So you had an idea or a vision and then built a company around it. With a lot of hard work it took off and now you have stable repeat customers and new ones finding your brand every day. You are getting to a point where in-house fulfillment is becoming too much of a time suck. If this sounds like you or your business you are not alone. Almost all great direct-to-consumer brands that are successful reach this point. The point where you are spread too thin and need to spend more of your allocated time towards growing your brand instead of fulfilling your own orders. But what should you look for when evaluating outsourcing your fulfillment to a 3PL? Keep on reading to find out how to choose the best 3PL.
Location
You know how they always say in the real estate market, “Location, Location, Location!” This is pretty much the exact same when looking for a 3PL. There are literally 3PLs in all 50 states, some states obviously with a heavier density. However, there are only a handful of states that make the most sense if you are going for a single point distribution center. The top states for the cheapest transportation in no particular order are Indiana, Ohio, Kentucky, Tennessee, and Illinois. It is no coincidence that all of the states are dead smack in the middle of the country. Lessgistics is centrally located in Indiana which is the ‘Crossroads of America.’ We can reach 80% of the population in two transit days using either FedEx or UPS Ground services.
If you have a partner that has a fulfillment center, say, out of Texas you can expect to have a higher average shipping zone which determines your bottom line shipping costs. The same can be said for a fulfillment center on the East Coast, such as Baltimore. You can expect many more zone 6, 7, and 8 packages (most expensive) with this type of set-up as it is so far away from the South, some of the Midwest, and all of the West Coast. Finally, a common area for 3PLs is California due to direct imports into Long Beach/Los Angeles. While it is wonderful to be able to quickly bring your imported products into their facilities, it can have an adverse effect on your outbound shipping costs. Let’s take a look at this last example.
Shipments out of Indianapolis Zip Code 462-
You can see here how far the reach is for 1,2, 3 transit times which equate to average shipping zones of 2-5
Now let’s take a look at the same type of map with an origin out of 90210 (still memorized from the ‘Beverly Hills’ show glory days #teamdylan)
Shipments out of Beverly Hills Zip Code 902-
Here you can see most of the Midwest, South, and Northeast are 4 and 5 days transits which equate to average shipping zone 6-8.
Simply put, you want your fulfillment center to be located in the middle of the United States, if possible. There is no way to get more central and cheaper average shipping rates.
Communication
The next most important thing to consider is how good is the 3PL’s communication. Granted, when you are interviewing 3PLs you will have a small sample size to influence your decision. However, if you struggle communicating right out of the gate it is a telltale sign that you are going to have problems long-term on the communication side of things. Ask the following five questions to get a feel for how the 3PL treats its customers:
- What does the on-boarding process look like?
- Who at your company would my team have access to directly?
- Will I have an Account Manager?
- How does the 3PL look at their customers?
- How are customer service issues managed?
A common pitfall to be cognizant of when dealing with some 3PLs is the over-sell of communication upfront. Frequently, sales individuals will tell you what you want to hear and promise their communication is unparalleled. At Lessgistics, we always suggest checking with current customers and reading the 3PLs reviews, either on their website or on Google. You can find out a lot about company these days with the vast resources on the internet.
Pricing
A lot of people would list this one as the first and most important thing to consider. However, if you don’t have the right location your fulfillment pricing isn’t going to matter as you will get killed on shipping rates. And if you don’t have a 3PL you can trust on communication why even bother as you will just start with them and drop their services a few months later. If you have the first two matters (location and communication) solidified, then you can move on to pricing.
3PLs pricing structures can be absolutely maddening. You can have charges for receiving, labeling, storage, picking, packing, and shipping and account management. There can also be charges for corrugate, paperwork, and special projects. A lot of times these charges are based separately and it can be difficult to get to a loaded cost per unit. If you get a quote from a 3PL that is difficult to understand it usually is not a good sign. Also, try to avoid 3PLs that have minimum monthly charges. This is a common strategy 3PLs take when dealing with start-ups and other small volume clients. At Lessgistics, we only charge fees based on usage; all of our fees are transaction based.
Expertise
There is no substitute for expertise. You can read all the self-help business books you want, you can go to college and get a degree, and you can decide to try and do in-house fulfillment yourself. Let us save you months and years of frustration by taking this simple advice; hire expertise for your fulfillment. Look for 3PLs that have a leadership team that have a lot of experience in high-volume shipping. If you are running a subscription box look for specific 3PLs that specialize in this area. Not all 3PLs do. If you have a special project like multi-pack creation or poly bagging, find someone that has done this for other customers. The tasks sound simple but if you settle for a substandard 3PL you will get a substandard end product.
Have your list of questions ready when you interview your 3PLs. You will quickly find out who are the pretenders and who are the contenders. In the end, execution will be key to the success of your 3PL partner. If you do not feel good during the Q&A process we suggest bailing. Go with your gut and you’ll find the right 3PL partner for you. Hopefully, this article was beneficial in helping you find the best 3PL. Drop us a chat or email. We would love to talk with you!