Accuracy Guarantees cover reimbursements for the cost of any lost or damaged inventory
- Receiving Guarantees promise that inventory shipments get received into inventory management within a specific window of time (usually 24-48 hours), and if they are not, the 3PL partner might pay a penalty fee
- Order Processing Guarantees ensure that orders are picked, packed and shipped on time, and if they are delayed, some partners promise to pay a fee in penalty
- Order Accuracy Guarantees promise correction of any errors as well as an error penalty fee in some cases
- No Data Loss Guarantees ensure the security of order data so that no information is lost even if the warehouse has a network or power outage
Support is one of the most important considerations when choosing your 3PL partner for order fulfillment. You’ll want to ask questions about their support for you as the client partner, as well as their support for your customers if they have questions or issues.
Is there a quick and easy way for you to communicate with them?
Find out how you will be able to interact with your fulfillment partner, how quickly they respond to inquiries, and whether there are different communication avenues for different issues.
For IT issues, is support provided from an in-house team or third party provider?
If there’s ever an issue with technology systems such as inventory monitoring and management or order processing, it makes a difference if the IT support is handled in-house (usually faster) or by another company who’s juggling their other clients.
How will your customers get in touch about order questions, details or issues?
Is there a 24/7 ticketing system for support, or is customer service handled by phone? How quickly will your customers get a response?
How are lost orders handled and resolved?
Who is responsible for communicating with the carrier if a customer’s order is lost after it leaves the fulfillment center? Some 3PL partners handle this on their clients’ behalf, while others will not.
Can clients visit your facilities?
If you want to visit the facility to tour or check on your inventory in some way, will that be allowed?
At the end of the day, pricing is typically a strong factor that you’ll consider when choosing your fulfillment partner. There are a couple of questions to ask beyond the per-pallet costs, and the answers may significantly alter your costs:
- Is there a free trial period?
- Is account setup free or is there an added cost?
- Are flexible pricing plans available that can be customized to your business’ needs?
- Is account management free or is there an added cost for this service?
- Are shipping discounts available?
- Will you be charged more if your business grows and you add more SKUs, or is SKU management free?
- Does pricing structure change with regard to storage, handling or shipping if your business grows?
- Are there system integration fees (one-time or ongoing)?
- Is there a policy of “no hidden fees”?
- If you happen to sell out of a pallet partway through the month, will your fulfillment partner offer flexible inventory storage pricing and pro-rate the cost?
- Is there an Inventory Shrinkage policy? If the answer is ‘yes’, you’ll want this removed from your agreement because it gives them an allowance that the fulfillment partner can lose or damage without compensating you.
- Are there any changes to pricing for storage, shipping or handling during holiday or peak seasons?
The security of your inventory is a very important aspect to consider with 3PL partners. You will want to ask some specific questions to make sure your partner has the necessary security measures in place to adequately protect and secure your business assets.
Are security cameras in place to cover all operations?
Every fulfillment center should have 24-hour monitored security cameras at every entrance and exit for baseline security. In addition to securing the fulfillment center from theft from the outside, your 3PL partner ideally has cameras that cover every bit of the operation including placement over each packing station. This will enable them to verify if an order was packed in error based on a customer claim.
How is facility access controlled?
The ideal is an access control system that is individualized on a per-employee basis so that unauthorized access can be easily identified. How difficult is it for non-staff to gain access? Are full background checks done on all employees, including seasonal staff? Are controlled substances and/or high-value inventory secured with additional levels of protection such as fenced, gates or locked storage rooms?
How are power and internet outages handled?
In the event that the power goes out, does the logistics partner have backup generators to keep their operations online and continue to get your orders out the door? If the internet goes out, do they have a backup wireless ISP and have backups been tested recently?
How well is data secured?
Does the fulfillment company have website security features in place, with off-site data servers, multiple backups and protection for customers’ sensitive information? Will your business account information be secured with permission-based logins or other security measures?