Choosing a New 3PL Partner? Here Are Your Most Frequently Asked Questions

Whether you're just looking for a change or have not yet partnered with a third-party logistics (3PL) provider, the decision to take on such a partnership is a momentous one. It's a sign that your business is in good health and in need of greater bandwidth, so you should be pleased to have arrived at this juncture. Once you've resolved to partner with a new 3PL provider, there are several areas of concern that you'll want to address, whether you have a partner currently or not.

3PLs are routinely questioned about their variety of services, from data security to order volume requirements. Narrowing down what you plan to ask your prospective 3PL providers will aid your efforts throughout your search for a partner. Encompassing a range of topics, these questions have been assembled to give you a sense of what 3PLs are being asked most often by inquiring companies like yours.

1. What's your specialty?

If a 3PL tells you they can "do it all," beware. You probably won't need them to do it all. But you will need them to have a track record of working with products like yours if you expect to have confidence in their service. Heavy equipment (HE) and other large items require specialized experience to transport, as do fragile products. Your 3PL partner should have a solid background in moving the kinds of merchandise you'll need them to move.

2. What would our contract look like?

As your operation expands and your fulfillment needs evolve, you'll want to make yourself familiar with the types of contracts you can expect to see from 3PLs. You may grow out of one partner and seek one with greater territory, or decide to take on a second partner to augment your distribution network. Should that happen, having a well-rounded understanding of the common ins and outs of 3PL agreements will make selecting a new partner a smoother ride.

3. Can you grow with my business?

You'll need whatever warehouses holding your goods to have the ability to scale with your business. You'll want your 3PL partner to make room for more of your inventory when necessary, as well as to adjust for market fluctuations to minimize carrying costs while maintaining their service standards. As demand for goods experiences unpredictable swings and starts, having a flexible partner with robust adaptability will make a world of difference to your bottom line.

4. What's your minimum monthly order volume?

Fees can pile up if your 3PL imposes a minimum volume of monthly orders that you're unable to meet. Inventory that doesn't move quickly enough, as during seasonal dips in demand, may lead to those added charges, eating into your margins. Minimum monthly charges should also be considered, as some 3PL partners will hold you to a minimum monthly storage volume in order to achieve their particular revenue expectations.

5. How's your on-time shipping performance?

Staying compliant with marketplace service-level agreements (SLAs) weighs on your mind, and so you know the importance of having goods sent on time. Your 3PL partner must come through for you here, leaving you with the critical job of investigating their SLAs and shipping records ahead of time so you can make an informed decision. Having a sense of their cutoff times will give you further context about their past performance.

6. Do you give regular cycle counts?

3PLs typically provide an annual report of your entire physical inventory, but more frequent dispatches are rare, unless they offer regular cycle counts. Cycle counts can happen daily, as they deconstruct the inventory reporting process per stock keeping unit (SKU), counting one unit at a time. Getting regular cycle counts from your 3PL partner can help you stay on top of trends in your inventory so you can better plan for the ebbs and flows of product demand.

7. What's your WMS?

The warehouse management system (WMS) that your 3PL partner uses will play a big role in your relationship with them. Though it's largely an internal tool for them to locate and quantify your inventory to select for orders, your partner's WMS should be one that helps them meet your expectations for order workflows. The WMS is key for your business as it brings unparalleled speed and accuracy to the order fulfillment process.

8. Can your system integrate with mine?

Knowing what WMS your partner has will give you a clue about the answer to this one. Because they'll need to have software that can communicate seamlessly with yours, asking for a list of integrations that a 3PL provider accepts is more than a reasonable request. Some 3PLs support integrations with particular online platforms, offering streamlined, automated workflows from those systems to their WMS. Automation is a must-have for any 3PL partner that's worth your consideration.

9. What reporting formats do you offer?

It's your call how you want to receive your data, and a worthwhile 3PL provider will try to accommodate the format you're comfortable with. Your partner's WMS should feature its own reporting functionality, allowing for tailored reports that highlight the data that matters most to you. You'll likely be looking for usage summaries, inventory reports, and any real-time insights that can give your business even the slightest edge over your competitors.

10. Do you take care of freight or postage labels and fees?

Price breakdowns will clue you in on any fees that a 3PL partner may level on you for shipping. You can try to get preferred rates by regularly delivering above volume thresholds, and/or by choosing to ship using one of their partner carriers.

Should you decide to stick with your carrier of choice, a 3PL provider may demand from you a steady supply of that carrier's prepaid shipping labels to ensure that your orders get fulfilled. However you elect to handle the shipment of your goods, your 3PL partner will be a hands-on participant in that integral process.

11. Do you work with my carrier of choice?

Carriers often give better shipping rates to their commercial accounts that run multiple warehouses than they give to more modestly sized merchants. Though switching carriers can be a stressor, it may prove advantageous for you to go with the carrier(s) that your 3PL partner works with already.

You'll want to make sure they process international shipments if that's a priority for you. And even if it's not, it could become one, and so knowing your 3PL's capabilities here can help you plan for the future. Hopefully you'll find a partner that passes their preferred carrier rates directly to you, so you can feel good about your choice.

12. Do you handle international orders?

The capacity for international shipments is largely determined by the carriers that your 3PL provider partners with. Of utmost importance is whether or not your 3PL does business where you do. However, some 3PLs also offer a way to manage customs costs and delays when you're shipping globally. If you have customers spread out across multiple countries, you may wish to consider using a different 3PL partner for each region to increase your potential reach and maintain order fulfillment speeds.

13. Do you offer ship method mapping?

Ship method mapping lets merchants designate shipping methods based on selected criteria. It would enable you to set fulfillment protocols, such as having orders placed through a particular retailer be handled exclusively by a specific 3PL provider. Ship method mapping is important for merchants doing business on several channels or using multiple fulfillment methods. Mapping helps to bring balance throughout this process, allowing you to match each order type to its ideal fulfillment method.

14. What are your warehouse locations and shipping times?

This one may seem obvious, but it's worth noting. What's more important than location, location, location? Wherever your 3PL provider is, they should be close to your customers to reduce fulfillment times and minimize the risks of loss and damage. It pays to get the most out of your partnership by touring your 3PL's warehouses and other facilities. This will give you an idea of how your products will look on shelves, and how they'll be processed through the network.

15. How do you manage returns and customer service demands?

Outside of handling and shipping products to your customers, your 3PL partner can sometimes help out in the customer service department. You'll have to determine with your partner which of you will field customer complaints about product and fulfillment. You may have to devise a system to direct complaints toward one or the other based on certain conditions.

Further, you'll want to figure out a process for inspecting and restocking returns. Ironing out this part of the agreement with your 3PL will make for a consistent fulfillment process and a well-functioning partnership.

Selecting a 3PL partner is a lot like choosing a mate. The process can be overwhelming, especially with the pressing time demands that merchants regularly face. But finding the right match for your business, and forging a lasting partnership with a provider that meets your needs, will prove to be well worth the wait.