If your business supplies goods to customers, it’s part of the supply chain. Therefor choosing the right 3PL partner has never been more essential.
Despite unprecedented recent challenges, supply chain analysts say many 3PLs qualify as essential critical businesses. Without them, the businesses that rely on their distribution systems simply can’t survive.
Selecting the right logistics partner in a crisis has never been more important. You may even need to consider multiple 3PL partners to mitigate risk if your products are diversified.
3PLs receive new inventory from manufacturers before shipping it to consumers. They can also handle retail distribution and returns. Ultimately, they deliver your orders with an out-of-box experience.
When should you enlist a 3PL?
With social distancing forcing some 3PL employees to work remotely, a 3PL partner that is efficient with automation and paperless warehousing is a good bet. Looking for those that began their digital transformations before the pandemic may be in a better positioned to service businesses and deliver your preferred customer experience.
Waiting until you’re overwhelmed by order growth isn’t a smart move. By breaking fulfillment promises you make to customers, you damage your brand. It also prevents you from being wholly focused on growing your business.
These three key questions will help you determine whether you need a 3PL:
Are you fulfilling a significant number of orders per day?
Calculate the costs of a potential partnership with a 3PL to stay fluid. Likewise, estimate the growth potential—opportunities you’re not currently able to pursue–by outsourcing fulfillment.
Are you running out of storage space for inventory?
Sometimes brands forget to include holding costs in their fulfillment expense calculations. Compare your current storage expenses with estimates from 3PLs. See if bundling costs with outsourced fulfillment is a better value.
Can your business’s infrastructure cope with the demand?
If you’re expecting a sustained spike in order volume—not just flash sales or promotions—estimate the costs and overhead necessary to meet demand. Compare with the costs of outsourcing fulfillment.
Types of Top Level 3PL Providers
The size and specialization of your business matters. Some 3PLs may only serve certain segments of the supply chain, or specialize in one or two areas. Larger established firms offer end-to-end execution, integrate seamlessly, but full service comes at a price.
Full-Service 3PL Providers
COVID-19 has made clear the importance of having real-time inventory visibility. The pandemic has also put efficiency in greater focus. Not only is knowing your stock levels a critical metric, so is operational efficiency and logistical considerations – does shipping inventory from the location closest to the customer actually show a cut in shipping costs?
Full service 3PLs offer:
- Inventory intelligence
- Brand the fulfillment experience
- Easy integration
- Same-day fulfillment
Warehouse and Distribution Type 3PLs
Warehouses that distribute are the most common type of 3PL – storing, shipping, and handling returns. Innovative warehouses can help you offer an Amazon Prime-like type of shipping in as little as two days. If you’re expanding aggressively, international warehouses can help build a global supply chain.
The best warehouses act as trusted advisors to their customers by offering product fulfillment workflow best practices. Especially with COVID-19’s impact on order volume.
When considering a warehouse solution, evaluate the following criteria:
- Warehouse network
- Shipping carrier rates
- Daily cutoff time for fulfilling orders
- Delivery service levels
- Management tools
Transportation Based 3PLs
A pandemic will spotlight how crucial it is to have a single point from which you can track orders worldwide, in real time, and automate delivery notifications.
Transportation-based 3PLs move goods between locations in-between locations. As an example, they might transport inventory between the factory and your warehouse, or you and your retail buyer.
Consider the following factors when choosing a transportation provider:
- Origin location
- Destination location
- Shipping methods
- Service levels
- Pricing and discounts
Specialized May Be Better
Along with these top level types of 3pl services, there are a number that specialize on specific services, and combine select services such as distribution, or shipping and receiving among others.
Depending on the size of your business and unique needs, a specialized provider may be your best choice.