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Why 3PL? And how to select yours

Mar 20, 2016

What is a 3PL?

A third-party logistics (3PL) provider works with shippers and carriers to coordinate freight and manage operations, including warehousing, transportation, price negotiations and distribution. It is an outsourced logistics service that helps move freight from one point to another. Depending on the 3PL provider and the shipping company’s needs, 3PL providers can handle all of the supply chain tasks or just one part of it. 

3PL part-1-123rf.jpgWhy choose to use a 3PL?                                                                         

Significant industry experience helps drive process improvement, reduce costs and enable growth---all critical aspects to stay ahead of the competition. Additionally, outsourcing logistics functions allows you to focus your efforts and resources on your core business. Partnering with a 3PL provider you can trust can help you grow your business and minimize overhead costs. Selecting the right 3PL is the key to successful results. 

Any business that decides to utilize the services of a third-party logistics company or 3PL will want to be able to trust that company to perform the tasks at hand. No company wants to worry whether its shipments will reach customers on time or at all. Every business wants to ensure that the 3PL company it employs is as concerned with           customer service as it is. A reputable 3PL company is one that treats each client’s customers as if they were their own. 

Preparing to speak with prospective 3PL’s

To get ready for your discussions with prospective 3PL’s look at history. Invoices will contain a lot of the information needed. Know your current volumes, number and frequency of shipments, deliveries, and warehousing requirements (if any). You’ll want to determine your current estimated costs per mile and hundred weight. Also, consider your current freight accounting and audit performance as well as existing carrier relationships. Be sure to formulate clear goals and improvements or extensions you want based on your present situation. 

Selecting your best 3PL

Selecting the right 3PL provider for your business means more than just picking a company that can do what you need at a price you can afford. When you allow another company to manage your logistics, you’re making that outsider a part of the very heart of your business—a decision that makes excellent returns when you choose well, but might prove disastrous should you choose poorly. Here are 11 factors to consider during your selection process:

  • Service
  • Experience
  • Technology
  • Financial fitness
  • Equipment (or access to equipment)
  • Flexibility
  • Costs
  • Customization
  • References
  • Culture
  • Penalties 

In order to get the most out of a third party logistics provider, one must have a firm understanding of what that company can and cannot do. Ultimately, you’ll have to look carefully at what a company does wrong, what it does right, and what you need from it as a 3PL provider. Make your decision after carefully considering all the facts.

In our next post we will discuss each of these eleven factors in more detail along with how to effectively maintain a productive long-term relationship with the third party logistics provider you select. For additional assistance feel free to contact American Group at 1-866-553-6608 for a quote or to learn how we make Shipping.Simplified.