One of the biggest challenges facing many retailers is how to manage and execute their fulfillment process. Many organizations have tried to manage everything in house, which can be costly and time intensive, only to discover that it’s not as simple as they had hoped. For this reason, more and more ecommerce and retail companies are seeking out a third party logistics (3PL) partner. However, as with most business relationships, finding the right fit makes all the difference. In order to realize the benefits of a strong 3PL relationship, choosing the right match for your company is essential. Here are the key questions to ask in your 3PL vetting process.
- Do you (the 3PL) have experience in our area of product specialization? If there are any unique or unusual characteristics in your products, this question is particularly important. For example, do your offerings require some assembly to put together? Will your packages be fragile, bulking, or extremely lightweight? Do they require special measures for food and beverage? Are there any special regulatory requirements? Find out if the potential 3PL partner has worked with this sector before, and ask for examples of how they handle these types of products.
- How will this 3PL integrate with our current systems? Technical implementation and integration can make a big difference in how easily the 3PL is adopted. Furthermore, the better the integration, the more seamless your entire supply chain process will be, with less room for error. Consider the process for transmitting orders for fulfillment, receiving tracking information for fulfilled orders, and for managing accurate inventory levels. Some 3PLs may offer a pre-built app or plugin that works with the ecommerce platform you already use. If not, will they include manual configuration with their setup or onboarding process? Would integrating their system require custom programming (and if so, do you have a resource for this)?
- Do you provide any service guarantees? The right 3PL is going to rapidly respond to order fulfillment, and they’re likely to be able to make commitments around this process. What type of service can they guarantee? Do they offer a performance guarantee for fulfilling orders in a given timeframe? Is there a specific order cutoff time during the day by which orders must be placed to ensure same-day fulfillment? What metrics do they use to measure success, and what happens if the metrics show they are not meeting expectations? How do they plan to remedy any shortcomings? Consider things like compensating the customer for the delay and crediting service fees for non-compliance.
- What are the minimum order volumes? Many 3PL companies require a certain order minimum before they will work with ecommerce retailers. The right 3PL for you is going to align with your order volume, as well as the growth that you’re hoping to see. Be transparent about your current order volume, as well as how you see that changing in the future. You want someone that is a good fit for you now, and can grow with you over time.
- Where are your warehouses located, and how does this affect the supply chain? One of the key aspects of your supply chain is how quickly products can get to consumers. For this reason, it’s important to understand where products are warehoused and how fast they can make it from the facility to customers. Is the 3Pl centrally located? If so, does that location help people to get packages more quickly? Do they have multiple locations so that they can better accommodate shipping around the country (or world)? If they do have multiple warehouse locations, do they require minimum inventory for each, and what are those costs? In general, you want to have a thorough understanding of warehouse locations and the benefits that they offer.
- How do you manage returns and customer service? 3PLs can play a surprisingly important role in customer service, which has a big impact on your bottom line. When something goes wrong, what is their involvement? Will customers call your home office, or the fulfillment partner? Furthermore, how will you and the 3PL partner determine if the customer’s problem is an issue with fulfillment or with the product itself? What is the process for inspecting returned inventory and placing returned goods back in stock? A 3PL that has a holistic view of customer service will end up offering a competitive advantage.
- Do you fulfill international orders? Naturally, this may not apply to all organizations, but it’s important to be clear on this if part of your business involves getting products to other countries. Do they have fulfillment capabilities in your primary countries? Or do they offer a mechanism for managing customs costs and delays when shipping globally?
Whether you are seeking out a 3PL relationship for the first time, or evaluating your current partnership with hopes for improvement, these questions provide a great starting point. For more insights into choosing the right 3PL for you, make sure to follow our blog for the latest tips and trends.