Navigating The Wild West

Howdy folks. Back at it with our 2nd newsletter. Thanks to everyone who subscribed over the last few weeks. Y’all are great people.

Today’s topic will be centered around choosing your spouse, I mean 3PL partner.

Selecting a 3PL is a long term marriage – it's about finding the right match, not just settling for the first one that winks at you.

I often see brands view their 3PL partner as something they can easily discard and find a new one.

This thinking is ass-backwards.

If you are a brand, it can feel quite overwhelming if you don’t know where to start. Welcome to the maze of choices, where every turn is a sales pitch and every dead end feels like a missed opportunity.

By the end of today’s piece, you should hopefully walk away with a bit more peace of mind.

Now, let’s get into the granular specifics around how to find the best 3PL partner for YOUR brand.

Understanding Your Needs: The Foundation

Would you go to the grocery store without a list?

(I mean you can, but that would be silly and probably lead you to overspend. Also, don’t shop while you are hungry, I made that mistake too many times)

Too many times, I see brands go and start finding a 3PL without doing true introspection into their own needs.

Operational Needs

Start by looking at your SKU catalog.

Are you dealing with a variety of products or a few? This isn’t just about volume; it’s about variety, turnover rates, and those pesky SKUs that always seem to play hide and seek.

Look at the weights of your products.

Do you have certain products that need special handling or storage needs?

Do your orders need to have any sort of custom packaging?

Then there's the geographical factor. Where are your customers clustered? If they're spread out you need a 3PL with a network to match.

Think of it as trying to date someone who lives 3 time zones away – not impossible, but definitely challenging.

Then think about your current customer base. Where are they located?

Do you want a 3PL that has only a single warehouse? What about a bi-coastal presence?

Do you need multiple locations?

More importantly, do your customers care about whether they receive their order in 3 versus 5 business days?

What carriers do you currently ship with? Do you want the same carriers?

Do you favor certain carriers over others or do you just care about the time in transit?

You should be asking yourself all of these operational questions as you think about the operational must haves versus nice to haves for your brand.

Technical Needs

What type of integration do you think you will need based on your sales channels?

Will a simple “plug and play” integration work?

Will you need a custom dev team to help do the integration for more complex setups?

What types of information do you want to extract from your 3PL?

Communication Needs

How do you best communicate internally with your team? (Slack, email, text, phone call)?

Are you expecting something similar with your 3PL provider?

Once you have your own house in order, only then should you start having conversations with 3PL’s.

Starting Your Search

Finding the right 3PL is exhausting. There are too many to choose from.

Typical advice would be to google search “best ‘x’ provider in ‘y’ location.”

This will yield very poor results.

If I were you, I would do the following:

• Use a 3PL consultant

  • The love matchmakers, as I so eloquently put it. These folks are truly motivated to find you the best partner based on your profile. The only horse they have in the race is your happiness.

    • Joe Spisak & Dan White - Fulfill.com 

    • Matt Hertz - Secondmarathon.com 

• Facebook & Reddit communities

  • You can get candid feedback from complete strangers! This could be horrible, or, in my opinion, a blessing.

• 3PL case studies

  • This is a sign that their specific relationship is going well (for the most part)

  • Try and find the teams contact information and have a thoughtful conversation on why things are going well.

• Linkedin

  • Unlike Twitter (I refuse to call it X) - people are quite accommodating, polite & helpful.

  • Try making a post and see who responds in the comments and the DM’s.

    • You will absolutely have sales reps at 3PL companies reach out to you in both. Be prepared.

Once you have a shortlist of providers (3-5) - its time to have in depth conversations with them.

Pro tip - In the most ironic statement I will most likely make in any newsletter, please heed this warning.

It's easy to get swayed by a slick sales pitch. Every 3PL will claim they're the best, but it's your job to see through the fluff. Look for substance over style – data-driven results, and specific examples of how they've solved problems similar to yours.

(I was pretty good at my job, but I was only as good as the amazing colleagues in operations, customer success, marketing & leadership to help close a partnership. Always win & lose as a team, 3PL’s)

Get in the weeds

Now it’s time to have those in depth conversations. If this process takes several weeks, that is perfectly fine. That is normal and should be expected for what should be one of the most important decisions of your brands existence.

This next few sections will outline both objective and subjective metrics you should be covering in addition to questions ask 3PL providers.

Objective Metrics

• Pricing Structure

  • Most of the time brands will have these categories of charges:

    • Receiving

    • Storage

    • Outbound

      • Pick Pack

      • Shipping

    • (Some 3PL’s separate their pick and pack costs from shipping while others do a blended all in model. There are pros and cons to both.)

    • VAS

  • Potential Additional Fees

    • One Time Implementation & Onboarding

    • Monthly Account Management

    • Integration / Platform Fee

  • Make sure you are getting a written proposal along with shipping rate tables.

• Transportation Metrics

  • Transit Time - Measure the average time it takes for the 3PL provider to deliver goods from their to the end destination.

    • Question to ask - “ How do you handle expedited shipping or same-day delivery requests?”

  • Carrier Utilization - Analyze how efficiently the 3PL utilizes carriers. High carrier utilization can lead to cost savings.

    • Questions to ask- “ Can you provide insights into your carrier selection and optimization process?”

    • “Can we use our shipping account?”

    • If using 3PL shipping accounts, “can we choose specific carrier options or does it have to be a blend?”

    • “How do you negotiate and manage carrier contracts to ensure cost-efficiency?

• Inventory Metrics

  • Inventory Accuracy

    • Questions to ask - “What measures do you have in place to maintain high inventory accuracy levels? (This will give you insight into their SOP’s, Quality Assurance, etc.)

    • “How often do you conduct physical inventory counts and reconciliation?”

• Order Fulfillment Metrics

  • “What are your processing SLA’s/ cutoff times?”

  • “How do you handle surges in order volume during peak seasons?”

  • “How do you manage backorders”

• Warehousing Metrics

  • Determine how efficiently the 3PL utilizes warehouse space. High utilization can lead to cost savings and reduced storage fees.

    • “How many warehouses do you operate?”

      • If the 3PL has multiple, determine whether you want to distribute inventory across multiple warehouses. Then ask who will help in the load balancing efforts?

  • Are they owned or leased warehouse space?”

    • “What % of the warehouse team work for your company versus another (if 4PL model)?”

  • “How do you optimize warehouse space and ensure efficient utilization?

  • “Do you charge storage fees by pallet/shelf/bin or by cubic foot?”

  • “How will you accommodate our storage needs as we scale?”

• Technology Metrics

  • Data Security

    • Check the 3PL provider's data security measures to protect your sensitive information and ensure compliance with data privacy regulations

    • Question to ask - “ How do you protect our sensitive data and ensure compliance with data privacy regulations?”

    • While the risk of a breach is relatively low, cyber attacks are very real and can shut down operations which cause an immediate negative impact to your brand (i.e Expeditors 2022).

•  Customer Service Metrics

  • Measure the average time it takes for the 3PL provider's customer service team to respond to inquiries or issues. Quick responses enhance communication and problem resolution.

  • Questions to ask:

    • “What is your average first response time for customer inquiries and what is the length for full resolution?”

    • “Will I have an account manager for my account?”

      • If yes, ask how many accounts your account manager works with. This will give you a sense of their bandwidth.

    • “Do you provide a slack channel for each brand? Or what is the most effective way of communicate to resolve issues?

    • “Can you share your historical CSAT scores or customer feedback data?”

    • “How do you actively work to improve customer satisfaction?”

• Scale & Flexibility

  • “How do you plan for and handle increased demand or changes in our business scale?”

    • Folks, please give sales projections based on SKU velocity to whoever you choose as your 3PL partner. You will thank me later.

  • “Can you accommodate seasonal fluctuations without disruptions?”

Subjective Metrics

While not quantifiable, these metrics should hold equal weight in your decision making process.

•  Culture Fit

  • How a company acts during the sales process may be a clear indication of the types of people they hire as a part of their organization.

  • Ask 3PL’s to describe their company’s core values and culture.

    • Go deeper, ask “ how do you ensure alignment between your culture and the values of the brands you work with?

  • Communication & Collaboration

    • "How do you foster open communication and collaboration with your clients?”

    • “Can you share examples of successful partnerships where cultural alignment played a significant role?”

  • Conflict Resolution

    • There will be conflict, I can assure you of that. It is less about whether there will be but rather how the 3PL handles it.

    • Ask “can you provide examples of past situations where conflicts were resolved to the satisfaction of both parties?”

• Innovation & Technology

  • How well can 3PL’s stay up to date with trends and innovations?

    • “Can you share instances where you implemented innovative solutions to enhance a client's supply chain?”

    • “Can you provide examples of how you've adjusted your services in response to changing market conditions?”

    • “What processes do you have in place for continuous improvement and optimization of logistics operations?”

    • “Do you encourage client feedback and use it to drive improvements in your services?”

• Problem-Solving & Client-Centric Approach

  • “How do you identify potential supply chain issues before they become critical problems?”

  • “Can you share instances where you proactively addressed challenges to ensure seamless operations?”

    • I am highlighting this question because so often 3PL’s are reactive by nature. There is a real opportunity to carve out your differentiator as a 3PL provider by proactively addressing issues before the customer notices. No news is typically good news.

    • If your 3PL could be clairvoyant, that is something you put considerable weight into.

  • “Describe your approach to putting the client's needs and objectives at the forefront of your services.”

Okay, that was a lot to digest.

However, this is the level of detail you should be going into with 3-5 providers in order to get a holistic picture of what the future would be like working with them.

Once you have dwindled down the list to 2 finalists, it is time for the final stage.

Client references and warehouse tours.

Candid Conversations & Warehouse Walkthroughs

You are almost there! Weeks (or months) of hundreds of emails, zoom calls and phone calls. The finish line is just out of grasp.

Now its time to have 3PL’s put their money where their mouths are.

It is time to get a solid 2-3 client references per 3PL.

Caveat, the potential 3PL will be setting you up with a client that is happy with their services. It could be a slightly biased reference. That is a double edge sword, in my opinion.

Anyway, I digress.

They are still vital conversations to have. Here is why.

During the procurement process (aka sales process), 3PL providers often make various claims about their services, performance, and client satisfaction. Client references allow you to validate these claims by speaking directly with their current or past clients.

Talking to other companies that have worked with the 3PL provider provides real-world feedback on their strengths and weaknesses. You can gain insights into how they handle challenges, communication, and overall partnership experience.

When speaking with client references, you can ask specific questions tailored to your brand. This allows you to focus on aspects that are particularly important to your supply chain requirements.

They can reveal how adaptable and flexible the 3PL provider is in tailoring solutions to meet your unique needs. This information helps determine if the provider can accommodate your specific requirements.

Learning about long-term partnerships between the provider and their clients demonstrates the 3PL's ability to maintain stable and mutually beneficial relationships. This should be important to you because remember, you are marrying your 3PL.

This is not a one night stand, folks.

When choosing a 3PL provider, think of client references as your personal Yelp/Google reviews. You wouldn't dine at a restaurant with a bad rating, so why gamble with your 3PL provider?

Word-of-mouth matters. Period.

Last but not least is my favorite part.

THE WAREHOUSE TOUR.

I loved going on these with clients. You got an unfiltered conversation with the brand. If this is your first time meeting with the client face with them, make it count.

Frankly, if you are on a warehouse tour with a brand and have been in conversations for months, you probably are in the final four.

Does not mean you will always win, but you should like your chances.

It is your time to shine, 3PL operators.

But on the brand side, here are all the things you should be doing and considering on the tour.

Inspect the technology and equipment used in their operations. This includes the WMS, OMS, TMS, material handling equipment, and security systems.

You can see firsthand how well-maintained and organized their warehouses are, ensuring they meet your standards for storage and handling.

Observing the day-to-day operations within the warehouse provides insights into their operational efficiency. You can assess how orders are processed, inventory is managed, and quality control is maintained.

This stuff is all fine and dandy. But here is one secret that can help you gauge how good the 3PL will be.

See how engaged the warehouse staff is!

Their level of engagement and enthusiasm is a direct reflection of the work environment fostered by the 3PL provider.

Engaged and motivated warehouse workers tend to be more productive and efficient. When employees enjoy their work environment, they are more likely to go the extra mile to ensure tasks are completed accurately and on time.

Labor shortages within warehousing is something executives worry about constantly.

A positive work environment reduces turnover rates. This means that the 3PL provider can retain experienced and skilled staff, resulting in a more reliable and consistent workforce handling our products.

I would also make the argument that engaged employees are often more safety-conscious. They pay attention to detail and follow safety protocols, reducing the likelihood of accidents or mishandling of goods.

Ultimately, an engaged and happy workforce can have a direct impact on client satisfaction. When our products are handled by motivated individuals, it reflects positively on the quality of service we can offer to our customers.

Any 3PL can show you the process of how they receive, store and pack your orders. Thats easy.

But it’s the energy, or lack thereof, on the floor that tells another story.

Finally Selecting Your Soulmate

Now, as you stand on the brink of a new beginning with your chosen 3PL partner, it's time to look forward with optimism.

This is why I always say you need to view your 3PL more as a revenue driver and less as a cost center.

Looking forward with optimism will help you look through the relationship in a different lens.

It is changing the mindset to having a partner, versus just another vendor.

Remember that partnering with a 3PL is a journey, not a destination.

Everyday will bring new exciting challenges. But knowing you have someone that is on your team, there is nothing you can’t solve together.

Stay agile and above all, stay committed to the shared vision of your partnership.

As a mentor of mine says, “Hard now, easy later.”

Best of luck throughout the process.

It’s grueling, but worth it in the end when you find your 3PL soulmate.

Well, that’s it for this week!

Any topics you lovely people would like to see me discuss in the future?

Feel free to email me or DM on good ole LinkedIn.

Until next time.

Cheers,

Hodes