Five Questions to Ask When Choosing a Top 3PL Provider
Shopping Rates Can be Disruptive to a Logistics Operation
It’s every logistics pro’s responsibility to look for ways to get things done more efficiently. Luckily, most of us find this type of challenge to be the most rewarding part of our jobs. We are logistics professionals; this is what we do.
Often the most visible and impactful way to improve a logistics operation is by finding new ways to save money. But shopping rates simply because it’s easy or relying too heavily on spot rates can be disruptive to your logistics operations, doing more harm than good.
Any type of procurement event is a serious exercise because the performance of your carrier or 3PL has a direct impact on your business in ways that extend far beyond a simple cost per mile rate. Here are five questions to ask when choosing to add a new transportation provider to make sure the changes you make have a net-positive impact on your logistics operation and company overall.
Is it only about finding the lowest rates?
For better or worse, rates get all the attention when it comes to managing logistics. Of course, negotiating great rates is important—and frankly it can be a fun challenge. Logistics pros are usually on the defensive, dealing with problems and having to answer to everyone. Negotiating rates is the one time it feels like you have control.
But you have to be careful. If you push partners too hard on rates, or always go with the lowest-cost provider, you end up getting exactly what you pay for. Always choosing based on cost comes with an unspoken acknowledgment that service is not the most important thing to your operations.
Before engaging in a RFQ, ask WHY your company is looking at logistics for savings. Is it because you think you’re overpaying, leaving money on the table, or because you’re trying to meet a specific target or KPI and your partner isn’t getting you there?
How will a new logistics partner help us operate better?
Adding new carriers or a 3PL partner should bring a range of new benefits to your operations, like technology, a vast carrier network, and other value-added services. For example, having a capable 3PL or core group of service providers helps to ensure better continuity of your logistics data and access to logistics technology you may not have otherwise.
Do they have a skill-set or knowledge-base that complements your specific industry? The power of working with a specialist can transform your operations. Their networks, tools, and insights can be transferred directly back to you. Make sure any new partner has a proven track record of onboarding and servicing businesses like yours to help ensure success.
How does the logistics service provider view our relationship?
Carriers and 3PLs, especially ones who feel beaten down on price, are never the best partners. A low per mile rate can look good on paper, but chances are it will be rare that the carrier has capacity when you need it. Worse yet, when they do, they’ll be quick to drop your load even after accepting it if a better paying load in the area comes up.
A low rate is meaningless without capacity. A good and loyal carrier relationship means you’ll get preferential treatment when capacity is tight and problems come up.
Strong relationships may even help you cut costs organically. Rather than chasing savings, a true partner will be willing to step up or take a hit when you need their help. Invested in the long-term benefits, they are stable and understanding. And in an ideal situation, they are also always on the lookout for opportunities that bring added efficiencies and savings.
Do they know our business and consignees?
Delivering products can be a very specialized process, especially for items like food. Working with carriers who do not know your products will create extra work for you and your consignees. Not calling for appointments or understanding the potential for chargebacks with certain deliveries are necessities commonly overlooked by low cost generalists.
Using a 3PL who has good, established relationships with your consignees is an undervalued advantage. For better or worse, few shippers will ever know the problems a 3PL partner has made go away on their behalf at the point of delivery.
It’s understandable when logistics professionals feel pressure to constantly be shopping rates to save a few cents per mile. These types of cost savings are important, but they need to be done as part of a larger plan. Chasing pennies at the expense of dollars is a mistake.
Companies that take a strategic approach to carrier procurement have a smarter and more efficient logistics operations. Asking the right questions of yourself before your next procurement event, no matter how small, will ensure you are making the right decisions for your company.
Andrew Lynch is co-founder and president of Zipline Logistics, an Ohio-based 3PL that specializes in providing multimodal transportation services and business intelligence for CPG, retail, food, and beverage customers.
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