Many different businesses rely on third-party logistics (3PL) providers to handle the fulfillment and distribution of materials, inventory, or customer orders. However, companies often make the decision to outsource logistics relatively early on once order volumes, inventory management, and freight movements become too cumbersome or complex to handle.
Unfortunately, the 3PL you selected to accommodate early business growth doesn’t always turn out to be the right partner for the long term. The needs of a business will change over time, so it’s important to regularly evaluate a 3PL to make sure the quality of service and capabilities still match your company’s needs and expectations.
Five Signs You Should Find a New 3PL
If your logistics provider’s performance is lagging, you’ll start to see signs to indicate it. Here are some indicators to look for:
- Your partner can’t keep up during peak periods. Your 3PL is responsible for getting your orders and inventory where it needs to go. If your partner performs poorly whenever things get busy, this indicates that the relationship holds your organization back. The growth of your business depends heavily on your logistics provider’s ability to scale.
- Your inventory gets damaged or lost. If you’ve only worked with bad 3PLs, you might think breakage and loss are merely a cost of doing business. In truth, your provider should implement processes to mitigate product damage, and it should have visibility into your inventory. Consider a lot of incidences of damaged and lost items during storage or shipping as a red flag instead of something you have to accept.
- Bad on-time delivery ratings. For retail and eCommerce, on-time deliveries are an essential part of the customer experience. Even one late order may keep a customer from shopping with a brand again. Similarly, a late delivery can halt production for a manufacturer and reverberate along the supply chain. So if your 3PL’s on-time delivery rate isn’t just shy of 100%, then it may have a severe impact on the growth and profitability of your business.
- Orders get mixed up regularly. Sending the wrong item to a customer has far-reaching consequences, including the return and replacement costs, damaged customer relationships, and more. A good 3PL will mitigate the risk of mixed-up orders through numerous technologies and quality control processes.
- You don’t feel supported. Does your 3PL reach out to you when something goes wrong, or do you only find out on the backend? Can you reach your account manager easily? Does your logistics provider invest in technology and equipment to improve their service to you? If you answered no to any of these questions, your logistics partner isn’t supporting you as well as they should.
How Do I Change 3PLs?
Once you’ve committed to finding a new logistics provider, vet potential partners carefully to make sure you won’t have the same problems all over again. Avoid sending out a blanket request for proposal (RFP) to hundreds of companies, which may invite proposals from unqualified providers.
Instead, begin by identifying a shortlist of 3PLs that seem to have the capabilities you want. Then send your RFP to those specific providers, offering as much detail as possible about your operation, product types, customers, and any other relevant information. Doing this in advance will help potential partners understand the partnership’s scope and offer more accurate quotes.
As you review the proposals, ask questions such as:
- How much experience do you have working with my industry/product type?
- What technologies do you employ, and will they communicate with ours?
- Does your fulfillment/distribution network cover all of my needs?
- Can you scale with my company as we grow?
- What value-added services do you offer?
- What is your minimum contract length to make investments in our account?
- How will you ensure the smoothest possible transition from my old provider?
Taking the time to do your due diligence on a new provider can help you find a long-lasting partnership, which also means you won’t have to go through the process again in a few years.
About Phoenix Logistics
Strategic Real Estate. Applied Technology. Tailored Service. Creativity. Flexibility. These fundamentals reflect everything we do at Phoenix Logistics. We provide specialized support in locating and attaining the correct logistics solutions for every client we serve. Most logistic competitors work to win 3PL contracts, and then attempt to secure the real estate to support it. As an affiliate of giant industrial real estate firm Phoenix Investors, we can quickly secure real estate solutions across its portfolio or leverage its market and financial strength to quickly source and acquire real estate to meet our client’s need.