There are many things you need to consider when contracting with a 3PL: price, speed, capacity, technology, etc... But one of the most important considerations, and typically the most overlooked, is whether your 3PL is able to help you grow your business.
This especially becomes an issue if and when your business is ready to expand into new segments. Most 3PLs are either B2B focused or B2C focused, and crossing between the two is difficult. What works in one area does not necessarily work in the other. But a 3PL must be able to do both effectively if they are to help you grow your business in new areas.
Many 3PLs, for example, start life as large public warehouses that get into the wider logistics game. Public warehouses have historically been “pallet-in, pallet-out” operations. These types of outfits are used to a B2B world, but often have trouble with each-picks -- something in high demand for B2C companies. On the other hand, companies that specialized in each-picks for the B2C world often don’t have the EDI systems needed for B2B retailing and wholesaling.
eCommerce and eFulfillment further complicate matters. These usually lead to more small order and increased each-picks. Having the ability to fulfill priority orders and allocate inventory to specific sales channels becomes a competitive differentiator.
The result: most 3PLs simply don’t have the complexity to scale and grow with you as your business changes. That means a built-in switch-over to another 3PL at a future date, and all the headache that comes with the change. It is a much better idea to carefully select a 3PL partner not just based upon what you need today, but what you may need tomorrow. There is no reason to settle for being the “guinea pig” that enables a 3PL to learn new things at your expense.
Here are two companies we have assisted in growing their business in multiple segments:
Antennas Direct (https://www.antennasdirect.com/) Antennas Direct started out as an ecommerce company that filled a unique niche. They grew rapidly, with a lot of their growth coming from both direct-to-consumer sales online and retail outlets carrying their product. Their logistics company was not able to meet the increased demand, so they had to switch providers.
Extend Nutrition (https://www.extendbar.com/) Extend Nutrition is in the specialty foods category, with nutrition bars, shakes and crunchy snacks distributed to both the direct-ship consumer and retail channels. This business model requires comprehensive fulfillment services. Their former logistics company was able to accommodate the direct-to-consumer business; however, it was unable to provide EDI integration and adhere to stringent shipping requirements typically required in the retail channel. Switching providers has allowed Extend Nutrition to streamline processes and expand distribution.
So how can you tell that your 3PL is failing to scale? The issue is complex, but here are a few tell-tale signs:
1. Receiving product is continuously late or incorrect
2. Increase in the number of delayed or incorrect orders when quantity and/or sku counts get higher
3. Lacking the ability to allocate products to certain sales channels to mitigate out-of-stocks
4. Charge-backs are being incurred, pointing to a lack of proper handling.
5. Routing issues are not well understood and become a bottleneck for opening new retailers
Any one of these, or a combination of them all, might be a sign that it is time to look for a 3PL with both B2B and B2C experience.
At Materialogic, our experience and size allow us to scale to meet virtually any size need. Give us a call or fill out the form on our website. Thank you for taking the time to read our post!
Bill Young - Senior Vice President / Business Development