As your retail business continues to grow, you will probably find yourself considering using a third-party logistics provider as opposed to fulfilling your orders in-house.
Third-party logistics is a big industry. In 2014, the Global 3PL Market expanded to $750.7 billion and the U.S. 3PL Market grew 7.4% to $157.2 billion. Two U.S. 3PL Market Segments experienced double digit growth.1. Global companies all around the world, from REI to Campbell Soup Company, use 3PLs to enhance their fulfillment operations. At the enterprise level, these logistics providers provide entire supply chain solutions.
Up-and-coming retailers have very different needs than the much more established enterprises. Most of us start out by looking to fulfill orders received through our web channel. And most of us don’t have the size of business necessary to require a full supply-chain solution. What we need is a logistics provider that solves our problems here and now and can also scale with us into the future.
Are the costs detailed enough to permit you to make valid cost comparisons between providers? Depending on your specific needs, typical costs might include2:
When comparing costs, be sure to consider:
Cutting-edge technology can provide 3PLs with efficiencies that can improve performance. Enhanced management software analyzes and monitors the 3PL’s practices to help identify and eliminate inefficiencies. Cloud-based platforms and Internet of Things (IoT) devices have come into prominence within the 3PL industry, as well as the rest of the supply chain. A leading 3PL will have the latest systems that provide real-time data and feedback on supply chain operations and freight.3 How does the 3PL measure up when it comes to transportation optimization software to allow it to access and use the fastest, most efficient and cost effective routing methods?
When comparing technology capability, be sure to consider:
Today’s consumer wants it now. The only way your retail operation is going to thrive is to give it to them. That means your supply chain has to be nimble and responsive to get the right item to the right place in good condition in the least amount of time. In part, the 3PL’s geographic proximity to your customers will play a role in your decision, but there are other considerations to keep in mind (especially considering the growing number of etailers offering same-day shipping). The speed of the entire process from transaction to delivery will have a bearing on how fast orders arrive at their destination.
When comparing speed capabilities, be sure to consider:
Remember that the relationship with your chosen 3PL provider is a partnership and for the partnership to work effectively, you’ll need to work together toward mutual success. Consider whether the 3PL will share the same values, ethics and sense of responsibility. Cultural values may become especially important if you ship globally. Is the 3PL you’re considering willing to establish agreed-upon benchmarks for success, and willing to share measurement data so that both you and your chosen provider can work together to understand what’s working and what isn’t so adjustments can be made accordingly. Essentially, your metrics need to align with your 3PL’s metrics4.
When comparing broader capabilities, be sure to consider:
You should dig deeply into these questions when you talk with the sales team at the 3PL. And, as always, the best way to get the real scoop is to talk to customers that are already using these folks. Any good 3PL should provide you with references. If you want to get exceptionally good data, try to source your own reference that wasn’t provided to you by the provider themselves. You’ll also want to consider the financial strength of the provider. When you think you’ve found a good one that meets your needs, you’re going to want them to be around for a long time to grow with you as your needs grow.