Inside the 3PL Process: What to Know Before You Sign

Regardless of how tempting it might seem, the fastest and cheapest route is not always the right choice.

Think about the last time you bought a nice outfit. Snagging a suit off the discount rack at a department store will save you a few bucks today, but it’s not likely to impress anyone at your next job interview. You could also invest some extra money now to get a custom-made garment from a local tailor, ending up with an outfit that makes you look like a million bucks. Five years down the road, which suit do you think will still be in your wardrobe?

In other words, inexpensive fixes can come back to haunt you. A tailored option will be your new best friend, and a one-size-fits-all solution will not likely stand the test of time. Finding an ideal third-party logistics (3PL) partner requires the same sort of careful consideration and pragmatism as buying a treasured article of clothing.

Although most companies understand they need to look beyond price when it comes to shipping — “cheaper” often hinders scalability and affects consumer confidence — they are not always sure how to find a provider that will deliver superior results. A true logistics partner will understand your business, create a customized service for your shipping needs, and provide complete transparency in terms of where your money is going.

The Importance of Reading the Fine Print

If you need outsourced 3PL services, don’t instinctively put all your eggs in an off-the-shelf basket. Before you sign on the dotted line, spend some time reading the fine print to ensure you choose a partner that can design a strategy based on your operations, budget, and objectives. These four steps will get you started:

  1. Focus on providers that understand your business.One of the quickest ways to narrow your initial list of potential 3PL providers is to figure out which ones have worked in your industry before. Unless you operate in a completely unique and emerging business segment, you will likely be able to find firms accustomed to working in your sector. This foundational knowledge will decrease the amount of time 3PLs require to understand how to best serve you and your customers. Contact references in your industry to ensure other companies have had satisfactory experiences with your preferred candidates.
  2. Prioritize accountability and transparency.Any vendor should be turning a profit for its services, but you want a partner that offers complete transparency in terms of where your money is going. A credible 3PL firm will be transparent about its rates, aligning compensation with value shared by both parties.If a 3PL is reluctant to provide honest answers about its upfront and continuing costs, you should look elsewhere. Considering that about 90 percent of Fortune 500 corporations in America use 3PL providers, there are plenty of genuine companies out there that will be willing to stand behind their service.
  3. Expect plenty of close interaction.Does one of your top candidates claim it will not need much of your time? Consider that a major red flag. Any worthwhile 3PL partner will want to have multiple conversations with you and your team members from day one.Your internal teams will have a variable level of engagement with your logistics partner over time, but everyone should be highly engaged and working in tandem during the implementation phase, which can last up to three months. Be suspicious of firms that promise to have you up and running with minimal effort in a matter of weeks. If potential providers don’t prioritize communication and collaboration early in the relationship, that is not likely to change months or years down the road.
  4. Be prepared to share information.You might feel hesitant discussing proprietary information with outsiders, but it’s absolutely necessary to let any 3PL you are considering know everything you can about your current supply chain. These conversations should cover everything from shipment volume to delivery locations to transit times. The more information you are able to provide, the easier it is for potential partners to evaluate your current situation and propose a customized solution to resolve any issues.

Finding a 3PL partner is not a simple process, but the time you put in at the outset will more than pay for itself later. Once you have developed a short list of potential providers, issue an RFP to ensure everyone bids from the same starting place.

Dedicate ample time to reviewing proposals and performing due diligence. Meet with top candidates face to face, tour their offices, and get to know their teams. After a thorough evaluation process, you will be free to sign a contract knowing you have made the best decision for your company and the customers you serve.

Want to figure out whether Sheer could be a great 3PL partner for your company? Contact us today to develop a plan for your business based on our extensive logistics expertise.