What Is 3PL? Everything You Need to Know to Pick the Right Logistics Partner

Has your company grown to the point where your logistics department is taking over your business? At a certain point, you need to start looking at outsourcing the logistics process so you can focus more on your actual business and less on shipping.

This isn’t a unique struggle, about 96% of Fortune 100 companies use a 3PL. Plus about 86% of Fortune 500 companies use a 3PL.

Now you are you asking yourself exactly what is a 3PL and what can they do for your business? We are here to help you.

Keep reading and we’ll help you get started understanding what a 3PL is and how to look for one for your business.

What Is a 3PL

The term 3PL stands for third-party logistics. These are entities that are a part of the logistics and supply chain system.

It used to be that buyers and selling made arrangements for shipments between each other. With a 3PL, a third party is responsible for the storage, transportation, and delivery of the inventory from the seller to the buyer.

When You Need a 3PL

The trick to successfully transitioning to a 3PL is to not wait until it is too late. Most business owners start the search when they realize that logistics has taken their focus away from their business purpose.

If you are at this point, you’ve waited too long. You may not realize it, but your customers are suffering from your lack of focus. If the following statements apply to you, it’s time to hire a 3PL.

  • You spend the majority of your day fulfilling orders
  • You are running out space for inventory
  • Your inventory storage expenses are taking over your company budget
  • your business growth is projected to spike or continue to steadily grow

Choosing a 3PL

We’re going to go over a few key elements that you need to consider when choosing between different 3PL options. Go with the 3PL that offers the services that fit the needs of your business.

1. Look at Them

Ask the 3PL if they offer any sort of confidentiality agreement. You are trusting this business with information about yours. You don’t want to risk one of their employees sharing that information with your competitor.

Look into the company’s history and track record. You want them to be financially stable.

Ask what their hours of operation are. Do they provide support on evenings and weekends? This is important as your pickups and deliveries can happen outside of business hours.

2. Look at Your Company

Determine your shipment average and discuss this volume with the potential 3PLs. Discuss your shipment needs, are you shipping B2B or B2C? Are your shipments domestic or international?

3. Technology Considerations

Discuss with the company about their technical capabilities. If you manage an online store then can the 3PL integrate with that?

Automating this process will reduce labor costs and risk of error. If they don’t integrate directly into your existing system, can they make it easy for you to upload your shipment orders?

Ask the 3PL what level of communication they can provide. Will they provide you with pick up notices, shipment updates, or delivery notices? What about if there is a delivery or problem with the shipment?

4. Costs

Finally, you need to determine what is involved in their quotes. These are costs that usually get included in your 3PL quote:

  • shipment costs
  • receiving costs
  • warehouse costs
  • picking fees
  • set up fees

You should also ask about any minimums the 3PL might have. This means that you might have a minimum monthly spend with them. This might not be an issue unless you have a slow month.

What Your 3PL Rep Should Do for You

Once you choose a 3PL that you want to work with, you will get assigned a rep to work with. Your rep should take an interest in your business and work to understand your individual needs.

1. Offer Custom Solutions

Every business is unique, so your rep should help you create a system that works for you. They should be able to look at your current system and processes and integrate them into the 3PL system efficiently.

2. Communicate Effectively and Often

One of the biggest complaints companies have is that their 3PL doesn’t communicate with them enough. You should be able to reach your rep when you need them.

It’s understandable that you cannot call your rep 24/7, but there should be someone available at your 3PL at any time. Your rep should also be proactive at keeping you informed of the status of your shipments.

3. Problem Solve

Your rep’s job is to spend the time and energy solving problems so you don’t have to. You should be able to depend on your rep to resolve issues of a broke down truck, sudden weather events, or lost shipments.

4. Know the Industry

By working with a 3PL you are hiring an expert. So, you should expect your rep to have their thumb on the heartbeat of the industry.

They should give you a heads up on federal regulation changes, driver and truck capacity issues, and anything else that might affect industry operation.

For example, a hurricane can knock out an entire region’s infrastructure. Your rep should see this coming and prepare so that your business doesn’t get interrupted.

5. Offer New and Better Solutions

Your rep should be able to analyze your current system and identify room for improvement. They have a wider knowledge of all of the logistics options and can recommend a solution that you may not be aware of.

For example, maybe you are paying for expensive warehousing locally. Your rep might suggest that you use their provided warehousing service. This would decrease your inventory storage costs and decrease your shipping time.

Make Your Life Easier

If you notice that you’re spending too much time on your logistics, it is time to start looking for a 3PL. You shouldn’t be asking yourself what is a 3PL and how do I find one?

The best thing to do is understand your business’s needs and shipment volume. Then you can discuss this with potential 3PLs to find one that fits.

Your 3PL should act as a partner by providing excellent customer service through prompt communication. They should be able to analyze your logistics systems and provide advice on how to optimize.

Contact us today and let us help you transition your business to using a 3PL.

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