As a full-service logistics company, we work with scores of companies representing several industries. Every one of our clients’ needs are unique, and therefore, it’s difficult to anticipate what a company might need to solve any problems they may be experiencing in their supply chains.
Some companies might be looking for an “easy button” approach from a logistics company, which means the company will manage it all for you, while other companies may just need support in a few areas, such as adding additional carriers.
Do the thousands of options and hundreds of vendors confuse you?
That’s why we‘ve compiled this 3-point checklist of items to consider when you decide it’s time to hire outside help. So if you’re a logistics manager, shipping coordinator, supply chain supervisor, or even the CEO, this checklist is for you. It will help you organize your thoughts and give you a few guidelines on what to do next. A third-party logistics company, or 3PL, is a fully managed solution. When you hire a 3PL to manage your transportation they will manage everything—the one-stop shop. Hiring a 3PL is usually the best choice if you have no internal transportation/logistics capabilities.
If you have some internal transportation capabilities, consider a 4PL to augment your staff. Chances are you have a handful of carriers or vendors you already work with, but may need to expand your carrier base for a number of reasons: cost, routes and carrier availability. The difference between a 3PL and 4PL is in the range of provided services.
There are scores of checklists on the Internet for how to choose a 3PL, but many are complex and lengthy. With the checklist below, I chose to focus on what I consider the three most critical areas:
A 3-point checklist for choosing the right logistics partner
Automated Process Management
Choose a company that has refined automation capabilities. A company that has extensive technology expertise can drive down your costs and be more efficient. For example, find a partner that can integrate their own software systems with your ERP (Enterprise Resource Planning) or accounting software.
This seamless integration will save your employees from having to access the 3PL’s rating system. Make sure you also have your own custom web page or portal for accessing your shipping information and submitting orders.
A 3PL with robust technology can instantly access a database of 10,000+ carriers and find a truck to reroute a shipment that gets delayed for any reason.
Your logistics partner should also have servers and data centers in multiple locations for backing up mission critical systems. You can’t afford any downtime.
Choose a company that offers flexible billing solutions. Do you prefer a weekly invoice, or monthly? Beginning of the week or end of the week?
Make sure you work with a company that has systems that are Sarbanes-Oxley compliant. Make sure they can capture all of your critical tracking numbers like purchase orders, sales orders, etc. Logistics companies should also give you an online portal for approving bills and transferring funds directly to the vendor.
Finally, make sure your logistics partner is retaining images of all your essential paperwork, such as invoices, manifests and other shipping documents. You should be able to access these documents anytime.
Every 3PL will manage your outbound freight, but not all do a good job of managing your inbound freight. Find someone that will.
Good freight management means being able to quickly react to a customer’s changing needs. There may be cases where you need expedited freight, or you’re shipping something that’s oversized and needs a flatbed. Through some companies it’s one call. The vendor calls us and we coordinate it based on their needs. In addition, some companies, like LPS provide their clients customized tools for accessing preferred carriers directly.
Good freight management also means being aware of what circumstances and business changes affect demand that may drive up or drive down costs. For example, during produce harvesting season trucks are in higher demand, and therefore, more scarce and expensive. A good 3PL will plan for seasonal fluctuations in demand and keep you constantly apprised.
LPS, for example, contacts thousands of carriers and truck owners to qualify them to drive for our clients. They all must have a high level of liability insurance and top safety scores. Insurance checks are conducted daily.
You should also be able to contact your logistics partner anytime, any day. Make sure you have names and contact numbers for all essential people.
To choose the right logistics partner for your business you have to consider numerous factors and research the landscape thoroughly. Be careful to not over analyze your choices, however. Most experts agree you should not consider more than a handful of vendors. Any more than that and you’ll reach a stage of diminishing returns.
Talk to the employees and ask, “can I work with them?” Does their company culture fit with your culture? Can you reach someone anytime? Will they put your needs first?