Third-party logistics providers (3PL) are designed to meet their customers’ unique inventory management and fulfillment needs. As those needs change, so too might the requirements for a brand’s 3PL. How do you know when it’s time to rethink your 3PL relationship — and maybe even find a new partner?
Perhaps you’re reaching out to new markets and require a 3PL with a nationwide footprint. Or you’re expanding your product mix and need specialized handling capabilities. The best problem to have to solve is when your volumes increase to the point that your existing system for managing them is stretched to its limits.
Here are three big signs you have outgrown your 3PL, along with ideas for how you can transition to the next level of service.
Basic geographic limitations may be causing you to rethink your current 3PL. Perhaps it serves a limited number of locations and your footprint is expanding beyond them. You need a presence in multiple locations across the country to serve a growing customer base. A 3PL with a nationwide reach can support business strategies to expand into new markets and product categories with flexible, scalable capacity wherever it’s needed.
Strategic network locations are critical. Serving the East Coast from a West Coast location and vice versa is challenging. Transit times are longer, and shipping costs are higher. After all, consumer and commercial customers often make buying decisions based on shipping times.
One- or two-day delivery windows were acceptable for customers on your coast. However, expanding your customer base with only three-to-five-day deliveries could lead your customers to scout the competition. Strategically located warehouses decrease lead times and take advantage of better shipping rates so products are available faster and at a lower cost.
The network footprint also plays a role in inbound inventory, with lower shipping costs and shorter lead times to stock shelves at strategic locations.
The solution to limited reach is a fulfillment 3PL with a presence in the markets where you want to be.
Another factor that can decide the length of your relationship with a 3PL is their warehouse space and labor capacity. Your growing volumes may exceed the rack and fulfillment space allotted to your company. They simply can’t handle your expansion and may not have the capabilities to meet strict service-level agreements.
Shifting market channels like a growing e-commerce segment can present another challenge. A traditional 3PL may excel at moving pallet quantities through distribution centers. However, growth in direct-to-consumer markets means you need an expert to pick, pack and ship smaller units down to the eaches level. A fulfillment-focused 3PL has the infrastructure and technology to manage high volumes of smaller shipments.
For example, a fulfillment-focused 3PL can help manage surges like the fourth quarter or back-to-school season, particularly with growing DTC volumes. This type of 3PL can also step in with value-added services such as kitting, customization and managing returns.
Perhaps your company is offering new, innovative products or expanding its customer base by adding product types. Some of those products may be beyond their capability. For example, many traditional 3PLs can’t easily handle liquid products, hazardous materials, or big and bulky items. Adding products that require specialized handling calls for a 3PL with the technical skills and experience to get the job done right.
These are a few key signs that you have outgrown your 3PL. It may be time to develop new relationships to manage some or all of your fulfillment processes.