How to Choose the Best 3PL Service Providers: 5 Questions to Ask Before You Decide  

With a global revenue of USD 961.8 billion, rising eCommerce, and surging cross-border trade, the global third-party logistics (3PL) industry is in a growing phase. The number of businesses outsourcing their operations for warehousing, distribution, and logistics transportation is increasing, and retailers are partnering with more than one 3PL service provider to unlock flexibility, smart scalability, and amplified reach. 

While the stats and market trends paint a hopeful picture, challenges related to rising transportation and delivery costs, lack of proper staff, consolidated data centers, and unified business management follow closely. This is why, despite having access to a plethora of 3PL service providers, retailers still struggle with critical challenges, such as managing inventory and eCommerce logistics, supply chain visibility, business process improvement, etc. 

Having a robust 3PL network and multiple 3PL partnerships is good, but the crucial link to getting the best value out of your investment as a retailer is an integrated and data-driven management. This is where the majority of retailers fail to make the right decision and then later have to pay in the form of costly integrations, siloed business data, unhappy customers, and revenue plateaus. 

So, then the question arises – How to break the vicious cycle of inefficient logistics, and what are some of the key considerations retailers must keep in mind while partnering with 3PL service providers? 

We explore the answers in the following write-up in a question-answer format.

5 Questions Every Retailer Must Ask Before Partnering With a 3PL 

#1 – Do Your 3PL Partners Offer Managed IT Services?

Managed IT services comprise a suite of technology-driven capabilities that allow retailers and every other stakeholder to control, track, monitor, manage or measure different functions, operations, or entities in the entire logistics ecosystem. For example, order tracking, rider management, customer communications management, feedback collection, and automation-powered business processes. Having a suite of managed IT services enables retailers to check the progress of every shipment and get automated updates about key milestone events. 

They can unlock better visibility over the entire supply chain, leverage these insights for efficient operations planning, and ensure a firm grip over the various functions. Automated invoicing & billings, online document lockers, logistics accounting, payments management, warehouse management functions – the list of managed IT services can vary across multiple 3PLs and is a must-check consideration before partnering with any one of them.

#2 – What Kind of Analytics Do They Offer for Business Intelligence?

Data has become as crucial and indispensable as water – the survival of businesses without having data visibility or actionable insights from advanced data processing is no longer possible. Retailers should ask for advanced data analytics capabilities that allow them to get real-time insights from actual numbers related to multiple stakeholders, processes, assets, and more. 

While predictive analytics empower retailers to plan their inventory and logistical events in an informed manner, prescriptive, diagnostic, and descriptive analytics enable them to manage business risks, identify hidden loopholes, and tackle inefficiencies in an effortless manner. Report generation and data visualization are some other features that make analytics insights consumable for business management.

#3 – Do Your 3PL Partners Offer Asset Prioritization for Dynamic Delivery Demands?

The delivery market is highly fragmented, volatile, and elastic in nature. Consumers are asking for free deliveries, same-day deliveries, 10-minute deliveries, etc., with a real-time tracking link, proactive customer communication, and automated delivery updates. While seasonal shopping rush can leave retailers panting for assimilating resources, dry months can violate their bottom lines in an unfathomable manner.

Having a 3PL partner that offers smart capabilities like asset prioritization, dynamic order processing/clubbing/deliveries, etc., to cater to these elastic demands can put the entire game in the hands of retailers. They can plan the most efficient deliveries and logistical movements and set specific rules for different areas, different types of deliveries, vehicles, etc. Upscaling, downscaling, working with a mixed fleet, and planning for rescheduled or planned deliveries in a cost-optimized manner can help them maintain their revenue streams as well.

#4 – Do Your 3PL Service Providers Use Any Automation for Logistics/Delivery Optimization?

The need for delivery automation is evident and dire. There is no way for retailers to stay profitable while delivering across the diverse and nuanced demands of digitally-powered customers unless they have technology-driven operations. Smart delivery orchestration and automation routines empower them to leverage smart in-built workflows, optimization algorithms, route planning, dynamic delivery planning, and much more to ensure highly efficient deliveries in terms of time, money and fuel.

They can opt for that particular 3PL and that particular vehicle which helps them complete a particular type of delivery in the most cost-efficient manner via the shortest and most optimized route. They can club returns with pickups or deliveries, leverage en route order clubbing, and offer diverse delivery offerings, such as white glove deliveries, same-day deliveries, rescheduled deliveries, etc., to their customers and elevate the overall CX as well.

# 5 – Can They Manage Elastic Business Demands as Your Business Grows?

As the market goes up and down, or the business scales or expands to a new geography, retailers need smart scaling of logistical functions as well. These needs can come in various forms, such as cross-border shipping, warehousing, delivery orchestration in new geographies, distribution or delivery/returns management, and more. Having a 3PL with flexible business offerings, a wide industry connect, and effortless integrations can help retailers expand with minimum disruption.

Further, this expansion must not come at the expense of revenue. Hence, it is important for retailers to ask the 3PL service providers about the flexibility of pricing, volume commitments, shipping, and service bundles in case the business expands.

What Can You Gain by Making an Informed 3PL Choice?

Initially, these questions might seem overwhelming for retailers with legacy business infrastructure, as there might not be many 3PLs out there with such diverse offerings and tech-savvy capabilities. This is where smart 3PL management automation platforms step in. With highly flexible offerings, effortless integrations, AI/ML-powered automation, and optimization routines, and abilities to manage multiple 3PLs and multiple parties via a single integrated dashboard, these platforms can help retailers to:

• Reduce last mile delivery costs by 12%
• Reduce 3PL invoicing errors by 99%
• Increase on-time dispatch by 28%
• Reduce order-to-ship time by 12%
• Increase delivery NPS by 26%
• Reduce shipment returns by 4%

With the smart 3PL selection, AI-based dynamic routing, fake delivery attempt management, real-time customer updates, and highly optimized logistics and delivery routines, retailers can partner with 3PLs across multiple geographies in a seamless manner and always ensure the highest level of profitability and efficiency.