By Jake Rheude, Red Stag Fulfillment
Choosing a 3PL is tough because they become a silent part of your operations that can make or break customer relationships and revenue opportunities. When a 3PL fails, your business can too. So, if you’re considering a switch in 2023, ask about the 3PL’s health and outlook. Here are a few to get you going.
How Did They Invest In 2022?
The past few years have been tough, and the industry has swung wildly between growth and downturn. In 2022, many companies considered or started large layoffs and reduced warehouse space. While you’ll want to know about a 3PL’s changes during 2022, it’s good to ask how the company invested in growth and the future to make 2023 a success.
Were they only pulling back? Did they not add any additional capacity? Is the staff down? How has this impacted their fulfillment footprint?
Companies that invest in growth during hard times tend to do better faster and even improve their customer base in the following year compared to companies that don’t invest. Ask how 3PLs invested in winning your business and protecting your sales.
What were their accuracy and on-time rates?
Low order accuracy rates and consistent delays in shipping hurt eCommerce businesses. They’ll upset customers and lower satisfaction rates, making it harder for you to generate recurring revenue. The worse your fulfillment, the more you must continually spend to find new customers.
So, ask what kind of accuracy and on-time rates the 3PL guarantees and how well they did in 2022. Get specific metrics around these capabilities. Then ask how they are addressed in your SLA (service-level agreement). The SLA should include provisions or benefits for you if the 3PL doesn’t meet the rates they promise.
How Much Capacity Is Available, And How Has This Changed?
You want to learn how much room a partner has available and what today’s availability looks like compared to last month and last year. Are they building more physical space and racking? Do they have a lot more available space but haven’t expanded their buildings? What is their expansion plan for 2023?
The goal is to understand the health of their business and how they’re approaching the near future. Uncovering how recently they completed their last upgrade or capacity expansion also can help you gauge the strength of a 3PL — comparing construction to scale versus trying to fill a lot of empty space.
How Are Their Carrier Relationships?
Carrier relationships give you a good idea about the general health of a 3PL. You want a partner who has relationships with multiple national and regional carriers and speaks positively about those. 3PLs should be high-volume shippers to secure better discounts on carrier rates. At the same time, healthy relationships also help you protect access to capacity when the next crunch happens.
Ask about how the 3PL splits volume between carriers, if you use their shipping accounts or yours, and if they secure any specific deals. Custom agreements can help when they address your needs.
What’s Your Experience With Products Like Mine?
Building on the carrier question, you want to ask about products like yours. The 3PL should be structured to receive, store, pick, pack, and ship goods like yours. You want to find a partner with the existing equipment and space to limit shrinkage and keep your goods moving quickly. For heavy items, that experience can mean forklifts and large racks, while small SKUs might need a complex set of slots to fit many items in a small space.
Circle back to carriers here, too. Ask if the 3PL has negotiated deals that benefit you directly based on your products. Heavy goods, for example, will want a better rate on DIM weight calculations. Or even very small reductions in residential fees can add up significantly if you ship a lot of products.
Round out the conversation with a focus on products like yours so you can evaluate if the other elements and advantages they tout actually apply to your business.
About The Author
Jake Rheude is the Vice President of Marketing for Red Stag Fulfillment, an eCommerce fulfillment warehouse that was born out of eCommerce. He has years of experience in eCommerce and business development. In his free time, Jake enjoys reading about business and sharing his own experience with others.