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May 26, 2021

6 Ways to Optimize Your Third-Party Logistics Strategy

third-party-logistics-strategy

Order fulfillment is complex, especially when your business is growing quickly or expanding to new retailers. In many cases, eCommerce brands choose to outsource logistics to a third-party provider, known as a 3PL.

3PLs can manage the bulk of an ever-growing order fulfillment workload and increase efficiency across your supply chain.

Whether you're outsourcing for the first time or upgrading to a large-scale vendor, you need to create a solid third-party logistics strategy and ensure your provider is the right fit for your business.

In this post, we'll walk through six ways to strengthen your third-party logistics strategy and match your organizational goals to the right-fit 3PL partner.

Set Clear Goals & Priorities

A goal-oriented action plan gives you and your third-party logistics provider the best chance at success. Rather than choosing a provider to fill a short-term need, start planning with your end game in mind. Think about your primary goals in outsourcing logistics operations. While every eCommerce retailer generally needs to fulfill orders, each business has its own unique KPIs and long-term goals.

Consider whether you need to:

  • Standardize shipping times
  • Improve inventory management
  • Scale your logistics operations quickly
  • Find more affordable vendors

You may have a single primary goal or a shortlist of ideal business outcomes. No matter how your priorities stack up, be sure to share them with your provider from the start. Having a clear idea of your desired outcome gives your provider clear direction and ensures you’re on the same page every step of the way.

Outline the Scope of Work

Once your 3PL knows your end-game, it's time to create an action plan that will take you from where you are today to where you want to be. You'll need to share clearly defined project parameters, upcoming deadlines, budgeting constraints, and other critical business metrics.

Additionally, your partner needs to understand your basic fulfillment requirements, including:

  • Shipping frequency
  • Projected order volume
  • Warehousing needs
  • Retailer handling requirements
  • Cutoff times for shipping
  • Returns management expectations

A 3PL will use both your business goals and these high-level requirements to create a feasible action plan. So, proactive decision-making and cross-team visibility will help ensure your provider can deliver the best possible outcomes during your engagement and beyond.

Define Service-Level Expectations

Your retail partners will typically have rigid requirements around delivery dates, order packing, product tagging, and nearly every other aspect of fulfillment. To ensure you meet these expectations on the backend, establish Service-Level Agreements (SLAs) with your 3PL before kicking off the project.

Implement standards around routine order turnaround –think time cutoffs for same-day or next-day shipping – plus protocols for unexpected order rushes or influxes. Depending on the number of retailers in your portfolio, you may need to establish multiple SLAs to account for varying requirements or guidelines.

Communicate these expectations as early as possible to your 3PL. Be sure to ask about their processes for ensuring an optimal experience in the midst of shifting priorities or last-minute requests.

Assess Key Capabilities

Regardless of your business objectives or handling requirements, your third-party logistics strategy should account for foundational services and capabilities. Develop a list of required features and assess how well your provider can accommodate each.

At a high level, consider:

Space: Your 3PL's fulfillment center must have the physical space to effectively handle your current and projected order volume. However, you should also think beyond square footage and consider your vendor's location and warehouse setup. Is the warehouse centrally located and optimized to deliver across your key markets? Does the actual warehouse space meet your unique product needs, like double-wide aisles or specific racking systems?

Technology: Increased visibility is one of the most significant benefits of outsourcing fulfillment. Discuss your needs and expectations around data insights, inventory visibility, and accessible reporting. Ideally, your 3PL's Warehouse Management System(WMS) will integrate with your existing software tools to provide real-time updates. Your 3PL will also automate internal processes to increase fulfillment accuracy and efficiency.

Transportation: Along with a speedy pick and pack process, your 3PL should maintain accurate shipping and delivery times. Warehouse location plays a role in fulfillment speed, but your 3PL should leverage a vast network of third-party shippers and courier services to enable timely, cost-effective shipping.

Adaptability: 3PL strategy should always tie back to long-term growth goals. That's why you need a fulfillment solution that can scale and adapt with your business. If you're planning to expand to additional retailers or expect demand to double or triple in the next year, you need peace of mind that your logistics partner can keep up. Discuss your plans with your 3PL partner and identify how they'll support your growth.

Prioritize Open Communication

The foundation of a strategic 3PL partnership, effective communication is key to an effective supply chain. Whether you work with a long list of retailers and vendors or a core group of primary partners, you need to set clear communication expectations upfront.

Set standards for how –and how often – you'll communicate with your 3PL. Schedule touchpoints and business reviews in advance to ensure all stakeholders remain on the same page. Beyond identifying a routine email cadence or a reporting schedule, plan for unexpected, time-sensitive requests.

Prepare a list of questions for your prospective partner, such as:

  • Who is the point of contact? Do I have a dedicated account manager for routine needs and urgent requests?
  • How quickly can I expect a response from that primary contact?
  • What is the primary channel or platform for communication?
  • What is the communication protocol in case of supplier delays, last-minute retailer requests, or customer service concerns?
  • How will the 3PL team contact me in case of a problem or emergency in the warehouse?

Ideally, your 3PL partner provides visibility into everything from daily warehouse operations to inventory data and performance reports. Learn about the systems they have in place and how you can leverage them to maintain transparency within the partnership. They should walk you through the dashboards and reporting tools you'll use to stay in the loop.

Increased visibility won't just help you stay on track: it gives you a way to hold your 3PL partner accountable and measure their success against retailer scorecards and pre-established KPIs.

Create a Lasting Partnership

While detailed contracts, industry best practices, and innovative technologies drive success for you and your 3PL provider, the key to ongoing growth is a long-term strategic partnership.

Steer clear of the cheapest option or 3PLs that push for one-off projects. Instead, ensure your current or future vendor has your best interests in mind. Your vendor should take the time to align with your business and keep your goals in mind throughout your engagement. They should also offer value-added services, industry guidance, and ongoing strategies that scale with your business.

A genuine, transparent, and lasting 3PL partnership can be the key that opens many doors for your business — now and in the long term.

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Are you looking for a partner to support your warehousing and order fulfillment operations? Download our Complete Guide to Selecting a 3PL Partner to guide your search.

At Materialogic, we tie our success to your success. We'll take the time to understand the details of your business logistics, as well as the goals that inform your current and future initiatives. We sell contracts and solutions on trust, not price, because we want to become a reliable business advisor, not a short-term vendor.

Guide to Selecting a 3PL Partner

Tag(s): 3PL Partner , Blog , Ecommerce

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