Companies that outsource part or all of their logistics to third-party logistics providers are increasingly common. According to a global survey carried out in July 2021, 63.5% of shippers were outsourcing their warehousing activities to 3PL providers. (Statista)
The benefits of outsourcing certain aspects of your supply chain, such as warehousing and distribution, are clear. If you outsource shipping, you can reach massive improvements throughout your supply chain, as well as improve your customer service and scaling abilities.
According to the 2021 State of Logistics Outsourcing Report, 91% of 3PL users agree that their 3PL relationships have been successful, and 68% say that the use of 3PLs has contributed to reducing overall logistics costs.
However, it’s important to choose the right third-party logistics provider (3PL), this is a big decision — the right 3PL can be a powerful business ally, while the wrong 3PL can have detrimental effects on your operations and cause many logistical problems.
Here are some important things to consider when you choose a third-party logistics provider:
1. Know why and what you’re outsourcing.
The first step in making this decision is knowing exactly what it is that you want to achieve by outsourcing. Some businesses just want to save money through lower labor costs and more efficient warehouse management.
Others might want more scalability than they could achieve in-house. Still, others are looking for more flexible services, particularly if they’re seasonal businesses or those with variable inventory needs.
2. Ask the 3PLs about their processes and technologies.
A good 3PL should be able to explain how they’ll help you achieve your goals in detail, including their processes and the technology that supports those processes.
Access to features like last mile delivery tracking, pickup/dropoff signatures & photo capture, same-day delivery, and bulk delivery scheduling are all crucial to logistics success.
Fun fact: At Dropoff, we offer all of our tracking and custom courier actions with no accessorial fees, or peak demand charges. To learn more about what Dropoff can do for your business, talk with one of our experts.
3. Trust is key when choosing a third-party logistics provider.
When choosing a third-party logistics provider, find someone you trust, with the culture and values to match your brand. In all aspects, you should view this as a partnership with mutual understanding and priorities.
4. Do your due diligence.
Before entering into an agreement with a 3PL, check their history and get recommendations from trusted sources so you can fully understand your prospective partner and their track record.
5. Your 3PL should service a large network of locations.
The more location coverage a provider can offer you, the smoother business will go as you expand into new areas. If there is an issue with one location, they can quickly redirect shipments to another one.
Obviously, not all logistics providers cover all areas, so be sure to check that your provider services the areas you need. Also, you might find it useful to check our guide on how to find a nationwide courier service.
6. Choose a 3PL provider that has experience with companies in your industry.
While all logistics providers offer the same basic services, not all do things in the same way. If a 3PL doesn’t have specific industry experience, they may make decisions that don’t work for your business. Look for a provider with experience serving similar businesses and ask if they can provide references.
7. Look for a partner, not just a service provider.
A third-party logistics provider should not just be a vendor but an actual partner in your business. This means they have invested in your success and have a vested interest in helping you grow.
The best way to make sure this is the case is to look at the other clients they have served. If they have an extensive client list with long-term relationships, it’s likely that they will treat you as more than just a customer on their roster.
8. Your 3PL should be flexible enough to scale with you.
When you choose a third-party logistics provider that can customize its services to match your specific needs, you know you’ll be set up for success.
You may not need all services immediately, but it’s good to know that if you need additional services down the line, your chosen 3PL can scale up quickly to meet those needs.
9. Look for a 3PL that’s growing.
Consider a provider’s stability in terms of both their financial and operational capacities. If a company is losing money or has significant debt on its balance sheet, it may be an indication of risk.
Have they made key investments in their infrastructure and people?
If not, it could mean that they are unable to keep up with industry standards.
10. Can they handle the pressure of high-demand spikes?
A proven track record of high capacity is also critical. You need a partner who has the ability to handle peak demand periods, keep on time delivery metrics without delay or disruption, and can adapt quickly if unexpected challenges arise.
“Those first few weeks were a whirlwind and we would have never gotten through it if Dropoff was not really a 24/7 service.”Terry Makasziw, Ops Specialist at Blackbox Meats
11. Your 3PL should provide all the services you need without breaking the bank.
Finally, look for a provider who offers the services you need at a price you can afford. A good logistics partner should be able to provide all of the services required to get your goods from point A to point B efficiently while offering value-added solutions like custom courier actions.
How Dropoff Can Help
Hopefully, you now have a better idea of how to choose a third-party logistics provider for your business. Of course, we have only covered the high points here, and there are certainly other factors you might consider depending on your unique situation and the needs of your business.
At Dropoff, we serve hundreds of clients across the US and process over 100,000+ deliveries per month.
Our logistics experts work diligently with every single client to ensure we provide the best service in the industry, schedule a call with our experts to see if Dropoff is right for you.
FAQs on How to Choose a 3PL Provider in 2023
A good third-party logistics company should offer various types of shipping options, such as full truckload, less-than-truckload (LTL), and use multiple forms of transportation (intermodal), as well as additional services like software to manage transportation, storage space (warehousing), and managing freight.
There are five things to consider when choosing a third-party logistics partner in 2023:
– Customer service and reliability
– Financial stability
– Area of expertise
Do your research by asking these questions when you are choosing a 3PL provider in 2023:
1. What types of transportation services do you offer?
2. Do you have experience in my specific industry and are you familiar with any unique requirements or regulations related to it?
3. Do you have a transportation management system (TMS) in place?
4. Can you provide information on your warehousing and inventory management capabilities?
5. How do you handle freight claims, and what is your process for handling lost or damaged shipments?