How to Choose a Third-Party Logistics Provider

There are three main scenarios in which your company needs to choose a third-party logistics provider. First, the decision has been made to transition from handling all or most of your logistics in-house. Second, you are forced to choose another third-party logistics company (3PL) due to issues with the current supplier. And, third, when you need services that the current supplier does not provide.

In all cases, you have the same problem.

Selecting a Third Party Logistics Provider Best Suited to Your Needs

There’s no denying the acceptance and growth of outsourcing some or all of your supply chain logistics to a 3PL. The following are just some of the statistics reported in the 22nd Annual Study of the State of Logistics Outsourcing.

73% of 3PL users (shippers) and 92% of 3PLs agree that 3PLs offer new, innovative ways to improve the effectiveness of logistics
81% of users and 98% of 3PLs agree that using 3PLs contribute to improving customer service
61% of shippers indicated that they are increasing their use of third-party logistics, versus only 28% of shippers who are returning to in-house logistics management.

Criteria to keep in mind when choosing a third-party logistics company.

1. Different 3PL Business Models

There are three main types of 3PLs

Asset-Based

Asset-based 3PLs own the vehicles, warehouses and management systems they use.

Management-Based

Management based 3PLs offer logistics systems and management expertise, but generally, use the services and assets of other 3PLs.

Integrated 3PLs

Integrated 3PLs use a combination of their own assets, expertise and systems, and those of other 3PLs as needed.

2. Choose More Than One

Different types of 3PLs can offer different efficiencies. Also, in emergencies or with short notice, a single 3PL may not be able to provide the required services. Having multiple relationships can make the switch to a different provider smoother and easier. But don’t go overboard. Research up to three providers.

3. Assemble an In-House Evaluation Team

Outsourcing logistics affects many more areas of your enterprise than shipping and receiving. An evaluation team can include representatives from your supply chain management, IT, sales and marketing, purchasing and finance departments.

4. Research Each Company

3PLs come in all shapes and sizes, and many may not be what they seem. Regardless of why you are outsourcing, you need a stable, trustworthy partner. Research the candidate company’s payment history and financial stability. Look into their client list for proof that they can do what they claim. Ask for and contact reliable industry references.

5. Seek Out Flexibility

If there is one constant in the third-party logistics sector, it is a disruption. Everything including the availability of equipment, weather-related issues, technological advancements and personnel availability can affect a 3PLs ability to deliver. You also need a provider who can scale with your business, both during expansion and downsizing.

If you have any questions about how a third-party logistics company can help your business, please contact us here at PiVAL.