Choosing a third-party logistics (3PL) provider which will add value to your global supply chain is a major task with different aspects to consider. Because today’s global logistics is highly complex: it involves multiple parties, covers dozens of trade lanes and shipping options, while at the same time all activities are obliged to comply with multifaceted trade agreements.
Don’t be fooled by the lowest quote
When it comes to searching for a 3PL partner, cost is only one point you have to consider. Even when you choose the service provider who offers the lowest quote, it does not necessarily mean that your final bill will be the cheapest. Imagine you would be faced with lower efficiency or a higher error rate than expected. This could quickly result in increased cost of service and, even worse, have a negative impact on your performance towards your customers. But how to prevent this kind of trouble? By doing some extended research.
Take your decision based on research and hard facts
Prior to starting their search for service providers, companies need to take a look at themselves. They need to clearly define their individual requirements and objectives when it comes to the field of logistics. This step is crucial in making a good choice for a provider later on.
Once you have come to a mutual understanding with your internal stakeholders, you can start with your research in the market of 3PL service companies. As a first step in making your choice, you should erase those providers from your list that do not offer those specific services and features your business requires.
By now, you should have identified a bunch of promising companies that are worth taking a deeper look at. As a next step, you need to evaluate their potential performance in regards to your business’ individual requirements. That is to say, strive to gather information from any available source.
Business reports
First, stick to the numbers and go through reports on current business and cost development of your candidates. Do you have accounting and audit figures at hand? Great! And, last but not least, examine their financial stability to make sure they are standing on solid ground.
Inside knowledge
Second, beside reviewing their finances, obtaining inside knowledge will be extremely helpful. Maybe you can find out details about existing partnerships and gain insight into your potential providers’ performance. Business reports and your personal network within your industry might help to get an impression of the real-life performance and customer care of your potential service providers.
Do they want to become your partner?
Strive to find not just a service provider, but a real business partner. Do you know how your candidates dealt with specific challenges? Have they proven to be flexible and willing to go the extra mile for their customers if necessary? Do they foster long-term relationships with their customers? In the end, one thing should become very clear: that your candidates always focus on delivering a strong performance to make their customers happy.
Keep an eye on their digital expertise
Given the times of digitisation we are living in, one of the key areas your new service provider needs to be an expert in, is IT. Because today’s logistics is not just about the flow of goods, it is also about the flow of information. This leads to customers expecting fast, real-time and 24/7 access to their shipping data. 3PL providers are only able to meet this demand by embracing digital solutions as a core part of their service offer, e.g. by having an in-house team of technology experts available who develop tools and interfaces for their customers.
Not only will these state-of-the-art digital solutions enable you to track your shipments in real-time, they will also be key for monitoring the KPIs and SLAs you defined with your 3PL company. In general, profound IT knowledge on your 3PL partner’s side can add real value to your business when it comes to customer service, competitiveness and potential for growth.
Think twice before choosing a company who do not own their digital services but outsource them. Your service provider involving yet another subcontractor might bring less flexible solutions and prolonged waiting when it comes to adapting services and systems to your customers’ individual needs.
Fewer partners ensure efficient operations
When diving into the market of 3PL providers, you will soon find out that many of them claim themselves as experts in specific areas. However, consider it twice before assigning different companies to fulfilling the different needs of your company. If you had multiple specialized partners on board, you might need to spend a significant amount of time and money for trouble shooting and aligning the activities of the different providers. Last but not least, there is also a higher risk of error and conflict between the different elements of operations.
For these reasons, try to find one partner who can fulfill your different needs be it freight forwarding, warehousing or distribution by providing one integrated solution. As a side note, nominating one single provider should also help you to keep your costs down. And, do not forget to think about the future. Any 3PL partner should be capable and willing to support you in your potential plans. They should also be able to adapt their services to any rise or fall in demand, no matter if this happens expectedly or not.
