A supply chain is a sprawling organism full of complexity. If your company finds itself in a position where third-party logistics (3PL) services are necessary to streamline and improve your operations, there are many providers that can integrate custom-made warehousing, fulfillment, and shipping solutions. But where do you begin your search? How do you find the best 3PL companies?
As with any outsourcing, you’ll no doubt find yourself shopping around for the best partner. Contacting multiple 3PL providers is an industry best practice.
However, be prepared – hiring a 3PL company is like conducting an extensive interview. On top of that, you’re not just interviewing potential partners; they are interviewing you as well to make sure that your needs and their services are a comfortable fit for their business. And in this very challenging and difficult warehousing environment, 3PL companies are being even more selective when choosing which new clients to bring into their facility.
So, make no mistake about it – when interviewing 3PL providers, you will most likely have to endure a deluge of questions before a 3PL will give you a finalized price quote.
Why are So Many Questions Necessary?
The typical 3PL provider will usually respond to a request for a quote with an extensive and exacting list of questions. Those questions often include:
- What product types do you sell, and do they have special requirements from a warehousing perspective?
- What is your current warehousing space requirements?
- How many unique, identifying SKUs do you carry in inventory?
- What is your typical outbound order volume?
- What shipping methods do you utilize?
- What sales channels do you utilize and how do you plan to integrate with these channels?
- What is your current service footprint?
- What systems do you use for customer experience?
The preceding list serves as a cross-section of topics that a 3PL company might ask prior to rendering a quote, but it is by no means all-inclusive. Here is a very comprehensive list of questions 3PL warehouses might ask you.
The question then becomes, “Why are there so many questions involved and why isn’t pricing standardized?” The short answer? Logistics is not a one-size-fits-all industry.
Questions Lead to Better Pricing and Organizational Fit
Every company has uniquely individualized needs. Those needs usually revolve around a concert of factors like volume of business, volume of warehoused products, specific types of products, sales channels, technology requirements, and the company’s sales territory. To prepare the most accurate 3PL quote possible, 3PL warehouses must spend time and effort in discovery, learning the ins and outs of your company’s business.
On the surface, these questions might seem annoying, but in truth, they are beneficial to your company and its resources. For example, some 3PL companies ship a lot of small parcel shipments within certain dimensions and weight ranges and therefore have extremely aggressive rates for products of similar shape and size. As a result, they can get much more aggressive rates for other prospective clients with similar parcel characteristics.
Similarly, other 3PLs may specialize in heavy-weight items and, thus, be able to get extremely aggressive with heavier weight shipping methods and costs. 3PL providers may be able to discount certain services if they fit within the “sweet spot” of their existing processes, procedures, and overall business strategy.
Some main examples of areas that might significantly impact the 3PL’s price quote include:
- Physical characteristics of your products, including size and weight
- Order volumes and storage space requirements
- Shipping characteristics of your product line
- Technology and integration requirements
- Customization needed
And pricing isn’t the only factor that influences whether a 3PL company will be interested in pursuing your business. High performing warehousing services operate off a strict vision and set of overall business strategies and tactics, which help them operate a well-oiled machine without significant errors. To make sure that they don’t over-promise and under-deliver, many 3PLs will ask questions to find out every one of your specific requirements to determine whether they can reasonably perform the specific nuances of your business without fail.
3PLs will consider organizational fit related to:
- Compatible company vision
- Flexibility of services needed that stretch beyond their procedures and technology
- Complexity of services needed, such as high SKU counts
From warehousing capacity to fulfillment, to transportation – 3PL providers require a comprehensive picture of your business to deliver the best service possible.
Wouldn’t You Ask Questions Too?
For 3PL providers, finalizing a quote is a complex affair, but that doesn’t mean that you have no control over the situation.
When shopping for a 3PL partner, flip the script.
There are tremendous benefits in asking them just as many questions as they ask you to not only secure the best possible rates for your company but also to make sure they fit all your needs. By responding in kind with a thorough list of questions, you can best assess the 3PL’s:
- Overall reliability
- Operational procedures
- Organizational fit
- Technology and systems capabilities
- Warehouse and data security
- Customer service capabilities
- Reporting resources
Some good initial questions to ask any 3PL warehouse include:
- What are your contract terms like?
- Can you provide metrics regarding your reliability and service?
- What is your fee schedule like regarding warehousing, fulfillment, and transportation?
- What ERP system do you use?
- Can you easily integrate your systems with ours?
- What kind of environmental controls and security do you offer?
For a more comprehensive list, you can view this list of question to ask your 3PL.
The bottom line is that 3PL companies ask you so many questions not to be a pain, but rather for your benefit and theirs. The point is to make sure the partnership will be mutually beneficial and secure the best rates while streamlining your overall logistical operations. Ensuring a solid partnership with your 3PL provider will pay dividends down the road for your business.