How To Choose The Right Third-Party Logistics Provider
There are a lot of third-party logistics providers out there offering a litany of different services. Those in the know will tell you that not all third-party logistics providers are created equal.
Choosing a third-party logistics provider (3PL) can be one of the best decisions a supply chain can make. Supply chains that utilize third-party logistics providers report increased efficiency, greater capacity, and a lower cost of doing business.
If you are looking to increase the scale of what your supply chain can achieve on a budget, then hiring a third-party logistics provider is how to do it. So how do you choose the right third-party logistics provider?
Consider Your Supply Chain
You wouldn’t buy a car without first considering what features you would like your new car to include. The same principle is applied to choosing the right third-party logistics provider for your supply chain.
Where is your supply chain struggling?
Why do you think a third-party logistics provider can help?
How do you want to interface with the 3PL?
How important is technology to your supply chain?
Answering these questions as specifically as possible will help you determine what services you would like your third-party logistics provider to provide, and therefore which 3PL is right for your supply chain.
Do Your Research
The importance of doing your research before contracting your supply chain to a third-party logistics provider cannot be overstated.
It is critically important that you thoroughly review each candidate, the services they offer, the rates they provide for those services, and how well those services are provided.
Don’t be afraid of asking each candidate the hard questions like;
- What happens when you can’t cover a load?
- Do you ever run out of capacity?
- Do you run out of space during the busier seasons?
- How long have you been in business?
If a 3PL candidate can’t, or refuses to answer any of these questions, then they may not be the best third-party logistics provider for your supply chain.
Determine Your Technology Requirements
Technology in the logistics sphere is always changing. Transportation management systems, inventory management software, artificial intelligence, freight market monitoring programs, and advanced load tracking systems are expensive, intricate, complicated and absolutely necessary to run a profitable supply chain.
The best third-party logistics providers will not only utilize advanced logistics technology they will also be compatible with the technology used by your supply chain.
The more compatible your systems, the easier it will be to operate as a seamless, efficient supply chain.
Consider Omnichannel Expertise
Different third-party logistics providers will specialize in different aspects of the supply chain. When choosing the best third-party logistics provider for your supply chain consider omnichannel experience thoroughly.
A third-party logistics provider that is versed in the various aspects of the supply chain and whom can operate seamlessly between them is going to be the better candidate.
Furthermore, it is important to consider your omnichannel expertise. How well does your supply chain function regarding warehousing, freight transportation, inventory control, etc.?
If you find that your supply chain lacks in any of these areas, then a third-party logistics provider may be able to lend their expertise and improve those areas.
Network Configuration and Scalability
Supply chains are not static. They are always changing with the market and growing as fast as consumers consume, which is why it is critical when choosing a third-party logistics provider, that you choose a candidate that can grow on the scale of your supply chain.
As supply chains grow in scale to meet consumer demand, they change to accommodate the new and ever-increasing demands of the consumer.
A third-party logistics provider that is too rigid in their configuration and ability to operate may not be able to provide you with the service your supply chain network needs when it inevitably changes.
Avoid Utilizing Too Many 3PL’s
Every 3PL provider is in competition with every other 3PL provider. Hiring too many to your supply chain can actually drive up your 3PL costs by removing valuable capacity from the market.
For example, if you consider that at any one time there are 1000 trucks in your area bidding on freight. Hiring four 3PL’s to secure transportation in that area does not increase the number of available trucks, it simply increases the amount demand for those trucks.
Simple supply and demand indicates that the price of those available trucks is going to go up.
Understanding what services and qualities that are shared by high-quality third-party logistics providers is only half of the selection process.
By far the most important aspect of choosing the right third-party logistics provider for your supply chain is understanding your logistics, knowing where your supply chain can improve, and setting tangible goals for your 3PL to achieve.
Flowspace inspects and approves each of our warehouses to ensure they meet security and quality standards. Our warehouses are staffed with workers who are available to receive your inventory, palletize your goods, and perform custom services like kitting or over labeling. We will always choose the right 3PL for you. Get started today!