A quick glance within Wikipedia, searching on the acronym “3PL”, will show you this brief description:
“Third-party logistics (abbreviated 3PL, or sometimes TPL) in logistics and supply chain management is a company’s use of third party businesses to outsource elements of the company’s distribution and fulfillment services.”
Recently I went through the process of identifying and selecting a 3PL partner to become our company’s main conduit for the launch of our first round of products here in the U.S. market. The process was on a shortened time table, particularly given the imminent timing of our launch and the fact that our products were already well into their initial production cycle.
There are many different criteria that can be used when determining which 3PL to engage for your company’s fulfillment operations. This is by no means an exhaustive list, but here’s the “stuff” I used to determine our particular selection. I encourage you to consider the items mentioned below. Every one of them could be expanded at much greater length, but for the purpose of keeping this article reasonably short, I will be brief.
- Start Locally. This works if you happen to be in northern California (definitely options in this part of the world), but hopefully if your business is near any type of metropolitan area, you’ll have some potential choices available to you close at hand. Why? Well, for me, with new products, in a new market, with a (relatively) new business venture, I wanted to “hedge the bet a little” for success and keep this part of the operation within reach-literally. If there’s a problem, I don’t want to necessarily have to jump on a plane for half a day or more to get there “in person” (see my previous post entitled “Face (to Face) Time”. Start locally if you can- it just makes sense. Even later on, if the business scales to a point where a global organization is needed (one with multiple sites to service multiple regions), there will still be a need for a local enterprise, just to give you some bandwidth on special projects or segments of your business. If you can cultivate this first, it can only help you later.
- Solicit Input. Don’t go it alone! There are lots of smart people around you, lots of opinions and experience that you should draw upon when determining which 3PL to partner with. I asked for inputs from those around me, and two of my colleagues, both of whom I trust and respect, offered some great working relationships from previous gigs that were helpful in the search process. Be somewhat selective about where you get your recommendations from- and if you do, this can pay off later on.
- State the Obvious. When speaking with a potential 3PL, you need to be able to articulate exactly what it is you’ll need them to do for you. They aren’t mind readers, and no two companies have exactly the same needs. Sit down with them, walk them through your basic business plan, and discuss the particulars around what is needed. If they are sharp, they’ll not only listen, they’ll offer some insights in response that you might be able to benefit from. Know what it is that needs to happen, and be able to share it with them in a way they can understand. Also, be prepared to be rejected by the 3PL. This happened to me as well- I had one company on our short list actually tell me that they weren’t interested in our business until we were closer to an annual revenue of at least a few million in sales. We’re a start up- with a great product line up- and a large parent company- but not yet in the U.S. market. Oh well- I guess this particular 3PL just didn’t need the business.
- Spend Effort. Don’t be lazy– this kind of stuff doesn’t just happen on its own. You’ll have to put forth some effort to really weigh a 3PL’s capabilities, since it isn’t always obvious. For me, it meant jumping in the car a few times and heading out to various locations throughout the Bay area. On at least one of those visits, I was able to grab the boss and bring him along for the ride- which can be a good thing- he gets to see the process first hand, and you get a supporter to your efforts. And when you conduct a site visit, ask yourself if what you are seeing is also how you’d run the place. If it’s not how you’d do things, that may be a red flag.
- Seriously- How Much? There’s a place for weighing the quoted costs. It’s okay to be a little price sensitive-after all, it’s not just business, it’s your business- so treat it that way. Costs are an important component of the decision process. Don’t pay more than you should, and don’t be so cheap that your customers suffer, either. There’s a definite balance to be achieved when it comes to costs and “comparison-shopping”. Be ready to agree to pricing for those things that matter most to your business and your customers.
Hopefully these points can give you some sense of direction when it comes to selecting a 3PL for your business. In the end, you’ll want to team up with an organization that mirrors your needs with their capabilities, shares your vision, and desires to truly be a part of your success!