How To Choose And Work With A 3PL Partner
Third-party logistics (3PL) is expected to be worth over $935 billion worldwide by 2020, according to CIPS. This is likely driven by the progression in globalized shipments and the growing need to scale quickly and efficiently without sacrificing quality interactions. In fact, in 2016 75% of shippers reported that 3PL services have contributed to a reduction in their logistics costs; and, 86% said it contributed to enhanced customer service and quality of deliverance.
3PL is growing across the globe as transportation managers look to reduce expenses and improve processes. In response, 3PL companies are improving and refining their offered services to keep up with this demand.
So how do you choose the 3PL that will be the best for your logistics and operations team? How can you create a successful partnership that will encourage growth for your company? Let’s dive into it.
3PL is a broad term that is often applied to various types of transportation contracts. According to the U.S. Bureau of Transportation, 3PL is simply defined as “outsourcing all or much of a company’s logistic operations to a specialized company.” Narrowing this broad definition further, 3PLs tend to specialize in integrated operations of the supply chain, including anything from warehousing to transportation.
Thus, it is important to fully understand the variations of 3PL companies and specialties to find the right match for your organization.
The Benefits of Outsourcing
Outsourcing allows your operations team to focus on your core business processes. With the right 3PL company, you can hand over transportation, warehousing, customs, and other services, which leaves you time, energy, and manpower to focus on the development of your logistics and operations procedures. Furthermore, 3PLs offer scalable and customizable growth to your business by offering the valuable resources and partnerships to which you would otherwise not have access.
In this way, a 3PL provider can offer your company:
Unlike a freight forward that simply moves goods from one point to another, 3PL providers often offer other services aside from forwardings, such as storage, processing, tracking, and more. In this way, 3PL can function like a “one-stop shop” for outsourced logistics.
The Types of 3PL
There are two key types of 3PL providers that you should be aware of when choosing which company is best suited for your needs. Basically, these two categories are broken up into whether or not the provider owns the assets they use for their services or they partner with others who specialize in these specific areas.
Asset-based 3PLs own their own trucks, distribution centers, and warehouses. These tend to be used mostly by large corporations for the high quantity of goods.
It is highly specialized and often comes at a higher price-point. These operations are best for long-term contracts and international transportation. Asset-based companies are good at having a few key clients that they deal with on an exclusive, personal basis.
Nonasset-based are the majority of 3PL providers. These companies do not own their own vehicles or equipment, and they contract out with other trucking companies, carriers, distribution centers, and various warehouses as needed. These operators can partner with a variety other companies, from air freight to truck freight, or even from intermodal marketing to circulation entities. These partnerships provide flexibility and customization of services to their consumers (like you).
Choosing A 3PL Company
Choosing the right provider to outsource to is not a simple task. In fact, choosing the wrong outsourcer could delay processes, expend significant time and money, and damage your bottom line. These contracts between shipper and outsourcer are not to be taken lightly.
So how do you choose the 3PL provider that is right for your company’s operations management? Below are the five questions to consider when researching a 3PL provider.
What are the services that are offered by this company?
Don’t fall into the “fancy language” trap of many transportation outsourcing companies. When you’re looking for a 3PL provider, you want a clear understanding of the services they provide. They could offer a single service or a network of bundled services that manage different parts of the supply chain.
The activities that are most frequently outsourced, according to CIPS, are domestic transportation, warehousing, and freight forwarding. Some other common services include outbound and inbound transportation, customs brokerage and clearance, contract negotiations, and freight bill auditing or payment.
Below is a list of LTX’s offered services and solutions:
• LTL Freight Management
• Data analytics and reporting
• Contract Negotiations
• Freight pay and audit
• Track and trace
• Custom technology
• Personalized customer service
How personalized and customizable are these services?
What is giving you a headache in your operations? The purpose of outsourcing is to alleviate those headaches. Find a company with flexible and customizable services that can grow and scale in tandem with your organization.
Furthermore, does this 3PL provider have strong customer service? 73% of shippers interact with their 3PL every day. Will you be able to have a strong relationship and partnership with this company? Do they care about your growth?
At LTX, we tailor our customer service solutions based on the needs of your business’ operations. Your logistics are our logistics.
Do they utilize a strong data and software system?
Third-party logistics was originally the term given to those transportation service companies that were using the internet to make freight processes more efficient. Your 3PL company should believe that data and technology are still at the crux of the supply chain. In fact, studies have shown that 3PLs using cloud technology are able to help shippers reduce costs, improve visibility, and better regulate inventory.
Your company should offer data consolidation, which is a tool that helps you manage every aspect of your supply chain whether you’re shipping FTL, LTL, parcel, international, or all of the above. Your 3PL should also have a way of tracking, analyzing, and reporting data in a consistent, usable way.
How will they enhance your efficiency?
Ask your potential 3PL their top three ways of enhancing efficiency. What sets them apart from their competitors? They should be able to have a clear answer for you that demonstrates their exact process for taking away your headaches and making your processes more effective.
For example, LTX increases efficiency by 1) streamlining supply chain data with high-quality, updated software; 2) negotiating contracts to save you time and resources; 3) and providing top-class customer service to quickly, consistently, and effectively address your individual business needs.
Of course, you should always compare costs with other 3PL providers and basic freight forwarders. How will your package of services stack up with one company versus another? Remember that a company that charges too little may not have the capacity for delivery as some of the more moderately or higher-priced providers.
3PL Partnership Bottom Line
The final question you want to ask yourself when partnering with a 3PL is simply: do they have your best interests at heart? Do they want to work with you towards mutual, beneficial growth?
Contact the LTX team to see how we would care for your logistics while streamlining your supply chain management!