5 Things to Consider to Ensure an Effective 3PL

Third-party logistics (3PL) is an increasingly popular business model, allowing companies to outsource their logistics needs to a specialized provider. As 3PL providers are responsible for the management and execution of a company's supply chain, it is important to ensure that the right 3PL is chosen to ensure effective results. Here are five things to consider to ensure an effective 3PL relationship:

1. Technological Sophistication

It can be difficult for a 3PL to swiftly adapt to customer requests and change their processes due to the complexity of managing multiple clients. To ensure the 3PL is keeping up with the current trends in technology, it is important to understand what percentage of their net revenue goes towards investing in technology. 

Additionally, ask the 3PL what percentage of their IT budget goes towards developing or utilizing new applications or customer-focused functionalities. Finally, make sure the 3PL's systems are compatible with your own automation and order routing tools and any CRM or accounting requirements.

2. Flexibility and Scalability

To keep up with the evolving needs of businesses, a 3PL needs to be flexible and can scale up or down depending on the company's requirements. The 3PL should be able to adjust to the business's current and future needs and keep up with the expansion. 

It is also important that the 3PL can handle peak times such as the holiday rush for retailers. They should be able to respond quickly to the company's demand while, at the same time, being able to reduce costs after the peak season has passed. A 3PL can better understand the company's planning, forecasting, and production needs and provide better services and support by forming a close relationship with the client.

3. Business Intelligence and Solutions

A 3PL's value goes far beyond just IT. Are they helping you stay current with the latest industry trends and advancements? Are they helping you connect with other shippers and experts in their network? Are they providing you access to many technology providers and resources? Do they offer opportunities to learn and network with other professionals? Your 3PL should be invaluable in helping you stay informed and efficient.

4. Risk Planning

It is important to understand how your 3PL partner is prepared to handle any possible supply chain disruption, as it can harm your business. Ask your 3PL partner about their plans in case of any disaster, lack of labor, technology outages, transportation problems, or any other risks that may be specific to your product. Ensure that the 3PL partner is adequately prepared for any possible disruption, which could greatly affect the bottom line.

5. Financial Stability

Before partnering with a 3PL provider, assessing their financial stability is essential. Are they capable of weathering significant disruptions? Have they the resources to invest in their own operational capabilities and the customer service you require? Are they able to take advantage of new technologies to improve your business? 

A 3PL that is financially sound will have the necessary resources to support your business during challenging times and to pursue advancements that will protect and enhance your operations. An important indicator of this stability is their cash flow; thoroughly research this before entering into a partnership.