Outsourcing elements of your supply chain to a third-party logistics provider (3PL) is a big decision, but the benefits of constructing the right relationship can enable growth, unlock new capabilities and flexibility, especially in a volatile world. Knowing how to choose a 3PL provider is only part of the decision, how you engage with them afterwards is what decides whether the value actually lands.
Before selecting a 3PL Provider, it is important to be honest about requirements – current volumes, service requirements and the likely future development of those needs.
How to choose a 3PL provider
Have open conversations with potential partners and be open to their inputs on how their capabilities could shape those needs. Look beyond pallet spaces and rate cards and consider what other services could enable value within your supply chain. A poor process today will remain a poor process when outsourced unless you put in the effort to change.
There will be a time for negotiations, and you will of course want to get value, but before that make sure you are talking to partners that are aligned with your needs.
Alignment is easier to judge with an independent view in the room. Our 3PL outsourcing support covers the full lifecycle: scoping the solution, benchmarking it against the market, sourcing the right partner, then resourcing the integration and putting the measurement in place to manage performance once they are live. We are independent of the providers throughout.
What the 3PL contract needs to cover
The contract discussion needs to reflect the reality of your supply chain. Most likely it will be pitched at certain volume levels but make provisions for:
- Future fluctuations in volume – how will you manage these?
- Changes in channel mix and profiles
- Additions / reductions to service requirements
- Changes in the underlying cost structures
- Commitments to joint improvement initiatives
- IT connectivity and customer service needs
- Governance structures
These conversations should go beyond sales contacts to the operations team in the 3PL who will ultimately be measured on the success and profitability of your account.
Engagement after you choose a 3PL provider
This sets the tone for when the real engagement matters – week by week, month by month, quarter by quarter. Open and direct communications, mutual focus on the key metrics that matter, no surprises and a recognition that there will be issues, but it is how you respond that defines the success of the relationship.
The most successful relationships that we have seen are between partners that understand what the other needs to succeed, where improvements can come from either side, and they are empowered to make it work.
We have also seen circumstances where parties are locked into contractual terms, where every ounce of flexibility comes with a price, and governance becomes a point-scoring exercise weaponised by KPIs.
Which feels like your 3PL relationship? Blink twice if you need to be rescued.
FAQs
How do you choose a 3PL provider?
Start by being honest about your own requirements – current volumes, service levels and where those needs are likely to go. Then talk to potential partners early about how their capabilities could shape those needs, and look past pallet spaces and rate cards to the wider value they could add.
What should a 3PL contract include?
Beyond volume and rate, make provision for volume fluctuations, changes in channel mix, additions or reductions to service requirements, shifts in underlying cost structures, joint improvement commitments, IT connectivity and governance structures.
What makes a 3PL relationship work?
Both sides understanding what the other needs to succeed, open communication on the metrics that matter, no surprises when issues arise, and people on both sides who are empowered to fix them.
Supply Chain Enabled