Choosing a third party logistics partner is an important decision. You’re well aware that you need to find a 3PL you can trust, but you may be unsure about how to evaluate your options. Supply chain management is a vital component of your company’s success so it’s important to choose carefully. Before proceeding, ask yourself these seven key questions. You’ll thank yourself later.
1. Does My 3PL Partner Utilize Technology to Their (and My) Advantage?
Logistics involves a lot of moving parts so it’s critical that real time information is available to you when you want to access it. A good 3PL partner will utilize current technology to ensure that data sharing is seamless.
Warehouse management systems are just one example of a functional and transparent information tool. Barcodes allow for seamless tracking of your cargo by updating the system and enabling you to monitor it at your own convenience. A comprehensive WMS will allow you to check inventory, create transactions, track orders, and access receipts without playing phone tag. (Even e-mail tag is starting to feel a little retro!)
These systems allow for more efficiency on the 3PL side as well.
“How much time have we spent in the past opening email attachments and typing everything up?” asks Canadian Alliance Director of Operations Vincent Wong somewhat rhetorically. “Now the customer sends an order and boom, I go into the WMS, push a button, and feed the information to the floor so they can begin picking or receiving.”
Transport management systems, electronic bills of lading, and labour management systems further streamline operations. Self service driver check-in kiosks at ports and warehouses simplify life for drivers, making queuing as straightforward as buying a Big Mac.
The key is to find a partner who utilizes these useful technologies without overwhelming clients. Onboarding support will allow you to experience the 4 Cs: control, clarity, confidence, and convenience.
The question to ask your 3PL: How will technology make my experience seamless and transparent?
2. Will My 3PL Offer Strong Customer Service?
Technology goes a long way in facilitating good communications, but it can’t come at the expense of good, old fashioned customer service. The human component remains key.
Your situation is unique to you, so a good 3PL partner will strive to understand your goals and needs. Your initial consultation should centre around gaining this deeper comprehension. The third party logistics partner should also demonstrate responsiveness, addressing your questions and concerns in a timely manner.
Supply chain management is full of surprises, so you’ll want to partner with a company that demonstrates flexibility and an ability to solve problems. They should strive to continuously improve their processes and, by extension, your confidence.
Your question: How can I be confident that you have solutions to my problems?
3. Which Key Performance Indicators (KPIs) Should I Be Aware Of?
Wayne Gretzky was good at his job. In the unlikely event that your eyeball test tells you otherwise, there exists a plethora of statistical evidence to support his greatness. 3PLs, too, can demonstrate their worth through KPIs.
OTD stands for on time delivery and is fairly self explanatory.
Order accuracy measures the % of the time that orders are picked, packed, and shipped correctly. (Hint: it should be high!)
A 3PL with high inventory accuracy is one whose records reflect the reality in the warehouse.
Shipment tracking and visibility, of course, measures the ability to track and provide visibility on shipments. Cost per order is similarly intuitive.
Return rate, cycle time, damage rate, and capacity utilization are additional indicators of a 3PL’s abilities. Ensure that your 3PL can compete with the best and that they have the numbers to prove it.
Your question: How does my 3PL stack up in these all-important categories?
4. What Strategies Can I Use to Negotiate Favourable Contracts with 3PLs and Suppliers?
Before approaching a 3PL, it’s important to define your own objectives and needs. After doing so, you’ll be able to research the competitive landscape and determine which company can provide the service you need at a competitive price.
On your end, you’ll want flexibility and scalability, allowing you the greatest amount of options moving forward.
The 3PL, of course, will value things that provide efficiencies on their side, such as uniform pallet sizes, good turn rates, and high volume. Remember, it’s not that a 3PL shouldn’t be able to accommodate unique needs, it’s just reasonable that a small premium may be attached to these situations.
By informing yourself and devising a solid game plan, you’ll be best positioned to get a contract that works for both parties, delivered at a competitive price.
Your question: Can you meet my needs at a competitive price?
5. How Can I Ensure My 3PL is Compliant with Regulations and Ethical Standards?
Consumers are increasingly factoring personal values into their purchasing decisions. As a result, it’s important for companies to understand what’s really taking place throughout their supply chain. Your 3PL partner is just one part of this.
Do they have a commitment to sustainability? How are they demonstrating this, both within their facilities and through their strategic partnerships?
What about employee rights? Are they an ethical employer who treats their workers fairly?
Safety is another consideration. Flammables and oxidizers pose a risk if handled incorrectly. Does your 3PL make this a priority? Far too many do not, putting them at risk of legal action or, worse, placing their employees in danger.
Before doing business with a 3PL, it’s important to understand how they operate and how the partnership will reflect upon you and your business.
Your question: What are you doing to promote sustainability and good ethics throughout your operation?
6. What Services Does My 3PL Offer?
Supply chain management is an involved process that has many components. Not all 3PLs are created equally. It’s important to measure the breadth of services provided by a 3PL and to compare that to your needs.
Warehousing and distribution are core services you’re likely to need from your 3PL. Inventory management and transportation may be required as well. Each of these aspects of service have numerous sub-components.
Perhaps you don’t exactly know what you need. In this case, a good partner will have an open discussion to help you determine the best path forward. At any rate, they should possess big picture knowledge, providing you with resources such as pallet and fuel price indexes to help you act strategically.
Your question: Here’s my situation. Can you provide me with everything I need?
7. What Steps Should I Take to Ensure I’m Adequately Prepared for Supply Chain Disruptions?
Your third party logistics partner is just that: a partner. They should be willing to work together with you to create a plan that addresses your needs. Even when you’re dealing with a 3PL that provides a breadth of service, however, it will still be important for you to be an active participant.
Only by crafting a long term plan will you be able to anticipate your needs. This, of course, will evolve over time, but will serve as a basis that informs your game plan moving forward.
Supply chains are inherently risky and sourcing involves determining your acceptable level of that risk. A good 3PL will possess a strong understanding of the global supply chain and be willing to advise you accordingly, but it will ultimately be you that makes important procurement and inventory management decisions. You’ll know you have a good 3PL partner if they take a considered and personal approach to helping you make these decisions.
Your question: How will we work together to create the best strategy for me?
Choosing the proper 3PL partner is one of the most important decisions your business will face. If a candidate has a good answer to these 7 questions, you can rest assured that they’re a wise choice. When it comes to such forks in the road, proper consideration will pay long term dividends, making the research well worth the effort.