The eCommerce boom has brought third-party logistics providers, or 3PLs, into the spotlight in recent years, and for good reason. For many companies venturing into this arena for the first time, self-performing fulfillment can be intimidating, expensive, and time-consuming. In contrast, a professional 3PL fulfillment company can likely do the work faster, cheaper, safer, and overall, better.
Whether a company is considering outsourcing its operations for the first time, evaluating its current 3PL’s performance, or considering severing an existing outsourcing agreement, it faces many challenging decisions – decisions that can have a dramatic effect on the success of the business. Therefore, it is critical to examine each of the three phases of engaging with a 3PL separately and review the circumstances before recommending a best response.
Situation #1 –Considering 3PL Outsourcing for the First Time
Outsourcing fulfillment may pique a company’s interest for any number of reasons. For some, it may be as simple as outgrowing the ability to perform fulfillment on their own. They may be starting a new business or division, expanding to a new market, or introducing a new product line. Whatever be the reason, before making a final decision to outsource, the company must understand what is driving the desire for change.
And this change can be difficult for a novice that is reluctant to give up control of some of their business. Many companies are pushed to outsourcing as a last resort because they believe they can perform fulfillment services better than a 3PL. However, these overachievers must remember that they can’t be experts on all matters of supply chain, distribution, and fulfillment,and those services might be better executed by an expert.
During an initial evaluation process, first-timers have several important questions to consider. For example, how many locations does their company have, and where are they located? Does the company lease or own its facilities? How would technology be developed and integrated into the process?
After contemplating these questions and several others, a company may conclude that it can handle distribution on its own but still needs assistance improving efficiency, cost, and/ or staffing challenges. In this case, services can be secured for an initial and nominally priced high-level assessment of the distribution operations.