Before we investigate how to choose the right 3rd party logistics provider, let’s do the groundwork… what do we consider a Logistics company? Logistics is actually a process of planning and executing the efficient transportation and storage of goods from the point of origin to the point of consumption. Many companies take part in logistics services, getting that product from manufacture to consumption.
So, the question that would be better asked, is there something called a logistics provider? The answer is yes – there is a company that provides logistics – the fulfillment company or the 3PL – 3rd Party Logistics providers.
The goal of the 3PL is to meet the requirements of a client in a timely, cost-effective manner. The question of which is the best 3PL for your company can be fine-tuned with this question – how well will the 3PL partner meet your requirements? Partner is the operative word here, and we will return to it.
Regarding logistics service providers, there are both 3PL and 4PL companies. Examples of third-party logistics providers are a 3PL partner that receives or arranges for the transportation of manufactured products to one of their locations.
Then they warehouse the product, receive the orders, pick and pack off the shelf, sometimes assemble the product, package the product including custom packaging, and fulfill the order by shipping it to the customer.
Also, they can possibly provide customer service and a full-service back office for the company including accounting.
Some 3PLs also handle returns including repair, repackaging, or disposal that fits the manufacturer’s requirements. A 4PL will outsource to a network of 3PLs or fulfillment centers for all those services. For a business partner relationship, the 3PL is preferred.
It is understood that finding the right 3PL can be a daunting and expensive task that requires industry knowledge. The potential partners should assure that there is a perfect match, as much as possible, before the onboarding goes live.
What Should Your Logistics Provider Provide
- eCommerce/D2C/Direct to Consumer Ability to handle a web catalog with thousands of SKUs.
- Wholesale/B2B/Business to Business Delivering and routing to everything from Big Box to Mom and Pop.
- Order Management Processing systems that support order management as well as warehouse management.
- Inventory Management A very tight focus on inventory control and accuracy.
Order fulfillment and distribution services are the core service offerings of the 3PL. The right partner will have robust systems technology, modern and scalable operating facilities, an excellent and well-treated labor force, experienced management personnel, plus a strong focus on inventory control procedures.
These are factors needed to support the picking, packing, and shipping of orders to business and/or consumer destinations. Look for a 3PL with a proven record of getting inventory items shipped accurately, routed properly, and delivered on time.
A 3rd Party Logistic Provider as a Shipping Partner
Concerning shipping, look for a 3PL that is knowledgeable about rate shopping among third-party logistics shipping vendors, considering the package dimensions, weight, and days in transit to find the best option and the best price. You want a company that has great relationships with carriers. If the company has warehouses on both coasts that is a big plus.
Shipping is all about price and service. Your ideal 3PL will find the freight shipping services best suited for your needs at the lowest possible cost. This is where the word “partner” begins to have meaning.
Your 3PL should take on the role of operations arm, performing shipping fulfillment services and finding solutions as would a partner, including auditing transactions to make sure you are not charged for invalid fees and you pay only for packages that arrive within the guaranteed delivery time.
Value Add Services (VAS), Kitting, & Returns Management
Warehoused products are not necessarily ready to ship out in the same way in which they were shipped in. Does your company need VAS — value add services? You will need a fulfillment partner able to rework products.
This re-working might include labels for international sale; price and UPC/barcode stickers; hang tags and hangers for garments; quality control/quality assurance inspections; repair work; product subassembly and final assembly; shrink wrapping, bagging, and sealing; gift wrapping,
kitting, and other requirements. For kitting and assembly, your 3PL should be able to implement effective assembly lines with state-of-the-art equipment.
Your 3PL provider should have a specific returns management and reverse logistics services team assigned to deal with returns as you stipulate, quickly, efficiently, and cost-effectively. This should include operating software that can be integrated with your systems.
If your product requires refurbishment, testing, repacking, replacing components, and/or checking for a broken seal, make sure the 3PL has a team able to follow documented guidelines.
Back Office Support & Customer Service
An ideal 3PL will have a highly trained client services team to respond to you, a highly trained customer services team to respond to your customers, and EDI retail routing.
A full-service 3PL will provide back-office support for companies that would like to outsource business processing. This is another case where 3PL will work as a business partner, collaborating closely with you.
The 3PL will provide an experienced team to manage administrative activities, including:
- Building customer profiles and prioritizing accounts.
- Order entry
- Accounting services
- Financial reporting
- Operational reporting
- Factor management
- Inbound customer service
- Operating systems
- Operations support
- EDI management and order routing.
- eCommerce development
- All methods of payment processing.
- Sales rep support and commission payments.
- Inventory allocation management
- Other back-office functions.
You Want the Best in Fulfillment Technology
Best of breed in fulfillment operations would be data integrations with clients, client portal, and reporting as if they were an operations partner.
Your chosen fulfillment company must have an experienced in-house IT Team. The fulfillment industry is complex, and you need the help of skilled programmers. There should be a balance between the 3PL’s fulfillment expertise and their cutting-edge technology. There must be
efficient and highly functional operating technology for order fulfillment services and inventory control. Technology that will handle the full scope of your needs, from pre-sale to post-order, efficiently and cost-effectively comes with the best 3PL logistics providers.
What to Look for Regarding Pricing
Pricing will vary from 3PL to 3PL, making comparison pricing difficult. Your best choice among 3PL providers will not have set prices but will determine prices based on your needs.
Several things have to be investigated and determined before onboarding, or as a part of the onboarding process. The fees will be customized so let’s look at what needs to be evaluated.
Setup, Receiving, and Pick & Pack
Setup Fees
Setup fees are typically a one-time payment. The setup or onboarding process should be in-depth and detailed depending on your requirements. This process is vital and when done properly it lays a strong foundation for a partner relationship with your 3PL.
Things to examine will be Client Service setup, IT integrations, and Operation facility configuration and training.
Receiving Fees
This is when the 3PL accepts your products in their warehouse, validates, inspects, and in some cases provides carton labeling services. Inventory accuracy is critical to you and the fulfillment company.
Your 3PL may charge an hourly rate, but you could also be billed by carton, pallet, unit, and/or container.
Pick & Pack Fees
These fees cover the task of employees picking and packing orders for your product, labeling, and preparing it for shipment. There is a significant difference in fees between orders that are shipped to customers B2C or other businesses B2B.
If the order is a B2C there are standard transactional rates. If your company ships B2B make sure that your 3PL is equipped to handle this process. B2C and B2B orders generally have different transactional pricing.
Storage, Kitting & Assembly, and Materials
Storage Fees
Storage fees include SKU count, carton dimensions, and item quantity per carton. Fees are charged based on the amount of square footage your product occupies. You can expect to pay more for temperature control.
Look for a 3PL partner that does not charge peak-season storage fees.
Kitting & Assembly Fees
You may have special kitting or assembly needs. If you have any of these projects, you will need to work with the 3PL to decide how to approach fulfillment.
3PL costs for kitting and assembly are quoted on a cost-per-kit basis.
Materials Fees
This means fees for packaging materials. Packaging materials can include everything from custom outer cartons (the shipping box or shipping bags), inner carton packaging, and cushioning.
Packaging material, whether standard or custom, is not typically included in fulfillment costs. You may want to see if your 3PL uses eco-friendly packaging.
Returns, Outbound Shipping, & Customer Support
Returns Management Fees
Chances are your company experiences product returns. Returns management is usually an add-on to the fulfillment cost and can be billed hourly or per unit. Make sure that your selected 3PL has the technology, dedicated teams, and capabilities to handle your returns.
Outbound Shipping Fees
Shipping costs vary based on the size, weight, destination, carrier, and service level of a packed order. Make sure that your 3PL negotiates carrier rates based on shipping volume – the more they ship, the bigger the discounted rates.
This is one of the biggest cost advantages of using a 3PL provider. Outbound shipping will often be the largest fulfillment cost on your monthly invoice.
Customer Support Fees
You may need some additional services performed to keep your account functioning smoothly. It is typically added to your monthly invoice as a monthly flat fee and covers administrative costs such as:
- B2B retail routing
- Handling customer service inquiries.
- Launching special operational projects.
- Setting up new order channels.
- Other incidentals associated with fulfilling your orders.
Are you Ready to Choose the Best Third-Party Logistics Provider?
As you can see, there is a lot involved in finding the right 3PL partner for you and onboarding successfully. You have located a 3PL provider offering the logistics services you need – transportation, warehousing, picking, packing and shipping, and so on. As you begin onboarding, you will need to create a detailed project plan.
During this phase, a timeline will be established leading up to and including a few weeks after the go-live date. Be prepared for implementation meetings and weekly reviews of item execution.
How Will you Benefit?
Given that the movement of goods is what drives cash flow, it stands to reason that choosing the right 3PL provider will impact your company’s bottom line for better or worse. It’s best not to leave that impact to chance.
There are major benefits of partnering with the right logistics provider:
Visibility
Working with a top-notch partner will afford you much greater visibility into the supply chain. It should enable you to better control costs, tease out efficiencies, spot supply chain management problems, conduct demand planning, and gain insights into opportunities.
Reduced Overhead
Your 3PL partner will enable you to reduce overhead in areas from cutting shipping costs to shrinking how much warehouse space you need by proactively controlling inventory levels.
Satisfied Customer
An excellent customer experience drives repeat sales. By delivering orders accurately and quickly, you improve the customer experience which in turn increases brand loyalty and future sales.
Loss Prevention
Your 3PL will help you prevent loss with true inventory accounting, so you know exactly how much stock you have on hand at any given time. You can also track movement and current location, so stock won’t be misplaced or diverted without notice.
In addition, by ensuring optimal storage and transport conditions, such as temperature and moisture management, spoilage and damage will be prevented.
Healthy Expansion
Demand forecasting supports expansion by realistically calculating inventory needs and ordering, transporting, and stocking accordingly. Further, best practices help you scale to fulfill customer orders on time.
Competitive Edge
Your company will acquire new buyers by delivering orders correctly and on time. This is a foundational element in the customer experience and is key to repeat orders as well as a solid brand reputation.
Having the right 3PL provider will help you consistently deliver on promises and sharpen your competitive edge.
Is There Anything Else you Want in Your 3PL Partner?
There is one more thing you could consider, related to the goal of a Better World – look for a B Corporation, knowing you are partnering with a company that has decided to be the change we want to see in the world.
Ask, how does your company show concern for the well-being of employees? Or, what is your company’s relationship with the community? Also, does your company take steps to protect the environment?
AMS Fulfillment is a 3PL Partner that fits the bill on all of the requirements we’ve mentioned above in this writing, in addition, AMS is a Certified B Corporation – one of a special few among 3rd party logistics providers.
AMS has a genuine mission to ‘do good’ as a business, so the success of this 3PL has as much to do with helping individuals develop skills and advance in their careers for the well-being of themselves and their families, as it does with earning profits. The company also believes in being earth-conscious and they uphold responsibility for earth-friendly practices.
What, Exactly, Does it Mean to be a Certified B Corporation?
A 3PL, such as AMS Fulfillment will uphold and support the larger supply chain by receiving, warehousing, assembling, packaging, and delivering the right products at the right time, reducing costs and helping retain customers through accuracy and efficiency. All of this is accomplished through dedicated employees, highly experienced management, excellent facilities, and a comprehensive information system.
B Corps are for-profit companies dedicated to using business as a force for good. B Corps meet the highest standards of social and environmental performance, transparency, and accountability to their stakeholders. B Corps use the power of business to help solve our most pressing global challenges. Unlike traditional companies, B Corps are legally required to consider the impact of their decisions on all stakeholders: clients, workers, communities, and the environment.
B Corporations focus on reducing environmental impact, creating a diverse workforce, developing employee skills, improving conditions for people in the communities, and serving clients as a partner. For clients, employees, the community, and the environment, AMS contributes to the betterment of the world as a B Corporation.
Going Green vs Earning Green
As a fulfillment company, AMS is in a unique position to ‘go green’. They do this by choosing packaging materials and box sizes that are earth friendly and, of course, by recycling.
Reducing the use and volume of harmful waste generated through material selection, production process or product design is something they encourage clients to follow.
Clients Play a Role in the Success of AMS
AMS can do the things that they do as a B Corp and Social Enterprise because of their clients. Employees go to work each day knowing that their success is fully dependent upon the success of the clients, and they are focused on driving success for the clients by sharing their knowledge, finding ways to save on costs, and fulfilling orders in a consistent, timely, and accurate manner.
Contact Us at AMS Fulfillment as the Right Logistics Provider!
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