Partnering with a 3PL can make it easier for businesses to operate and grow by outsourcing the headaches that can come with fulfillment and order management. A good 3PL relationship is one that does the heavy lifting for you, allowing your team to focus on their product and sales expertise. However, getting that right can be tricky, so there are a few important things to check before establishing this 3PL partnership. Among the most important are experience with your products, ability to meet your volume needs, support, transparency, and reliability.
1. Experience with similar products and volumes
Each product and SKU should arrive and be stored safely, picked and packed without shrinkage, and arrive in a secure box to fill a customer’s order. Your 3PL is responsible for these steps and each in-between. One of the best ways to ensure your goods will be taken care of, and to find some relief at the start of your relationship, is to work with a 3PL that is experienced with your types of product and sales volumes.
Ask about the requirements of your goods and request testimonials or references from similar customers. Discuss how much freight you’ll be shipping to the warehouse, how goods should be stored, and what equipment is needed for safe usage. Get specific. For example, if your products are heavier than 20 lbs., a 3PL specializing in heavy, bulky products likely negotiates with carriers based on these larger products. That means they ensure everyone has the proper equipment to move goods and typically work to reduce DIM weight costs more than traditional weight costs.
2. Capacity and volume both fit
After discussing your products, look at your business’s long-term capacity and volume needs. How much inventory do you need to send the 3PL at the start to have the goods needed for handling a few months of orders? Can the 3PL handle that influx and the monthly and annual projected order volume?
This discussion should lead to a conversation on their warehouse location(s) and what mix of locations and inventory volume you’ll need to offer two-day and three-day shipping speeds. Ask if the 3PL has the ability to reach customers as quickly as they expect.
One important thing to check is that the 3PL discusses both available and total capacity. You want to know how much they’re growing and if you can increase your sales volume significantly when working with that 3PL. They should have a plan for growth that benefits your operations.
3. Integration and partner support
Your 3PL relationship should improve your existing business and not force unnecessary changes. For eCommerce, this often means finding a partner that can integrate with your existing software, sales tools, order management tools, sales channels (like social, Amazon, and your website), and your preferred carrier partners.
Thanks to APIs and EDIs, most modern systems can be configured to integrate with other tools. You want a 3PL that works with standards and APIs to help you access real-time data, whether within your system or via a dashboard that the 3PL creates. You deserve inventory, freight, order, and similar data when you need it. Be sure the 3PL will give that to you on your own terms and provide ongoing support if an integration breaks or API rules change.
4. Transparency in fee structure
Most 3PLs will offer you a transparent look at their total fee structure. That said, you still want this clear and in writing, covering all standard costs as well as potential fees. Ask when and how each is calculated and assessed, including elements like long-term storage costs that may not be introduced until later in your relationship.
Put a request for pricing documentation in your 3PL RFP document so that you have a complete understanding and can negotiate as necessary. Don’t let a partner stonewall you here, and always speak up with a potential charge that is unclear. You’ll even want to ask about what carrier charges are passed on to you or what the 3PL does to reduce those — such as requiring you to use their carrier account to ship to get discounted rates.
5. Guarantees and addressing mistakes
Every 3PL makes promises and guarantees in their service-level agreements (SLAs), which set the standards you should expect. It’s important to clearly understand what happens when the SLA is broken and the 3PL is responsible for an issue or error. How do they address mistakes and make things right?
Work to create a plain-language understanding of how they resolve problems from late shipments and dock delays to incorrect orders, shrinkage, and returns. You shouldn’t have to pay for someone else’s mistakes. Part of outsourcing to a 3PL is to have these efforts done for you in a worry-free way. Get guarantees in writing, including how you’re made whole when a 3PL costs you business or harms your products.
Keep a focus on growth
The core goal of outsourcing your fulfillment and inventory management is to be able to focus on your company’s growth. Always keep that at the center of these relationships. A 3PL should help you grow and make operations easier for you to manage. When they create more work or start costing you business, that’s a time to look for a new relationship.
Talk with your 3PL about the reasons you’re outsourcing. Share this growth goal with them and see how they respond. Pick a partner that feels like they’ll help you meet this goal starting on day one. The tone someone sets during your RFP and interview process is a good benchmark for how they’ll treat your business throughout the life of the relationship.
Jake Rheude is the Vice President of Marketing for Red Stag Fulfillment, an eCommerce fulfillment warehouse that was born out of eCommerce.
He has years of experience in eCommerce and business development. In his free time, Jake enjoys reading about business and sharing his own experience with others.
