The continual rise of e-commerce, the “Amazon effect”, the tight labor market, and increased compliance are all challenges brands face when getting their products to their final destinations. As a result, there are more options than ever to transport, store, fulfill, and deliver goods. That’s why many brands rely on a 3PL (or third-party logistics provider) to manage their supply chain. In this guide, we’ll walk through what a 3PL is, who uses a 3PL, and best practices for selecting or switching supply chain providers.
A 3PL or third-party logistics provider is a partner option that manages all of or some aspects of a brand’s supply chain. This includes everything from Freight Forwarding (i.e. getting a product from overseas into the United States), Warehousing & Fulfillment (storing product as well as picking, packing, and shipping orders), and Transportation (delivering goods to their final destination whether that is the warehouse, the retail store, or consumer).
Generally speaking, brands that need additional resources and/or are looking to expand their own fulfillment options should look into using a 3PL. Shipping issues are the second-most widely reported reason for customer dissatisfaction when shopping online. It can heavily impact your customer experience so it’s important to be able to deliver on your brand promise.
Over 90% of Fortune 500 companies in the United States are using a third-party logistics provider in one way or another. This is due to the many benefits that come with using a third-party logistics provider such as brands being able to spend their time focused on growing their company rather than managing orders.
Over 90% of Fortune 500 companies in the US use a third-party logistics provider.
Ensuring you have the right partner is a critical component of success. A 3PL is an extension of your brand and as so should meet your brand’s standards. It’s important to evaluate your 3PL’s performance to make sure you are working with the right partner. Did peak not run as smoothly as you wanted it to? Is your 3PL proactively trying to help your brand grow through innovation, technology, and continuous improvement efforts? Here are six things to consider when selecting or switching logistics providers.
Your supply chain can make or break your customer experience. If you promised your customer a two-day delivery period and your product shows up in four days, you could hurt that customer relationship. Because your supply chain is such an integral part of your business, it’s important to have a provider that is a strategic partner, not just a vendor. A vendor will hit your key performance indicators (KPIs) and move on. A strategic partner, however, not only hits those KPIs but values and treats your business as they would their own. They have a seat at the table and are providing your team with valuable insights into the latest market and consumer trends, new innovations and technologies, and ways to optimize your supply chain.
When searching for a strategic partner, it’s important to understand what you will receive from them in terms of communication. Will you receive a dedicated account manager? Do they have an organized plan to help meet your business needs as well as help you grow? A good strategic partner should feel like an extension of your internal team.
You need a partner who understands both your needs and your customers’ needs. They need to stay on top of market trends in order to give your company a competitive edge against your competitors. Find a partner who is a thought leader in the supply chain industry. These are companies who have been featured in the media or industry publications as well as written their own publications on supply chain topics. Researching what providers have said on topics that matter to your business will help you determine if they are subject matter experts in those areas.
One thing to consider is if the 3PL specializes in your vertical market. If so, what does that look like? Organization by vertical market should go beyond the sales team. Ask how their internal teams are structured in order to determine how much vertical expertise your business will receive.
Another great way to know if a provider is an expert in your area is to look at their track record. Ask to see case studies of similar brands in your industry. You can also ask for referrals from other brands who are tackling similar problems your brand is facing.
One huge benefit of working with a 3PL is taking advantage of their network. This is particularly beneficial for e-commerce business since the closer you are to your customers, the faster they can receive your products. When searching for logistics providers, it’s important to ask if they have the capabilities to reach your customers in the right amount of time. How much of the country can their network reach in 2 days or less? Do they have Same-Day delivery capabilities? What are their trade lanes? Are they operating freight forwarding services in the same markets as your manufacturers?
Besides transportation capabilities, a strong network also enhances your fulfillment and warehousing capabilities. Having a 3PL that has warehouses located in clusters or “campuses” enables them to share resources. If one client’s peak season is in the fall and the another’s peak season is in the winter, the labor and equipment can be shared between facilities. This is a benefit to brands because it means they don’t have to invest in a bunch of expensive heavy machinery or hiring and training new staff members.
Also, it’s important that a strong 3PL can offer you options such as network mapping. Will they develop a solution for your brand that is customized to you? Can they determine if you should have one large warehouse or a network of 4 smaller facilities that are geographically diversified?
One of the biggest trends in the industry is working with a provider who can offer companies a fully integrated, end-to-end supply chain - this includes Freight Forwarding, Warehousing and Fulfillment, and Transportation services. By having one strategic partner handle the entirety of the supply chain allows brands full visibility into their products’ journey.
When searching for a 3PL it’s important to look at their capabilities and service offerings to make sure they match yours. A good 3PL is not only strategic but agile. Business goes through peaks and valleys and the best way to be prepared for any situation is to have a partner that is not only a strategic planner but can easily adapt to changes.
By working with a strategic partner, brands receive a customized relationship and services to help them grow. Not all third-party logistics providers are created equal. Some specialize in certain verticals, some offer deeper services in one area or another, and others provide extra, value-added services. Brands succeed when they work with the right strategic partner.
What are some additional services your brand needs in order to be successful? Maybe your business requires:
A sophisticated returns process
Big-box retailer compliance
An expert in winning the peak season
Pop-up warehousing space
Other value-added services that are specific to your brand.
At the rate consumer expectations are changing, brands can’t afford not to have a 3PL invest in innovation. Technology is propelling brands forward and they need a supply chain partner who can support and initiate this growth. One-quarter of supply chain spending in 2018 went to automating fulfillment - specifically manufacturing, distributing and delivering goods at the speed of e-commerce. It’s important to work with a 3PL who has a strategic innovation plan and is actively pushing forward to achieve those goals.
One-quarter of supply chain spending in 2018 went to automating fulfillment.
Robotics & Automation
Robots are no longer a thing of the future. They now play an active role in fulfillment in the warehouse - and they get faster, smarter, and less expensive every day.
In today’s fast-paced e-commerce environment, many supply chain executives face a growing logistics challenge—meeting the demands of direct-to-consumer expectations. Fueled by online shopping, shorter product life cycles and the ongoing influence of the Amazon effect, distribution centers are finding it increasingly difficult to handle large volumes of single-piece orders via traditional picking methods. Furthermore, expedited delivery times continue to require efficiencies in the supply chain—driving operational executives to seek autonomous solutions for order fulfillment.
Watch how one a women’s apparel retailer doubled productivity with robotics.
Automation allows businesses to fulfill orders faster. It connects workflows, eliminates mistakes, improves forecasting, minimizes loss and lets brands see orders across all sales channels. In one operation, adding over 7 miles of conveyance, put-to-light walls and other automated services enabled the brand to increase their fulfillment capacity by 263%.
Radio-Frequency Identification Technology
Radio frequency identification (RFID) technology is also booming. Worldwide, RFID revenue is expected to soar from $4.2 billion in 2018 to close to $12 billion by 2025, with $3.8 billion coming from the retail sector. RFID supports both forward and reverse logistics and track items across offline and online channels. The ability to track every move made by every item means brands have total end-to-end visibility into what’s working and what’s not in your supply chain.
Productivity & Continuous Improvement
Innovation isn’t just about technology, but it also includes constantly trying to do things better, faster, and more efficiently. Every second counts when it comes to fulfillment and distribution. Saving time equals saving money which is why a strong 3PLs should invest time and effort into continuous improvement initiatives. Lean practices make employees more efficient and therefore able to fulfill more orders.
One advantage of working with a 3PL is the shared best practices across different customers. A strategic partner will continually be on the lookout for new, innovative ways to optimize your operation including learning what works in similar operations that could be applied to yours.
When deciding who to work with, one of the most important factors is if the 3PL and the brand work well together. What core values do they share with your own brand? This is a strategic relationship that requires a lot of communication and trust and will only work if both parties are on the same page.
Look at the 3PLs growth strategy and see how it aligns with yours. When the 3PL grows, it means your brand now has access to additional support and services. Many companies have a roadmap for their growth strategy. Ask if they can share some of that with you so you can ensure they are headed down a path that works for and elevates your brand.
Another key thing to look for when determining culture fit is a 3PL’s corporate social responsibility. Are they actively pursuing sustainability initiatives? What certifications do they have? A company that has a strong CSR program will be able to provide case studies on reduced CO2 emissions, waste reductions, and other sustainability metrics. They will also be able to showcase how they are impacting and giving back to their communities both locally and globally.