All posts by Will Schneider

Accountability and performance are important aspects of any business relationship, but when it comes to your 3PL partner, they’re especially important.

If your 3PL provider misses a beat or makes a mistake, it could have huge and lasting repercussions for your business.

But what are the best ways to hold your 3PL provider accountable and how do you measure their success?

This is a topic that we are asked about a lot. So, we thought we’d provide you with some tips on how to evaluate a 3PL provider to make sure you’re getting the best service.

Take a Second Look

The contract that you originally signed with your 3PL provider may no longer suit your needs. As your business changes and grows, so must the contract that you have with your 3PL partner.

You contract defines the terms of your relationship with your 3PL provider and lays out each party’s responsibilities. As you learn more about the logistics solutions your business needs and as you gain more experience in the 3PL industry, you’ll be able to negotiate more favorable contract terms over time.

When you do review your contract’s terms, keep in mind that contracts aren’t in place for the good times, they’re in place to protect both party’s interests no matter what happens in the future.

All too often contracts get renewed without making significant enough changes to meet the needs of the businesses who are signing them.

Regular Meetings

One of the most important things you can do to manage your relationship with your 3PL provider is to meet with them regularly. During these meetings you should be reviewing their metrics, evaluating their performance and discussing improvement strategies where needed. We recommend holding these meetings every month or every quarter.

By having pre-scheduled meetings with your 3PL provider, you’re able to stay on top of their numbers and performance before there’s an emergency.

When you hold your 3PL provider accountable in the short term, they’ll take your business more seriously and will be less likely to make mistakes when handling your goods.

Now, if you don’t know what metrics to talk about in your meetings or how to evaluate the 3PL’s performance, then read on.

Metrics That Matter

Data and analytics reports are a standard in the modern 3PL age we live in today. This is a fantastic benefit for your business because you’re able to see the numbers and judge your 3PL’s performance based on facts, not feelings.
Here’s what you should look for when you’re evaluating your 3PL provider’s capabilities:

1. Order error and success rates

Your 3PL provider’s business is making sure that your goods are handled properly and that your orders are completed without error. Of course, no 3PL provider will have a 100% success rate every time. Errors do happen and should be expected as a cost of doing business.

However, your 3PL provider should be able to explain where their errors stemmed from and what they’re doing to prevent them from happening in the future.

2. On time shipping percentage

When your customers are given a delivery date, that date should be met. Even if your 3PL’s order success rate is high, if there are a large percentage of orders that aren’t arriving on time, that’s a problem that needs to be addressed.

Every order that gets delayed impacts your business’s reputation and your bottom line.

3. Inventory count accuracy

Your 3PL provider not only handles the transportation and storage of your goods, but in most cases they’re managing your inventories to ensure that you’re not over or under producing goods.

That’s a big responsibility and if they’re not managing your inventories well, it could cost you your business. Likewise, if they’re doing a great job with your inventory management, then you can be confident when it’s time to renew your contract.

Communication

Beyond the metrics and the numbers, your 3PL provider should be providing quality customer service to you and your team throughout the relationship.

In addition to the regular meetings you’ll be holding with your provider, your requests for information, phone calls and emails should be responded to promptly and professionally.

Logistics is about organization and execution. If your 3PL provider isn’t able to respond quickly with the data and answers you need, then their priorities and organizational skills could be called into question.

Conclusion

Logistics is a complicated and data driven industry. Your logistics provider has to manage a lot of moving parts in order to deliver on their promises of prompt execution and timely service.

Make sure that your 3PL provider welcomes discussions of accountability and is transparent about how they’re managing your account.

By using the metrics and tips above, you’ll be better equipped to evaluate your 3PL’s performance and make more informed decisions about the future of your business’s logistics needs.

If you have any questions about holding your 3PL accountable, feel free to contact us.

Your goods are you business. Their safe transport from your production facilities to their subsequent warehouses and their safe storage is one of the most important considerations that you have to make as a business owner.

If your goods are lost or damaged while in the hands of a third party warehouse provider, you could be looking at losses in revenue of tens of thousands of dollars or more without the ability to recoup those losses.

That’s why asking the right questions and choosing the right 3PL warehouse provider is such a critical decision. Our clients often ask us questions about what kinds of insurance is required when using a 3PL warehouse provider and what kind of insurance should they include in their contracts?

This post is all about answering those important questions and giving you a deeper understanding of the warehouse industry so that you can make informed decisions.

What kind of insurance is required and what are you covered for?

There are several types of insurance that any warehouse and transportation provider can possess. Each one has a different level of coverage and will cover your goods for different scenarios.

We are going to cover three of the most common types of insurance that you need to be aware of when contracting a 3PL provider for warehousing and transportation services as well as what each one means for your business.

1. Warehouse Legal Liability Insurance

Warehouse legal liability insurance means that the warehouse provider is responsible for the safe storage of your goods and must provide “reasonable care” to your goods while in their care.

This means that if the warehouse provider does not provide “reasonable care” and their negligence results in loss or damage of your goods, the warehouse provider’s insurance company will cover your losses and pay your for the goods.

Under this kind of insurance policy, you are still responsible for your goods for any other kind of damage or loss of goods i.e fires, floods, windstorms, hurricanes, etc.

It’s important to note that with warehouse legal liability insurance, the insurance provider that is covering the policy will only pay your damages if negligence is the cause of the loss or damage.

If the warehouse provider is offering you a level of care that goes beyond the legal definition of “reasonable care” the insurance provider will most likely not cover damages in the event of lost or damaged goods.

So, if your warehouse provider is offering added storage benefits or a higher degree of care than what their insurance policy defines as “reasonable”, you need to make sure that your contract specifies who will cover damages in the event the insurance provider declines to cover the costs.

2. Business Interruptions Insurance

Business interruptions insurance covers the warehouse in the event of a natural disaster or other business interruption and pays the warehouse their profits during the time that they were unable to conduct business.

This is a step beyond property insurance as it covers the profits associated with loss of business and not just the costs of repairing the property.

This kind of insurance will only cover the warehouse provider, not the customers that are storing their goods there.

If the warehouse that you’re storing your goods in is located in an area prone to natural disasters, you could add a provision to your contract that would require the warehouse provider to give you a portion of your losses out of their payment from the insurance provider who underwrites their business interruption insurance. However, this would be a very hard bargain and is unlikely that most (or any) 3PL providers would agree to it.

However, there is also contingent business interruption insurance which means that in the event one of your warehouses cannot operate and you lose profits during the time that they were inoperable, you would be able to file a claim with your insurance provider to cover the losses during that time.

This would be something that you would need to purchase outside of any warehouse provider you decide to do business with, but could be incredibly beneficial to you as you expand your business and increasingly rely on third party logistics providers throughout the country.

3. Transportation Insurance

Much like the warehouse legal liability insurance above, transportation insurance has varied clauses, legal definitions and limitations to when and how much you’ll get reimbursed if your goods are lost or damaged.

Basic transportation insurance specifies that the carrier is responsible for the safe transport of your goods and their insurance provider will pay your for loss or damage as long as the carrier was negligent during transport.

Again, you’re still responsible for loss or damage due to natural disasters or other circumstances outside of the control of the carrier. When you’re reviewing the contract for responsibility during transport make sure you understand the definition of negligence that the carrier is using.

Another consideration for transportation insurance is whether or not the payment will be made to you based on loss of profits, wholesale price of your goods or price per pound of your products. Depending on how payments are specified, you could be looking at a varied amount of payments.

These examples are some of the most common kinds of insurance required when using a 3PL warehouse. Based on your specific business needs or products being stored & transported, these may be insufficient for your needs. It’s always best to consult a professional or a lawyer when drafting or signing contracts that could impact your business’s bottom line.

If you have any questions about insurance or any other aspect of 3PL warehousing or transportation, feel free to contact us.

Are you vowing to follow the 3PL industry more closely or expand your knowledge of the logistics industry in the new year? The third-party logistics industry is complex, especially for small business owners without prior storage or shipping experience. One of the best ways to stay on top of evolving trends and learn more about the industry is to read 3PL blogs.

We want to help you find answers to your questions and make smart logistic decisions on behalf of your company, so we compiled this list of the best 3PL blogs. These are blogs that anyone involved in this industry should follow. They are listed in random order, so browse the full list to find blogs that will help you stay better informed in 2016.

1. 3PL Wire: Follow “Swizstick” and “Splatty” into the world of supply chain management and logistics. This blog is maintained by two professionals with more than 20 years of industry experience, and they provide information of interest to all professionals in the logistics field.

2. The Quiet Logistics Blog: This blog is centered on third-party logistics for e-commerce businesses. It is written and maintained by professionals with a lot of industry experience, and all of the information is geared towards making 3PL for e-commerce more understandable. If your online business is booming and you want to work with a 3PL to better serve your customers, this is a good place to find information.

3. The Transportfolio Blog: This blog is maintained by one of the largest 3PL providers in the transportation industry today, but you don’t have to use their services to benefit from the information presented. They are good for market updates and discussions of regulations that impact the transportation industry.

4. The Logistics Management Blog: Get in-depth information regarding all aspects of the logistics market, including a lot of information regarding 3PLs. The blog is maintained by Logistics Management magazine, which is published by Peerless Media LLC. If you want your information fine tuned to the 3PL market, look at the posts appearing on their 3PL Critical Topics page. This information is updated frequently and is much like a 3PL-focused blog.

5. The Supply Chain Management Review Blog: Published by Peerless Media LLC, the Supply Chain Management Review is a print journal designed to inform all professionals involved in the supply chain business. The blog features many posts related to the third-party logistics industry, so you don’t have to subscribe to the blog to learn more about 3PL or logistics in general.

6. The Trinity Logistics Blog: Learn about the transportation industry from the perspective of an established 3PL provider. This blog uses a friendly tone and breaks many complex issues down into terms that are easily understood. It’s a great resource for anyone interested in working with a third-party logistics provider for the transportation of goods, especially those just entering the market and searching for entry-level information.

7. The BCR Blog: The information in this blog comes from an Australia perspective and is provided by an active 3PL service provider. If you’re interested in keeping up with regulation changes and trends from around the world or in Australia specifically, this is a great blog to follow.

8. Blogistics: This is the blog of ODW Logistics, a full-service 3PL provider. Not every business is a good fit with their services, but their blog remains an excellent place to find information relevant to the third-party logistics industry. They also post a lot of information regarding the operations of their award-winning company, so it’s a good source of information if you’re considering them as a 3PL provider for your business.

9. The Logistics of Logistics: Covering issues related to third-party logistics as well as relevant topics for all logistics professionals, this blog includes direct links to a variety of resources that will help you understand this field better. You’ll find white papers, videos, and training opportunities all in one place.

10. The 3PLCompanies Blog: This is the blog you’re reading right now, and it’s always a reliable source of trustworthy information. If you ever have questions that aren’t answered through this blog or our website, feel free to contact us. We are always willing to help business owners maneuver the complicated logistics industry.

The 2016 third-Party Logistics Study conducted by Capgemini Consulting and Penn State University shows continued collaboration between shippers and third-party logistics providers. This year’s survey indicates that the partnerships between customers and logistics are becoming more proficient at what they do and the relationships are deepening. The study showed that 70% of logistics service users and 85% of 3PL agreed that the use of 3PL services has contributed to improved customer service declaring that 3PL providers are offering new and innovative ways to improve logistics.

The impact of 3PL providers is being felt by major shippers. Top retailers are saving 25% or more on net shipping cost by shipping using their 3PL company’s FedEx account rather than their own FedEx accounts. FedEx itself is reporting operating income down 1% from $545 million last year to $537 million this year. FedEx’s announcement of increasing shipping rates by nearly 5% is adding pressure for online retailers to move to 3PL companies.

Collaboration is Expected to Grow

Relationships among companies, even competitors, are changing in the industry. To achieve cost and service improvements 41% of shippers and 81% of 3PL providers value collaborative relationships with other companies.

Shippers continue to rely on the information processing services that 3PL companies provide. The ability to provide these services is viewed as a necessary core competency.

Growth of E-Fullfillment Should Increase

Increasing development of Omni-channel retailing will lead to increased growth of e-fulfilment warehousing specialty operations. Multiparty third-party warehouse courier operations can substantially reduce the cost of deliveries. A continuing interest in e-marketing, where the marketers themselves have minimal logistic support is driving up the market for 3rd party logistic services.

Robotics Will be Used More Frequently

Robotics is perhaps the most important area of new technology in third-party logistics. Robots are having a rapidly increasing part to play in large third-party logistics operations. As vision systems and robotic arm technologies advance, more human beings will be taken out of the process of carrying the loads. Robots will decrease the need for warehouse labor to near zero in 2016. New robots can lead to something that is starting to get close to a “lights out warehouse” operating 24/7. Investment in this kind of robotic technology is more likely to occur in large third-party operations where demand dictates high efficiency. Amazon Robotics  (also known as KIVE systems) is among the major research and development laboratories that have been developing the kind of sophisticated robotic technology to redefine logistics in large-scale warehouses.

In one facility in Seattle, squat orange wheeled robots move stocked shelves to the workers instead having the employees seek items among long aisles of merchandise. “Pickers” at the facility stand in one place and wait for robots to bring the 4X6 foot shelving units to them, sparing the employees from having to walk as much as 20 miles a day as they did under the old system.

Each robot investment has been shown to represent a long-term expense reduction, improved efficiency. The typical one-time cost of a “Sawyer” robot is about $25,000, about the equivalent to the annual salary of a starting employee. Within 40 years the robot will save the company $1 million.

High-Tech Warehousing Will be the Norm

Warehousing and storage systems are becoming increasingly automated. This trend will accelerate in 2016. Using Radio Frequency ID systems and other electronic labelling technology will continue to improve accuracy and speed. Mobile storage systems, movable racks and systems that move pallets are reducing labor costs. Motorized mobile bases are electronically powered and guided by rails in the floor. New warehouse structures (rack supported buildings) are being built with the rack systems integrated into the actual construction, utilizing height rather than land mass.

Natural Gas Conversion Could Impact Fleets

Large third-party logistic fleets are quickly converting to natural gas fuel. This is certainly a trend that will accelerate in 2016. The increased production of domestic natural gas fuels is making this alternative fuel the choice of increasing numbers of logistics fleets.

Improved Logistics Software Will Improve Performance

Supply chain software is developing very quickly with new front-end interfaces that make them easier to use. The software is functioning more and more like social media, enabling groups to interact to solve problems. The programs are integrating real-time analytics into their operation which makes decision-making easier.

If you are looking for third-party logistics services for your business, 3PL Companies.net can help. We are the only site that rigorously screens 3PL companies to find the best match. Please contact us to learn more.

It doesn’t take much effort to find 3PL companies lists online today. You can pull up any search engine, type in “3PL companies list,” and it will deliver many websites and blogs featuring lists of the top 100, 50, 25, or 10 third-party logistic providers in the world. These lists show how profitable some logistics companies have become, but they’re often intimidating and confusing to small or mid-sized businesses.

Business owners have to figure out which of the listed companies may provide the services that they need, and more importantly, which companies may partner with them at prices that they can afford. In many cases, business owners spend hours researching listed companies only to learn that none of them are a good fit to their needs.

Small to mid-sized businesses often cannot pay the prices demanded by global third-party companies earning billions of dollars each year, and many large logistics companies don’t want to work with smaller businesses unless they store and ship a substantial amount of merchandise each year. Some global companies also specialize in international shipping and storage, so small companies searching for 3PL providers in a localized geographical area won’t meet requirements set out by those companies.

Are All 3PL Company Lists Useless?

Should you just assume that all 3PL provider lists are worthless and try to find other methods of identifying third-party companies that can meet your needs? Not necessarily. Most lists can provide some value to any business in need of a third-party logistics provider. You can look at some of the larger companies to determine whether your business is a good fit with their services, eliminating many companies from your list of possibilities.

You can also identify any local providers that may be featured on those lists, exploring options to partner with another business within your own community. If you’re new to the concept of logistics and aren’t sure what services a 3PL can provide, browsing one of these long lists could also help you identify the wide range of services that are currently available to businesses of all sizes. By identifying services used by other companies, you can get a better idea of how you may want to handle your own growing logistic needs.

Since most businesses find that the companies on these lists aren’t good fits to their needs, we don’t recommend that you spend much time searching them out or reading them. You may get some introductory information from select lists if you want to do your own research, but 3PL networks like the one found at 3PLCompanies.net are a far better use of your time.

Watch Out for Bias

Some 3PL companies lists are created with one thing in mind: profit. The organization or website compiling and presenting the list may operate with a bias towards certain companies, and they may even have something to gain financially from promoting select 3PL companies. Their goal isn’t necessarily to connect businesses of all sizes with logistics providers that are reputable, but many businesses just starting out with logistics don’t realize that there are other companies out there besides the ones prominently listed.

How Can 3PLCompanies Help?

There are hundreds, even thousands of 3PL providers operating in North America today and thousands operating around the world. Some specialize in select services while others offer a long list of services and provide customized contracts to each of their clients. There are companies that specialize in certain types of goods or specific industries, and then there are global companies that can help businesses in any industry. This makes it difficult to find the providers that are well suited to your needs because there are far too many companies to thoroughly research and compare on your own.

That’s the reason 3PLCompanies.net was created. We have done exhaustive research into 3PL providers so that we can quickly match customers like you with the third-party logistics providers best suited to their needs. Our network of third-party providers is different than those long 3PL company lists featured through other websites because we research 3PL companies of all shapes and sizes, and there’s one additional difference: we have thoroughly screened every provider in our network.

We also include many smaller 3PL companies that you just won’t find on those top 100 or top 50 3PL companies lists. You also receive our guidance and personal help to ensure the provider you choose is well suited to your needs and budget, so contact us to begin the process of requesting quotes from multiple 3PL providers online.

Often, people automatically think that controlling every area of their business is the best way to save money. If you want it done cost effectively you do it yourself, right? That’s not always true. In fact, by outsourcing your warehousing and shipping to a 3PL company, you can save a substantial amount of money. Where most companies make the mistake in the analysis is by failing to look at all of the costs and benefits – missing out on important considerations because they’re not on top of mind. But by factoring for every cost component, 3PL outsourcing really does provide an effective way to eliminate the headache of performing the storage and shipping while at the same time saving you money.

Expansion and Retraction of Warehouse Space

Many businesses often find that one part of the year business booms, then other times of the year orders just trickle in. If you invest in your own warehouse space, you may find that you have too little or too much warehouse, depending on the time of the year. Paying for a warehouse that doesn’t fit your needs year-round is a waste of money. 3PL providers can scale to meet your current needs. Furthermore, when you lease the warehouse yourself, your business (and most likely “you” as the small business owner through a “personal guarantee”) is on the hook for fulfilling the agreement. By outsourcing, this risk is avoided.

Warehouse Supplies Costs

Most frequently, when comparing the costs of outsourcing warehousing versus in house operations, companies do a fairly good job of anticipating hard costs associated with cartons and other packaging materials. However, frequently companies forget to consider other warehouse supplies costs that, when totaled over a year, can amount to a sizeable amount of money. For example, some of the more commonly forgotten supplies costs include: shrink wrapping, warehouse computers and other equipment, software programs, paper and labels, and many others. These costs can easily add up to $2,000 to $5,000 per year, and can cause faulty conclusions if unaccounted for in the analysis.

Terms Provided by 3PL Companies

When you run your own warehouse, you’re responsible for directly paying these costs. Some of these costs, such as labor for employees, has to be paid quite frequently – oftentimes every two weeks. However, many 3PL firms will grant you “terms”, oftentimes invoicing you monthly and giving you a certain period of time to pay your bill. These terms help improve your cash flow cycle, and by paying one company for all of the costs associated with warehousing, your payables management process is streamlined.

Opportunity Costs for Management

Of all of the costs in an in house versus outsourcing analysis, owner and management “time” related to warehouse and shipping management is typically the most under-represented. Usually, businesses forget to incorporate the time spent managing the process, or they simply under-estimate the total actual time spent. And this cost can be quite significant, considering that managers and owners are the highest paid members of the team most likely. So in order to make it a completely “fair” analysis, it’s important to get an accurate estimate for the amount of time that is spent by management on the warehouse function. Furthermore, figure out how much value could be derived if this time was spent on a more “value” producing activity, such as sales and marketing. This isn’t meant to minimize the importance of the shipping function, but it is a more easily outsourced function, which then allows management to spent time in other areas.

As you can see, there are many ways going with a 3PL provider can save you money, short-term and long-term. Before you sign a warehouse lease, make sure you’re not passing up a great opportunity by going with a 3PL provider instead.

When a 3PL (third party logistics) company is looking for a warehouse management software program, it’s usually because they’ve run into some limitations with their existing software that is preventing them from operating at the expected level of success. Oftentimes, the requirements for a 3PL firm are quite stringent, considering that they are operating the storage and shipping functions of a multitude of clients and may span multiple locations. Furthermore, warehousing providers may utilize more sophisticated supplemental technologies to enhance the various warehouse processes and procedures. All of this combined makes for a complicated set of requirements for inclusion on a software request for proposal. If you find yourself wondering if your current warehouse management software has seen its better days, then pay close attention to these key features that will help meet the ongoing needs of your warehouse for years to come.

Ability to Handle Different Sales Channels

Let’s face it – the world has changed significantly in terms of the various sales channels available to businesses. From ecommerce websites and retail sales to wholesale relationships and manually entered orders by sales reps in the field, a warehouse software program must be able to integrate with a multitude of varying platforms. Furthermore, each of these sales channels can be even more intricate and require layers of additional information exchange and integration. For example, with literally hundreds of ecommerce shopping carts to choose from, 3PL firms must be able to quickly integrate with new shopping carts in order to win new clients – and retail clients offer another glimpse into the complexity of order exchange, with unique EDI requirements for each specific retailer. A robust warehouse management system must be able to integrate with these divergent channels, or else a 3PL will not only miss out on the opportunity to streamline operations, but may also miss out on signing up a new client.

Flexible Bar Code Scanning Technologies to Enhance Picking Efficiencies and Effectiveness

One of the most frequently requested features by fulfillment companies looking to increase warehouse performance is added functionality in the picking and packing process. Many baseline warehouse management programs offer integration with bar code scanning technologies. However, as the picking and packaging process evolves, many of these programs fail to scale with the additional needs. For example, batch picking processes can decrease the time it takes to pick products in the warehouse, thereby decreasing costs significantly. But without a fail safe way of validating that each order is correctly assembled, it’s a cost saving mechanism that a warehouse cannot implement. 3PLs that have their eyes on performance and high quality results are continually pressing for new and better ways to increase picking and shipping success rates and decrease their costs for clients. Therefore, in order to implement new picking methods, or to tweak existing processes to better the performance for a single customer, a warehouse management program must offer great flexibility with regard to scanning technologies and order picking and packing modules.

Ability to Automate 3PL Billing

Every 3PL company charges differently for their services provided. Therefore, warehouse software programs for this particular market need to be flexible, allowing individual companies to structure their unique billing process. Furthermore, the extent to which warehouse software automates billing procedures alleviates an intense burden for accounting personnel – and reduces the chances of errors in the billing process. Examples of the divergent billing needs of a 3PL include a systematic way to automate product storage, fulfillment fees (along with ad hoc packaging materials used throughout the process), receiving time, assembly of units, shipping charges, among many others. As if this isn’t enough, 3PLs will also have to export this information to the appropriate accounting software or platform, making easy integration a top priority.

The Platform Must Allow for Evolution and must be Service Oriented

There are quite a few other important factors that most 3PL firms will use in the vetting process when choosing a warehouse management software program. But in terms of some of the most important factors to consider, two of the final check points that should be on each and every 3PL’s list are both the ability to evolve the system to meet future needs and the ability of the software provider to meet the service requirements of ongoing support. Many a fulfillment company have moved to new warehouse software simply because either the software didn’t allow for any customization or the software support team didn’t react to their needs quick enough.

Because warehousing companies have so many clients with unique needs, they have an enormous need for customization of certain components of the software program. If they can’t build these custom features into the program, bottlenecks will result. And nothing is more of a recipe for disaster than a warehouse software provider not giving its customers adequate customer support. When looking at various 3PL software programs, it’s vitally important that they include some level of flexibility and stellar customer service support. There’s nothing worse that having an end of day warehouse crisis for a key client and not receiving timely support to remedy the issue and process all orders on time.

I stumbled upon an article recently that talked a little bit about how users of 3PL (third party logistics) and fulfillment companies should be more hands off with their outsourced provider and “let them do their job.” You can probably imagine that this article was written by an executive at a fulfillment company. And this is most likely in reference to the general complaints of many 3PL’s that their customers have a tendency to push the limits in terms of customization and, on some occasions, with attempting to control the overall warehousing and fulfillment process to a certain extent. While I do see the perspective of the 3PL with regard to being allowed to “do their work”, and while there are some great advantages regarding using systematic processes across all customers that are more rigid than flexible, there’s an entire argument for the flip side of the coin. More specifically, in my humble opinion, a more balanced approach should be taken to incorporate “customer involvement” in the 3PL process.

Striking the Right Balance with Customization

Let’s face it, one of the main reasons smaller and mid sized companies utilize the service of an outsourced third party logistics firm is to capitalize on a more customized level of service, rather than succumbing to the “one size fits all” box that larger 3PL’s tend to force their customers into. Generally speaking, smaller fulfillment companies are more willing to do what the customer asks in order to win and maintain the business. This might be a slight deviation from the standard process, or an added step in order to provide a value add for their clients. These can all be very important and critical to the merchant or manufacturer of goods, as it helps them to maintain a great service level for their customers, which leads to continued and potentially increased sales for the merchant and order volume for the fulfillment company. Flexibility is one of the keys to success for businesses using outsourced fulfillment services. But, I would argue, flexibility and customization that can be codified into a process and backed by some level of automation or quality control is a necessity. In other words, striking a balance between flexibility and control is necessary to not cross the boundaries of knee-jerk customizations that can cost everybody business due to errors.

Control is an Outsourced Relationship Should be Balanced

An outsourced partner is somewhat like an “employee” of the company, except that they don’t reside within the same office (usually) and they aren’t subject to payroll tax. And in the case of logistics, the stakes are extremely high, so taking the outsourced relationship serious and treating it like an employee relationship that requires ongoing “management” and “accountability” is not only healthy but also necessary. 3PL providers shouldn’t be on an island and they should be allowed the freedom to do as they will – especially since they have so many customers with so many varying needs. A business owner using outsourced fulfillment should find the way to strike a healthy balance when it comes to checking in on the process and making sure that performance objectives are being achieved.

When Too Much Control Becomes Troublesome

But just as it’s wrong for the 3PL to wield far too much power, so too must the business owner guard against exerting too much control over the outsourced provider. The best relationships, both in terms of internal employees and outsourced providers, come from the perfect balance between structure and freedom. When the business exerts too much control, questioning every aspect of the process, then it not only takes up valuable time of the fulfillment firm, but also restricts the freedom that the 3PL needs in order to maintain a healthy balance over its process for ensuring high quality shipments of orders in a timely fashion.

So leaning too far in the direction of either the 3PL or the customer can quickly become problematic. Therefore, both parties should strive for a balanced approach that respects the integrity of the process and the flexibility needed to create enduring logistics experiences for end customers.

So you’ve been tasked with putting together a complex request for proposal (RFP) for third party logistics (3PL) services and ultimate selecting a suitable partner? Not only is this a mouth full, but it’s also a very time consuming process in order to do correctly and include all information necessary to make the best choice. But worry no more – we’ve put together a checklist of some of the most important components to include in your RFP, as well as a detailed 3PL selection process to follow based upon the experience of one of the top supply chain experts in the US and owner of The Lean Supply Chain, Charles Intrieri.

Why do You Need a 3PL RFP in the First Place?

Before we begin with outlining the perfect 3PL RFP, it is extremely important to understand why having one is important in the first place. The time investment to create a 3PL is significant – so why should you make such a commitment? Below are three key reasons to take the time to outline a formal RFP.

1. A 3PL Fulfillment RFP Asks Potential Partners to Come to You. One of the key benefits of the request for proposal (RFP) process is that you control how potential partners to come to you with their offers. You choose who sees your RFP, and you choose the terms on which potential partners come to you. This stance places you in prime position while bargaining with 3PL fulfillment companies. You are the one in control. Also, you know up front that anyone who comes to you will be able to do the work outlined. This means thatyou can save time searching through alternatives, speaking to companies who will not be able to fulfill your needs. For example, let’s say you are looking for a 3PL fulfillment company will be able to insert small complimentary items like flyers or business cards in each shipment. The RFP process helps to ensure you don’t waste your time on fulfillment companies who do not perform these services.
2. A 3PL Fulfillment RFP Lets You Define the Format of Responses. The second key benefit of RFP’s are that they allow you to solicit responses from a broad range of competitors and then compare their responses side-by-side. A RFP lets potential 3PL fulfillment partners know exactly what you’re looking for, what kind of information you’d like about their businesses, and how many estimates you would like to receive. When sorting through responses, it will then be easier to compare competitors side by side, viewed in terms of how you do business. What are the costs for the services you’ve requested? What are some additional services you may want for the future? Be sure to include any relevant information you want businesses to include in their proposals, such as any SLA’s and metrics and business history you consider relevant when weighing possible options. Then, you’ll have all the answers you need in one easy place.
3. A 3PL Fulfillment RFP Helps You Start Your Partnership Right. Third, and at least as important, an RFP helps to normalize business relationships in a professional manner. Whatever the age and type of your business, a RFP is a time-honored, professional means to begin a fruitful partnership. RFP’s are used in a variety of business settings; they are a standardized, above-board way of letting other companies know you would like to enter into a long-term contract. You then have the added confidence that the businesses responding to you are professionals willing to act above-board. To put this another way, let us say you do not use a RFP but instead search for the right company by looking through the phone book or by reaching out through business contacts. This method will often limit your prospects, and it may include some businesses which are less than trustworthy, including hidden costs and unreliable practices. A RFP is a way of conducting business that is standard and open, giving you better access to all the reliable businesses who can perform the services you need.

Your Third Party Fulfillment Request for Proposal: Defining Your Goals

Putting together a 3PL bid is a process that needs careful consideration since you’ll likely be sending multiple bids out to your top warehouse choices. Otherwise known as a Request for Proposal, sending a bid to a 3PL happens after you’ve thoroughly vetted a number of companies. As you send out bids, you’ll want to provide various types of information, including questions to ask the 3PL.

Overall, you want to include things in your bid request that helps you establish a good working relationship with the fulfillment center. You already know they have the right technology available for your business structure. Plus, you may know they have a dedicated team and have financial security.

You still want to know what kind of relationship you’ll have with your 3PL company. This includes requests for more information so you have a complete picture of which company is the best choice.

Vetting is never easy, yet it sometimes requires being slightly forceful to get more info. Most of all, providing information about your own goals can help the 3PL better prove they’re right for you.

Take a look at what to include in your request for proposal, including a list of your data points so a 3PL can give you a better idea of their logistics process.

Defining Your Goals

Experts on 3PL bidding always emphasize that you need to define your business goals before you even write a proposal. Once you understand what your goals are, you can have a better idea of how to craft your proposal. A 3PL can also get back to you with more thorough information about what they provide so you make a better educated decision.

Here’s three questions to ask yourself before sending in bids:

1): What Do You Hope to Accomplish?

Answering this question can help you determine what your true aim is in distributing your products. Do you have a specific geographic area in mind? Do you want to provide unique shipping offers as part of your brand? You may also want a better line of communication with your 3PL so you’re aware of upcoming technology changes or improvements.

2) What Are Your Estimated Cost Saving Goals?

What your 3PL charges you for their services matters in your savings goals. Sending out multiple proposals helps you weigh the costs to determine which fulfillment center provides what you need for your budget guidelines.

3) What Kind of Operational Efficiency Do You Need?

You’re perhaps in a unique niche industry that requires certain types of shipping equipment and procedures. Some of the 3PL companies you vetted may not have enough commitment toward service improvements to help you expand in the near future. This can help you whittle down your bid choices fairly fast.

Outlining Your Requirements

Based on the answers of your goals above, you can incorporate that and more into your bid on what your business requirements are. Don’t be timid on including more data, because the more the 3PL knows, the more they can help nurture better teamwork with you.

Some other things to add include the minimum requirements you need for your business to keep up with demands, plus any perks that could benefit you along the way.

Listing Your Current Costs

By providing data on what you currently pay for freight and what your expenses are, the 3PL can give you a more accurate quote after looking at your bid. In a sense, you’re providing your own audit so the 3PL can see what you truly need in order to work well with them.

When the 3PL sees you’re considering several warehouse choices, one may counter with a savings offer to prevent you from going to one of their competitors.

Contact us here at 3PLCompanies.net so we can help you find the 3PL company right for you and provide tips on the bidding system.

3PL RFP: What to Include in Your Request

Business Issue and Services Required

The “meat and potatoes” of the RFP is a thorough description of the business issues and services required for your 3PL project. This will include all of the things that you’re looking for in an outsourced third party logistics partner. When creating this aspect of your RFP, don’t forget to include any assumptions that you use so that each potential service provider is aware of the confines of your needs.

Pricing Format Including any Special Pricing

One of the most difficult tasks involved with 3PL selection is comparing the various pricing structures of competing 3PL companies. Therefore, create some “rules of the game” so that you can easily compare apples to apples. Providing the expected structure of the pricing component puts you in the driver’s seat and will save you much needed time. Furthermore, many companies allow warehousing firms to also provide any specific pricing they would propose using in addition to the standard requested format. This allows providers to “pitch” other ways of streamlining pricing.

Term of Contract

Be sure to include the potential term of any fulfillment agreement. This sets the expectation for how long the relationship will last. Keep in mind that the longer the term, the better the rates that the providers will potentially propose, as longer term contracts hedges some of their risks. However, on the other hand, a shorter contract hedges your risk of performance should you want to switch providers in the future.

Due Date/Timeline

It’s important to set a timeline for the 3PL RFP to be completed by the various providers. Furthermore, you may wish to provide a timeline that spells out exactly how long they have to ask you questions, for you to respond to their questions, as well as any other timeframes needed during the process.

Location Requirements

If you have a preference as to where the 3PL is located, be sure to spell this out clearly early on in the request for proposal. This way, providers will know right away if they are eligible or ineligible to compete based upon the location of their facility.

Selection Criteria

Most people enjoy knowing the ways in which they’re going to be “graded”, as it sets the expectations appropriately. Similarly, 3PL companies need to know what factors you’re going to use when “grading” them against other providers. While you don’t have to put everything out on the table, highlighting the most important factors will help them showcase the appropriate information to make a sound decision.

Key Performance Criteria

The best RFP’s are forward thinking – meaning that they not only help you provide a basis to make a decision, but also serve as a foundation for assessing their performance. By including key performance indicators that you’ll be using if they’re chosen, you not only get to assess their success or failure with these criteria, but you’ll also be gain insights into whether or not they have the capacity to measure the desired results within the confines of their current systems.

Questions for 3PLs

One of the most important aspects of an RFP is the section related to your questions for the various providers. This is your opportunity to ask them specific questions to get at the heart of how well they’ll be able to address your needs. Be sure to put some extra time into thinking through the most valid questions possible. By making the competing companies respond to questions, you’ll be the insights you need to make the best choice of a partner.

How to Respond and Point of Contact

Lastly, you’ll want to provide an avenue to respond to your request. Let the 3PL firms know how you want them to respond and provide a specific point of contact. By funneling all of the information flow through one representative, communications will be streamlined.

Third Party Logistics (3PL Selection Process): A Step by Step Guide

Below is a comprehensive step-by-step guide exclusively developed by Chuck Intrieri of The Lean Supply Chain to help you keep track of all the nitty-gritty details as you screen and choose the right 3PL for your business. (There’s quite a bit to manage, so using a 3PL consultant might be wise.)

1. First, a cross-functional team investigates internal, company current freight and logistics costs: Choose a 3PL implementation Project Leader or be guided by an external 3PL Consultant.
2. This cross-functional, internal team will then create a Request for Quotation (RFQ)/Request for Proposal (RFP) with consultant’s recommendations. The more detailed the RFQ/RFP, the better the quotation/proposal. Put a due date (7 days out) on the RFQ/RFP to measure responsiveness of 3PLs. Send to at least three (3) different 3PLs.
3. Know all of your customers and their zip codes for delivery examination. We want the 3PL in the right location for our customers.
4. IT requirements: Your IT Manager should address IT needs: Warehouse Management System (WMS) integration, Transportation Management System (TMS) integration for tracking your freight, Yard Management System (YMS) and Electronic Data Interface (EDI). API, a replacement for EDI: API is an acronym for “application program interface” and allows different computer systems to communicate with each other. Compared with standard EDI, API provides flexibility and enables a faster, more efficient exchange of electronic documents such as load tenders, customer orders, shipment status, and invoices.
5. You may receive a Request for Information (RFI) from the 3PL(s) asking for additional information needed to quote/create a proposal.
6. A quote/proposal follows. Always be aware that these prices can change and are based on YOUR FORECASTED REQUIREMENTS; your ACTUAL Day-To-Day requirements will change pricing.
7. Ask 3PL(s) for clarification of RFI, if required.
8. Obtain pricing for services aside from quotation/proposal including gainsharing, cost-plus pricing, activity based pricing. and unit rate pricing.
9. Find out if the 3PL is Asset (they own their own warehouses/transportation) or Non-Asset based (where they subcontract warehousing and transportation).
10. Call at least three current customers of the chosen 3PL and make a list of the pros/cons of the chosen 3PL.
11. Choose a 3PL after analyzing the total, bottom line value to your company that they will provide.
12. Check the 3PL’s financial strength. You can analyze a Dunn and Bradstreet report on the 3PL.
13. Always have “fail-safe” backup 3PLs, just in case the chosen 3PL does not work out.
14. Visit the chosen 3PL with a 3PL Checklist (the consultant has a 3PL Checklist).
15. During the first visit, pay attention to whether or notyou feel comfortable. Is the chosen 3PL collaborative, flexible, understanding—and do you have “good chemistry” with the 3PLs top management and your 3PL daily contact person?
16. Negotiate prices with the chosen 3PL during your visit. Negotiating prices while at the chosen 3PL’s facility works very effectively. Clarify: your forecast based pricing versus ACTUAL pricing.
17. Consider gainsharing, cost-plus pricing, activity based pricing (pricing per move), management fee pricing, hourly pricing. Which pricing is best for you? Examine them all.
18. Negotiate the per month charge: i.e., $ 1000/month flat fee plus prices and other fees.
19. Review accessorial prices (pallets, labeling, banding, shrink wrapping, palletizing, etc.).
20. Make sure you understand How long the final, negotiated prices will remain in effect.
21. Be aware of: 3PL “upfront charges” on a new, large account for administrative set up. These upfront charges are negotiable.
22. If you agree to a three-year contract, read the contract thoroughly or let your 3PL consultant review the contract in detail. Ensure that there is a cancellation/modification clause in the contract so that you can cancel or modify the contract if the chosen 3PL is not meeting your expectations or if a change is needed. There may be a Warehouse Contract (Public Warehouse or Allocated, Private Warehouse Space) and a Transportation Contract.
23. Will the chosen 3PL agree to a Transportation Quarterly Business Review (QBR) which includes Transportation Management System (TMS) Optimization of routes and lanes, after 60 days of experience (cost reduction % agreement) with your company’s freight, and fuel surcharge (FSC) management? Do you have a carrier preference? This means NO AUTOMATIC increase of FSC, but negotiating FSC increases that come along frequently, increasing transportation prices. All transportation freight bills/invoices should be audited; quote versus actual billing: are there any variations?
24. Always have your own Terms and Conditions of doing business. If the 3PL has Terms and Conditions and you do not, the 3PL wins in a court of law if there is a dispute of any kind. Watch out for Terms and Conditions on quotations/pricing sheets.
25. Do you have Liability Insurance? Cargo Insurance? Cargo theft insurance? (Have the type of cargo identified on the Transportation Bill of Lading.) Other insurance? Does the chosen 3PL have Liability and other Insurance?
26. Find out what cargo security issues/policies are in place.
27. Returned Material Authorization (RMA): Is there an RMA policy to inspect damaged “poor quality” goods upon receipt, and approve the return with an RMA number? What is their Reverse Logistics Process? Return to Vendor (RTV) Policy?
28. Will the chosen 3PL agree to a “win-win,” collaborative Service Level Agreement (SLA) with Key Performance Indicators (KPIs) for Continuous Improvement, with a monthly review? Collaborate with the 3PL: if the 3PL misses metrics/KPIs and/or delivery due dates to our customers, agreed-upon penalties are in place to negatively reinforce the 3PLs missing metrics or KPIs. If there are too many detriments, the 3PL is put on probation for a period of time, and MAY be replaced with another 3PL. Credits can also be discussed for positive activities, like meeting all KPIs/metrics.
29. Is the 3PL a Lean 3PL? 3PL Culture in place / who is accountable/responsible? Is Top Management focused on Lean? Do they come to the shop floor and work with their associates to solve problems and improve processes daily? Daily continuous improvement? Kanban pull systems? Lean Six Sigma quality? Visuals showing Lean focus and strategy and continuous improvement. Lean education frequently?
30. Does the 3PL manage your International Trade? Import/Export? Customs Broker? Freight Forwarder? Warehousing? Is there a Foreign or Free Trade Zone (FTZ) within the 3PL facility?
31. Does the 3PL have: Last Mile Delivery? Last Mile Deliveryis defined as the movement of goods from a transportation hub to the final delivery The final deliverydestination is typically a personal residence. The focus of last mile logistics is to deliver items to the end user as fast as possible.
32. White Glove Delivery: White Glove Delivery. … The deliveryagents will unload and place your items in the room of your choice. White Glove servicegenerally includes unpacking, removal/disposal of packing materials, and transporting your order up or down a maximum of two flights of stairs.
33. There may be other issues that come up as each 3PL tailor-makes how they do business with their customers. You also learn new things as you move forward with 3PL Management and Selection.
34. Eventually someone like the 3PL Implementation Project Manager or 3PL Consultant has to manage day-to-day 3PL activities: i.e. monthly reviews of the SLA and quarterly reviews of the QBR to ensure all KPIs are met and you are BOTH continuously improving. Especially focus on cost reduction targets through collaboration with the 3PL. Managing a 3PL can be a full-time position. Daily communication and collaboration with the 3PL is vital.

Unless you’ve been underneath some rock for the past decade, you’re probably fully aware of the accelerated growth of the Web and the significant number of businesses using the Internet to search for products and services. In fact, significant doesn’t adequately describe the extent to which businesses search online. According to Hub Spot, 57 percent of B2B businesses have acquired a customer through their blog and 41 percent of B2B businesses have acquired a company through Facebook. These numbers are staggering – so much so that it would be hard to believe that any B2B service company would choose to ignore this rich and plentiful prospect channel.

But that’s exactly what many 3PL (third party logistics) companies have decided to do, if not by default. Perform a quick search of the websites for the top 100 3PL companies in the US and something noticeable might be missing – namely content rich social media links and regularly updated blogs. Sure, you may find that the websites look good from a design perspective (although in some cases this isn’t even the case), but many of these top firms are choosing to ignore the vast potential that the Web and social media have to offer.

Stuck in a Rut

Many of the top firms are stuck in the “old” mindset of generating business. They focus most of their attention on cold calling targeted lists, direct mail, industry trade publication advertising, trade show advertising, and sponsoring local events in an attempt to facilitate relationships with larger prospects. By no means should these mechanisms be ignored. However, putting all of the proverbial eggs in these offline marketing channels will undoubtedly result in significant lost potential. And 3PL companies are missing out on more than just potential revenue – they’re also missing out on potential cost savings that online marketing channels offer. In a recent infographic published by Voltier Digital, blogs, social media, and SEO (search engine optimization) all cost less than traditional telemarketing, direct mail, and trade shows.

Where Are They Going Wrong?

Blogs represent an area of online marketing that offer one of the greatest opportunities for return of investment that 3PL companies seem to be ignoring. One of the reasons that blogs are so attractive is that they cost so little to produce, yet provide a high rate of return. Many content management systems offer built in capability of extending a blog onto the corporate site, and the only other cost involved is the time to create and publish content. If the blog articles contain relevant and useful information, others will link to and share the content – which not only drives interested people to the site but also helps to facilitate increased search engine ranking. Unfortunately, when you glance at many of the top 3PL company websites, you’ll either find no blog or a blog that’s stale. Consistently updating content each and every month is imperative to actualizing success.

Social media is often ignored due to either intimidation with the medium or a perceived lack of relevance. In particular, many 3PLs overlook this treasure trove because they believe that people on Facebook or Twitter among others won’t transition into a paying customer. This could be no further from the truth. And, as with blogs, many companies either don’t post their social media profiles on their websites or don’t push fresh content through the social media platforms consistently. Many of these channels require weekly, if not daily engagement in order to be successful. And quality is much more important than quantity. By actively participating in relevant groups and discussion, perceived industry expertise can be developed and powerful connections can be made.

Finally, SEO is such a powerful way of attracting prospects. With SEO, companies gain visitors to their website by optimizing their website to appear in the top search engine results for targeted and relevant keyword searches. Once obtained, all clicks to the website are obtained without a per click fee. If you conduct a search for industry related keyword phrases, you won’t see many of the larger 3PL firms listed in the top spots. More frequently, you’ll find the smaller and more progressive competitors occupying these much desired spots. SEO requires a significant amount of effort and takes an extended period of time to develop. So it makes sense that many companies would avoid this channel. But with as much as 94 percent share of all search engine clicks (eConsultancy), SEO is an area that can’t be ignored.

Moving an 800-Pound Gorilla Takes a Lot of Strength

The top 3PL companies have a blessing and a curse with respect to their size. While they have the capital that many of their smaller competitors don’t, change oftentimes takes significantly longer to implement and permeate throughout the company. More importantly – many of the top 3PL companies believe that their target audience, Fortune 500 companies and other large public and private companies, either don’t search the Web for these types of services or would be better targeted in more traditional marketing channels. This perception is completely inaccurate, as many large companies use the Internet to a great extent when searching for outsourced vendors and service providers. Furthermore, other online marketing channels offer great potential for customer service and relationship building, such as social media and content marketing. In fact, large 3PL companies would be wise to take a book out of some of the more sophisticated users of online marketing by integrating support responses through social media channels and regular pushes of relevant information via their websites and regular email communication with prospects and customers.

But not even money can make up for an extended period of absence. Timing is everything in the world of the Web. Changes take place at a breakneck speed and new trends emerge almost daily. It will be interesting to see if more of the largest 3PL companies start adopting the new wave of marketing. One thing is for sure – if they don’t start adopting it quickly, they just might be left in the dust of their more Internet conscious competitors.