Top 16 Questions To Ask Your 3PL Provider
For any eCommerce business or online store that doesn't have in-house order fulfilment capabilities, it can be one of the biggest stumbling blocks along the road to commercial success.
Logistics operations and logistics management are two of the biggest considerations for any company that sells goods, as you need a place to keep products in a warehouse space and fulfilment centres to ship the products out from.
But even if you don't have these capacities, don't worry— a third-party logistics provider or 3PL provider can be the right path for your eCommerce company to go down!
Not only do logistics service providers help with the fulfilment process, but you can save money and concentrate on business scaling, instead of managing shipping and supply chain management.
Read on for the top 16 questions to ask a potential 3PL provider to ensure that you choose the best possible company to deal with, as well as some specific benefits to anticipate when you outsource fulfilment!
What Is a 3PL Provider?
In essence, a third-party logistics provider is responsible for an eCommerce businesses' supply chain management, from warehouse to distribution.
Ideally, this process should run smoothly, allowing for fast turnaround times for online store customers who want to complete the checkout process and get their products within an acceptable time frame.
Instead of handling these complex manoeuvres yourself, hiring a third-party logistics provider not only gives you the opportunity to focus on managing your business and marketing, but their professional service experience can avoid mistakes being made that could cost customer loyalty.
What Are the Benefits of Using a 3PL Provider?
The move to working with any kind of fulfilment partner is not a decision to be taken lightly, and choosing the best third-party logistics provider for your company is no different. But many business owners do opt for a 3PL provider due to the benefits involved with such a relationship.
There are many advantages to using third-party logistics providers, and we can touch upon some of the primary ones here.
A Professional Advantage
Most reliable third-party logistics providers have been in the business for a long time, and have plenty of industry experience to bring to the operation.
A good 3PL provider can offer advice and shortcuts, based on what has worked in the past, including better options for shipping, order volume management, invoice configuration, and schedule pick-up/delivery windows.
While your company might have its own account and distribution advisors, it can still be helpful to get a knowledgeable outside perspective— and the right 3PL provider will fit into your existing team like it's been there all along.
A very common reason for choosing a logistics provider outside of your business is the cost savings associated with it. Instead of navigating the complexities of supply chain management by yourself, relying on a 3PL provider is much easier.
Such logistics companies can already have working business partnerships with transit and delivery services, suppliers for wholesale packing materials, and more, getting you the best possible deals throughout the supply chain.
Depending on your business's growth periods, it's much easier to scale up and down with a third-party logistics provider managing the fulfilment centres.
From high sales seasons to periods with low order volumes, it's easier to coordinate product fluctuation with third-party logistics providers that have access to more resources.
Finally, good third party logistics companies are generally equipped with technology that not only enhances your understanding of product inventory and shipping fulfilment, but every other step along the way as well.
Technology assets that you might not have access to on your own include:
- Auditing for freight forwarders.
- Automated route optimization.
- Data analysis for sales and reporting tools
- Order tracking and transit management.
- Real-time inventory tracking.
- State of the art payment solutions.
Top 16 Questions To Ask Your Next 3PL Provider
For an eCommerce business owner, third party logistics companies often form the crucial link necessary for their direct-to-consumer brand to be successful. As such, choosing the right 3PL provider is one of the most important decisions you can make!
Though it might seem daunting, having a company to help with supply chain management and shipments can make online retail business processes run smoother than ever.
And to assist you in finding the best possible provider, read on for 16 key questions to ask your next 3PL provider before you sign a contract.
1. What Product Types Does the 3PL Provider Specialise In?
Depending on what your online retail business or eCommerce company sells, you might need to seek a 3PL provider that specialises in particular product types.
Consider what kind of products you market and make sure they are compatible with the services offered by any potential 3PL provider.
Fragile Product Fulfilment Services
The last thing you want is a breakable order arriving at the customer’s address in a million little pieces, so choosing a 3PL provider with experience working with delicate items and fragile product fulfilment is essential.
After all, not only do these products typically need special packing materials and handling, but storage considerations will likely also be different from a heavy or bulky object.
And if you select the right 3PL provider for fragile items, it can ultimately save you a good deal of anxiety, packing mishaps, and damaged product refunds.
Heavy Order Fulfilment Services
Any heavy product fulfilments are undoubtedly going to take more skill and time to handle, so your 3PL provider needs to be equipped to deal with their pick-up and delivery safely.
Large Delivery Fulfilment Solutions
For an object that is not only large but light, fulfilment concerns are slightly different. Big products that are not heavy can accrue some of the highest shipping costs, in part because they are hard to ship profitably based on weight.
But if you find a 3PL provider that understands the struggle of selling and shipping such products, as well as the most economical ways to deliver orders, it can make the entire process so much easier!
2. Where Are the 3PL Fulfilment Centres Located in the World?
Depending on warehouse locations, a particular fulfilment company might not be the best choice to run the supply chain for your eCommerce store— but unfortunately, many businesses don't consider this aspect until it is too late.
It's hard to provide same-day shipping or even two-day guarantees if the fulfilment centre is in an entirely different country than where most stock is sold!
So, your supply fulfilment centres need to be strategically placed for the fastest and cheapest shipping.
What About a Fulfilment Network and Multiple Locations for Faster Service?
When it comes to fulfilling orders, where in the world you ship is essential. For example, a fulfilment strategy that hinges on products arriving in the United States and then having to travel to the United Kingdom is cumbersome and circuitous.
In that instance, it might be better for supply chain management to go with a 3PL provider that already has a warehouse in England.
In the end, always make sure a 3PL provider's fulfilment strategy matches up with the primary locations your products end up going!
4. What Integrations Does the 3PL Provider Work With?
Which 3PL provider you choose might depend on what retailers your products are being sold by.
This includes the online shopping platforms, big box stores, and various marketplaces where your product sales happen, because, in order to get there, your 3PL provider needs to be able to work with these locations.
Ask your possible logistics provider about which integrations they currently accept at the beginning to avoid wasting time.
5. Can the 3PL Provider Handle the Customer Experience Process and Customer Service Issues?
Some third-party logistics providers offer to handle customer service and quality control issues for your company, which can be a real advantage for any quickly-growing business that is already looking to outsource customer relations teams.
From client inquiries to package tracking, ask about what customer services a 3PL provider offers, and whether they are part of the overall business package or come at an additional cost.
6. What Kind of Security Does the 3PL Provider Have in Place?
Though warehouses and fulfilment centres might seem like imposing and well-fortified structures, they are still vulnerable without the proper security protocols put in place.
Always ask a potential 3PL provider about 24/7 security measures protecting your goods and everyone else's. After all, a third party fulfilment centre is only as good as its safety precautions!
Things to look for include:
- 24/7 surveillance.
- Climate controls.
- Employee background checks.
- Fencing around the property.
- Security cameras and monitoring systems.
- Secure internet protocols, including biometrics and firewalls.
6. How Does the 3PL Provider Handle Shipping Orders?
A major part of third party logistics is the shipping aspect of getting your products to the buyer. And how a 3PL provider handles this can make or break your success rate.
Not only do customers want fast and reliable shipping, but avoiding high shipping costs is important for your business to break even.
What Are Their Shipping Costs?
Depending on the size and weight of the product, the price of shipping can change. However, you should always determine shipping costs at least on a base level before choosing a 3PL provider. Research how much other businesses are charged for shipping, the type of shipping, and the quality of delivery.
What Is Included in the Shipping Costs?
You might find some hidden fees in third party logistics' shipping costs, so always inquire what is included in the price you might be paying.
Does the 3PL provider offer shipping label costs and packing materials as part of the deal, or will you be paying for those separately? If you are paying handsomely for just the minimum packaging required, it might not be worth it.
What Shipping Carriers Do They Use?
Many eCommerce companies have a preferred delivery service or shipping methods for their goods. Whether it's down to personal preference or better service to certain parts of the world, make sure the 3PL provider's methods and carriers align with yours.
This is especially important for international shipping and deliveries, as some carriers only work within a specific national boundary. And if your 3PL provider doesn't do business with them, it can shut out a large part of the market from your business's reach.
7. Does the 3PL Provider Offer Same Day Shipping or Guaranteed Two Day Shipping (Industry Standard)?
Sometimes, you might assume that large delivery companies run on time and get your orders where they need to go simply because they are popular carriers. But it's still worthwhile to ask about shipping times when considering a 3PL provider.
For example, do they offer the industry standard of two-day shipping? What are their turnaround times for same-day product orders, fulfilment, and shipping?
What Is Their On-time Shipping Performance History?
Timely deliveries keep customers coming back and let busy eCommerce business owners breathe easier. So, while a 3PL provider might say that shipping times are optimal, take a look at their track record nonetheless.
What does the Service Level Agreement specify, and how was it fulfilled? How often does the 3PL provider actually complete shipment and deliveries on time?
8. Is There a Minimum Monthly Order Volume To Be in Business With this 3PL Provider?
Some 3PL providers require a minimum monthly order volume to use their services, which is something to keep in mind. Your eCommerce business operations need to align with the third-party logistics provider's minimums, or else you run the risk of incurring fees for slow-moving inventory.
Depending on the typical order volume for your business, make sure the fulfilment centre can scale to accommodate your stock and sales comfortably. It will help with cost savings and a smoother supply chain in the long run!
9. What Is the 3PL Provider’s Shrinkage Allowance?
It is fairly typical to have shrinkage allowance built into your 3PL provider contract, but the amount is quite important to determine.
Because shrinkage allowance is the difference between what you produce for your business inventory and what is shipped out, this aspect helps you get reimbursed for items if enough go missing. It usually covers products that are broken, missing, or stolen either on the way to the fulfilment centre or while in the warehouse.
You don't want to be paying for products that never arrive for distribution, so look for a 3PL provider with as low a shrinkage allowance as possible— a zero shrinkage guarantee is your best option!
10. Can the 3PL Provider Meet a Demand for Increased Capacity Due to Business Growth?
Business growth is always the end goal, and you need a 3PL provider that will be right there with you along the way.
As your eCommerce company grows, do the logistics operations and fulfilment centres have enough product room, shipping services, and order management system capacities to keep up with your business?
Is There Flexibility When It Comes to Fulfilment Warehouse Space?
One reason to outsource stock storage is to eliminate the cost of your own warehouses. However, the fulfilment centres where business inventory is stored should still have the flexibility to scale with your company's fluctuations.
Not only when it comes to more shelf space or real estate in case of a boom in product appeal and order volume, but also should your business go through a period of low sales— flexibility is key for a logistics provider's warehouse accommodation.
11. What Is the Order Fulfilment Process for Returns With the 3PL?
For virtually any business, returned orders are an unavoidable occurrence. No matter how good your product is, there might still be a malfunction or dissatisfaction issue that sees it being sent right back. But how does a 3pL provider handle these situations in terms of reverse logistics?
It's important to know in advance, as the way returns are processed will either help or hinder your entire business.
Do They Assess Damaged Return Orders When They Arrive at Fulfilment Centres?
If a product has been returned because of damage, it's important to know a 3PL provider's process of assessment when it arrives back at the fulfilment centre. Who determines if the product is unsuitable for restocking and reselling, and what are their criteria?
How Fast Are Return Orders Processed?
The longer it takes for a return to be processed, the more money you are losing on that article of stock. Make sure you know the projected timeline for a 3PL provider's reverse logistics process.
How Fast Do Return Orders Go Back Into Stock?
Paying for warehouse space can add up, and keeping it full of products that are ready to be sold and shipped is essential. So, find out how quickly a return can be processed and put back into circulation before you choose a 3PL provider!
12. Can the 3PL Provider Handle Any Other Packaging and Transportation Services Required?
Some 3PL providers offer a range of custom services when it comes to packaging and transportation. These can include custom packaging upon request, different branded packaging options, and a choice of packing materials if you want to stick to a more eco-friendly option.
Your 3PL provider might also offer product customization, kitting or bundles, and personalised inserts before shipping to enhance the customer experience.
13. What Kind of Warehouse Management System (WMS) Does the 3PL Provider Use?
Knowing where items are throughout the process of creation to the customer's door is important, but tracking stock within warehouse locations is absolutely key to running a successful business.
You need to know exactly where your products are, how many are there, and where they're going— at all times! Having portions of your inventory go missing is not a situation that successful companies want to find themselves in, and can significantly drive up overhead costs for replacement, particularly if the 3PL provider does not have a suitable shrinkage allowance.
To accomplish this, your 3PL provider needs to have a great order management system and WMS software that offers full transparency, back stock reporting, and optimal connectivity options so you can always see what's happening with your goods.
14. How Much Are Any Additional Fees for Working With the 3PL Provider?
Good 3PL providers won't bury hidden fees into the fine print, so make sure you understand any additional fees that come with a 3PL business partner to ensure you can afford them.
Some common costs include account setup and management, as well as possible SKU fee structures that can add up for large amounts of inventory management.
If possible, try to find a 3PL provider that offers a free trial period, and analyse any other incumbent costs for working with them, including insurance, WMS, transit equipment, and labour costs, among other price point considerations.
14. Does the 3PL Provider Create Counts for Inventory Levels and Inventory Management?
No matter the time of year or where you are in seasonal sales cycles, it's important to keep up-to-date with your retail distribution and inventory. But when your stock is stored in a different space than your own warehouse, it can be difficult to have current inventory management.
That's why a good 3PL provider needs to offer real-time inventory tracking and updated counts whenever your business needs them!
15. What Kind of Business Contracts Are Required for Working With the 3PL Provider?
Finally, you don't want to lock yourself and your eCommerce business into a contract that ends up stifling your supply chain and limiting your company's potential. This kind of business partnership needs to hit the ground running, so the weeks immediately after joining forces are crucial to your success.
Check the contract term against your anticipated growth period, assess costs that fluctuate versus a fixed rate, and always read the fine print.
It's crucial for any business to do your research before choosing a third-party logistics provider.
As a deal that could make or break many parts of your company's supply chain, fulfilment guarantees, and overall customer experience, asking the right questions and finding the right 3PL provider can be the best decision you've ever made for your eCommerce business!