You need more than quality products, a strong marketing strategy, and glowing reviews to grow your business. Order fulfilment is crucial to your online retail business. A strong relationship with your third-party logistics provider (3PL) is vital. You’ll need their support as your business grows.

So, how do you ensure you forge a trusting relationship from the get-go? Ask your third-party logistics provider these twenty questions.

What Is a 3PL?

Let’s first establish what a 3PL provider is. 3PL stands for “third-party logistics provider”. When a business owner outsources, the 3PL provider manages logistics, distribution, warehousing, and fulfilment services.

But what does this mean? Third-party logistics companies look after everything to do with your inventory, shipping, and returns. When a customer places an order, the 3PL provider will pick the product from the warehouse, pack it, and deliver it to the customer. If the customer chooses to return or exchange the product, your 3PL provider will handle that too.

Rather than storing goods yourself, outsourcing reduces costs and promotes a streamlined, efficient fulfilment solution.

What Are the Benefits of Using a 3PL Provider?

Partnering with a 3PL provider is an important decision. Your third-party logistics provider will handle much of your shipping and handling affairs. Therefore, you must trust them completely to look after your brand reputation. But, many business owners prefer working with a 3PL provider – what are the benefits for your company?

• Professional advantage: Many 3PL providers have been in the game a long time. Their industry experience and advice on shipping, order volume management, invoice configuration, and delivery windows will give you a professional advantage.
• Cost savings: Outsourced logistics could save money and resources. Your 3PL provider will have strong existing relationships with other supply chain management companies and order wholesale packing materials – resulting in cost savings for you.
• Scalability: Growing your business is challenging when you rely on your own means. 3PL providers can provide the required resources, technology, and expertise to help you scale quickly.

20 Questions to Ask Your 3PL Provider

Yes, third-party logistics companies are hugely advantageous. However, to reap the benefits, you must partner with the right 3PL provider for your business. Therefore, you must get to know potential third-party logistics providers before signing the contract. Here are twenty questions to ask your 3PL provider.

1.    What Types of Products Do You Specialise In?

Depending on your products, you might need a 3PL provider with specific expertise. Heavy, bulky, hazardous, or fragile product fulfilment needs extra care.

If this is the case, ask logistics companies how they ship big or fragile items. For instance, large delivery companies might use traditional or dimensional (DIM) weight to determine shipping costs. Depending on your products, DIM might increase shipping costs and put customers off. An experienced 3PL provider will find the most economical way to ship items.

2.    What Experience Do You Have With Other Companies in My Industry?

Every company is unique. However, if you package gift items using pretty materials, you’re unlikely to want to work with a fulfilment provider who mainly handles industrial-scale tools.

Note: Beware third-party logistics providers who promise they can do everything – you want a partner with specific experience in your industry.

3.    What Will You Do to Meet Performance Metrics?

You set goals for your eCommerce business. If your fulfilment provider doesn’t value your goals, your business growth may suffer. Your outsourced fulfilment process is part of your operation. They should have the same standards as you do and work with you to achieve success.

Look for a 3PL provider that has incentives to exceed accuracy and speed goals.

4.    Is There a Minimum Monthly Order Volume?

Some inventory management companies charge an additional cost if your stock moves too slowly. You might not meet the minimum monthly order volume during seasonal sales cycles. Similarly, your 3PL provider must accommodate the increased order volume with on-time shipping performance during large spikes.

5.    Will You Provide Cycle Counts?

Cycle counts keep track of your inventory and stock levels. Protecting your stock against loss or theft is essential – find a 3PL provider who checks that the number of items in the warehouse management system is the same as those physically sitting on the shelves. Real-time inventory tracking is beneficial to saving costs.

6.    Can You Meet Demand for Increased Capacity as My Business Grows?

One of the benefits of outsourcing your supply chain management and order fulfilment is to scale your business. However, not all 3PL providers will accommodate growth. Ask your potential partner how quickly you can expand and whether they offer the flexibility to reduce shelf space if your business contracts.

7.    What Percentage of Orders Will Reach Customers in Two Days or Less?

While two-day shipping is industry standard, more and more customers expect even faster shipping. Can your partner meet your fulfilment needs without high shipping costs? Ask whether they have multiple locations for faster shipping.

8.    Do You Offer Same-Day Order Processing?

One way to improve shipping times is to process orders on the same day as the customer places the order. Promising two-day shipping is useless if order processing takes a week. Ensure your 3PL provider keeps up with the latest industry trends and best practices.

9.    Where Are Your Warehouses Located?

As mentioned, multiple locations mean faster shipping. Plus, it reduces your shipping costs. Think about it: Sending packages from city-based warehouses to customers an hour away will result in cheaper fuel costs than sending from one side of the country to the other.

Moreover, if your eCommerce business offers international shipping, ask your 3PL provider whether they have international carriers and warehouses.

10.    How Do You Handle Shipping Orders?

Third-party logistics is all about getting the product to the buyer. How your 3PL provider handles shipping can make or break a successful business. Customers want fast, reliable, and cheap shipping.

11.    What Is Your Shrinkage Allowance?

Shrinkage is the difference between the stock levels in the inventory management system and the number of items on the shelves. Many 3PLs have a minimum shrinkage allowance before they reimburse you for lost or stolen products. Ideally, you want a third-party logistics provider with a zero shrinkage allowance.

12.    What Performance and Accuracy Guarantees Do You Offer?

If your products arrive mis-packed or have the wrong items, you lose money and customer loyalty. You need a trustworthy partner with performance and accuracy guarantees that you can rely on. For instance, will they implement a minimum packaging required rule to ensure your products arrive at the customer’s doorstep safely?

13.     How Do You Process Returns?

All eCommerce companies have to deal with returns. It’s often a logistical challenge – knowing how your logistics company processes returns is essential. For instance, quickly refunding customers can ensure loyal customers. Similarly, how quickly do the items go back into your stock? Do they assess damage to products?

14.    Do You Handle Customer Service?

As your eCommerce company grows, you might need to outsource customer service issues. Find out if your 3PL provider will handle queries about orders – this cuts out the middle man as customers can directly contact the warehouse, saving time and money.

Additionally, will they offer real-time product tracking? This kind of transparency dramatically improves the customer experience.

15.   How Do You Avoid Downtime?

Severe weather interruptions can cause power and internet outages that disrupt your business performance. Just because there is a storm affecting your warehouse on one side of the country, it doesn’t mean that your customers on the other side cannot get their parcels. Your warehouse should have a backup power source and two different IPSs.

16.   What Kind of Security Do You Have in Place?

Your inventory is one of your most significant investments as an eCommerce company. Ensure your fulfilment centres have security cameras, employee background checks, fencing, 24/7 security, climate control, and internet security protocols.

17.    Will You Work With My Preferred Carriers?

Changing your 3PL provider is a huge step. If you already have a preferred delivery service, it might be too disrupting to adjust shipping methods simultaneously. Make sure your fulfilment centres have established relationships with your preferred shipping carriers.

18.   Do You Offer Other Services?

Find out what other services your 3PL provider offers to support your logistics operations and supply chain management. For instance, kitting, customisations, and custom box inserts can improve your sales. These extra efforts will go a long way.

19.   Are There Any Additional Fees?

Hidden fees and additional costs are inconvenient and can disrupt your carefully laid plans. You want a completely transparent relationship with your 3PL provider. Ask about account set-up and management fees, and SKU fees. Hidden fees may drive your costs up and your profit margins down.

20.   What Kind of Contract Do You Offer?

No matter how many questions you ask, you will only know whether they are the right partner for your company once you begin working with them.

Ask if they offer a free trial period and what kind of contract they require going forward. As your eCommerce business scales and changes, you might outgrow your 3PL provider. Read the fine print and ensure you’re happy with the contract.

Working With a 3PL Provider

A 3PL provider can improve your business performance and ensure fast cost-effective shipping. However, you must question your potential outsourcing company to ensure your business partnership is effective. With the right 3PL provider, your business will scale beyond your expectations.

FAQ

What Should I Look For in a 3PL Provider?

You should look for a 3PL provider that values your business goals and has experience in your industry. Do they have performance metrics and quality control measures to protect your brand image? Can they meet your shipping requirements and make timely deliveries? Will they encourage business growth?

How Do You Evaluate a Logistics Company?

To find out if logistics companies are right for you, question their experience, shipping methods, security capabilities and transparency. You must form a trusting, honest relationship for your partnership to work. For instance, if the contract introduces lots of hidden fees, you’re unlikely to have a successful relationship down the line.