How to Choose the Right 3PL Provider for Your Business
Third-party logistics (3PL) providers are in high demand from e-commerce businesses operating across a range of industries. They take the weight of fulfilment off your shoulders, with many providers managing the fulfilment process from start to finish – including inventory storage, picking and packing orders, and shipping products to customers.
There are many 3PL providers out there, so finding the right one for your business is crucial to getting the best service and return on your investment. In this blog from Allegro Logistics, we offer a concise guide to selecting the right third-party logistics provider for your business – noting key factors to consider when choosing a 3PL provider, offering useful questions to ask a potential provider, and provding methods to evaluate their performance.
Key factors to Consider when Choosing a 3PL
Cost
Naturally, one of the most important factors for a business to consider when looking into 3PL providers is cost. You should ask yourself:
- How much is your business willing to spend on logistics management?
- How long are you looking to enter a contract for?
- What is the price of any 3PL services already in use?
All of these questions may impact which quotes stand out as appealing, and which can be marked as a poor fit. Carefully considering your options not only helps with immediate decision making, but also to avoid financial challenges down the line.
Transparency about the amount your business is willing to spend and the price a provider charges for their services prevents hold-ups and halted agreements during the negotiation process, saving you admin headaches and last-minute pullouts.
Request a quote to see how we’d price your project.
Services
When selecting a 3PL provider, it is important for a business to understand which services a provider does and does not cover. Different 3PL providers will have expertise in varied areas – so it’s important to find a provider that complements your needs.
What one provider may offer within their core package; another may charge additional fees for. Some providers may not even offer some of your required services at all. Conducting thorough research on a range of different providers helps businesses find a provider that meets their needs best, resulting in greater customer satisfaction and fewer service challenges.
When choosing the right service, it is also important for a business to anticipate whether any planned upscaling or growth may alter the demands placed upon selected 3PL services. Checking that a provider is able to accommodate changing needs helps avoid the need for swapping providers later in the day.
Scalability
Having a partner that can match your growing needs is another key consideration for businesses looking for a 3PL logistics provider.
As your e-commerce business grows and expands, its logistics needs will change too. If a business chooses a 3PL provider that cannot accommodate changing needs, the growth of that business may be limited – making for reduced returns.
In addition, if a business experiences rapid growth while using an ill-suited 3PL provider, customers may experience a reduction in service quality. Ensuring that your 3PL provider can accommodate scale changes is an important aspect of keeping a business running smoothly.
Technology
In the majority of cases, 3PL providers will use a range of technology to maximise the efficiency of their operation. Establishing which technologies a provider uses may allow a business to make a more informed choice about whether a provider is right for them. Real-time order tracking, sophisticated inventory management, and software integrations all play a crucial role in offering the best service for your logistics and your end customer, so checking your 3PL partner has these is a good place to start.
Businesses may also wish to establish the rate of a provider’s technical growth. If a business opts for a provider that is resistant to incorporating new technologies, they may find themselves falling behind competitors over time.
Questions to Ask Potential 3PL Providers
When researching prospective 3PL providers, take the opportunity to reach out and ask questions. This can show at a glance who will be able to readily respond to communication about and throughout the fulfilment process, and offer valuable insights into the full capabilities of the provider.
Useful questions might include:
- How many warehouses/units does a provider operate from, and where are they situated?
- How close are these to transport hubs?
- Do your shipping & distribution services exclude any locations?
- How is your business working to practice more sustainably?
- What is your business procedure for troubleshooting or returns?
- Can you help us prevent overstocking and dead stock?
How to Evaluate 3PL Performance
As with the assessment of performance in any area, KPIs can be used to offer businesses insights into the performance of their 3PL provider. These include:
Timely Shipping – Data on the number of orders reaching customers on time provides businesses with a useful insight into whether any elements of the logistics chain are operating ineffectively.
Shipping Accuracy – Parcels arriving on time is only useful if they are arriving at the right address! So, shipping accuracy is also an important factor to keep an eye on when it comes to the performance of your third-party logistics provider.
Order Accuracy – Further still, it is important that delivered parcels contain the correct items. If frequent issues with order accuracy arise, you may wish to find a new 3PL provider.
Inventory Accuracy – Unfortunately, order fulfilment processes are susceptible to errors. However, when errors stack up, inventory levels may become inaccurate. If inventory issues prevent the day-to-day smooth running of a business, this may serve as an indicator that a 3PL provider is failing to manage its inventory effectively. Additionally, inaccurate inventory levels make it tricky to forecast revenue or estimate demand, so making sure your 3PL keeps inventory levels accurate is vital to sustaining your business.
Time to Process Returns – Returns are an important element of any e-commerce business, so you should observe how effective a 3PL provider is at processing returns. Failure to process returns quickly and accurately will directly impact customer experience, while a smooth process means happier customers and more repeat business.
Efficient and Effective 3PL from Allegro Logistics
Sometimes, the right 3PL provider is closer than you think. At Allegro Logistics, we provide integrated e-commerce fulfilment solutions for businesses in Bristol and beyond, helping our clients to streamline their logistics process and improve customer satisfaction and retention. We stand out from the rest, going above and beyond to ensure your logistics process is clear, communicative, and successful. Get a quote today to find out more!
Learn more about last mile delivery technology and innovations >
Explore the importance of customer retention for e-commerce fulfilment >