How to Choose a 3PL That Works for You

Why do businesses use 3PLs?

Many e-commerce brands begin by fulfilling all of their orders from their own warehouse, running their own logistics, product prep, and fulfillment operation.

At some point along the way, many brands decide that it is no longer worth fulfilling their own inventory. This could be for any number of reasons including:

• Operational Challenges - Certain areas of your logistics operation may not work as desired. Orders are not being delivered on time, customers are unhappy, inventory gets lost, etc.
• Business Changes - Your business may be growing and expanding causing significant structural changes. It is common for growing brands to “outgrow” their existing logistics solution.

What should a smaller Amazon FBA focused business look for in a 3PL?

Flexibility‍

It’s important to find a 3PL that offers flexible, on-demand services, with no long-term contract commitments.

‍Experience working with E-commerce brands, especially Amazon FBA‍

Your 3PL must understand and have the ability to meet your needs as an e-commerce brand selling on Amazon and your own website store. They need to be deeply familiar with all Amazon FBA product prep and inbound shipping policies.

Your 3PL should be able to ship orders directly to customers for your own website orders or when FBM (Fulfillment by Merchant) is needed for Amazon orders, like when FBA inventory goes out of stock temporarily.

‍Transparent billing and fee structure‍

Make sure your 3PL is abundantly clear on what each service will cost. Also, their billing should be very clear and easy to understand, and match the fee structure you agreed on.

A 3PL should save you money compared to your current solution, so choose a 3PL with a pricing structure that works for your business. Study your 3PL’s fee structure and make sure you understand exactly what it will cost to use the 3PL to meet your logistics needs.

‍These costs can include:

• Onboarding Costs
• Receiving Costs
• Storage Costs
• Fulfillment Costs
• Shipping Costs
• Product Prep Costs
• FBA Specific Costs‍

‍Technology‍

Work with 3PLs who invest in technology to run efficient operations and to report accurate information back to you. Many 3PL offer free integration apps that can connect to your own back-end systems.

‍They have experience in your industry

‍​When choosing a 3PL, they should have experience in your specific industry or product category. For example, a company that sells products in the grocery category should absolutely work with only 3PLs who have extensive experience working with products in the grocery category, as this category requires specialized knowledge of Amazon’s policies and required monitoring from Federal regulators.

‍Location‍

It’s important to consider the location of your 3PL, as it can change how much you spend on logistics and fulfillment.

Choose a 3PL that:

• Can receive your inventory close to where it is manufactured or imported.
• Is located close to an Amazon Distribution Center
• Is located close to where your customers live, if you expect to have substantial orders through your own site or through FBM
• Has multiple locations distributed strategically, reducing the cost of fulfillment and reducing shipping times.
  

Financial Stability

It is not uncommon for 3PLs to run out of cash and go out of business without warning. It is very important to investigate whether your 3PL is in a solid place financially. Look into your 3PL’s credit history or contact their business partners to find out if they have a solid history of on-time payments.

More?

Continue to dig as deep as you can to make sure that your 3PL can reliably meet your business’s needs in a way that saves you time, money, and stress. Ask questions, interview staff members, and do a walkthrough of their warehouse if possible.
​
​Some questions that may be worth asking:

• How many customers do they currently have? How many of those are long term clients?
• What level of communication can you expect?
• What is their service level and down they always meet it?
• Are they prepared for challenges, like being short-staffed? Ask for specifics
• How do they handle mistakes?
• Ask if they have listed all costs
• Can they meet your needs if your business grows significantly?
  

Conclusion

Working with a high quality 3PL can be a good business decision for many brands. It is important to understand exactly what your needs are and to ask questions of potential 3PL partners to make sure they can meet those needs at a cost that works for you. Finally, always make sure you are working with a financially stable partner that communicates clearly and transparently, and will continue to work for you as your business grows.