Outsourcing e-commerce warehousing to a third-party logistics provider (3PL) has many benefits for a growing business. On average, using a 3PL can reduce fixed/variable logistics costs & inventory costs. Third-party companies address storage, transport, and handling needs on behalf of client companies.

All set to sign up? Think carefully. Committing to a 3PL partnership is not a decision to take lightly. Committing to a 3PL partnership is not a decision to take lightly. A 3PL must be compatible with your business operations, enlargement plans, and customer service culture.

Here is a short list of the important considerations.

1) What is the 3PL’s level of technological expertise?

Why can it take a 3PL so long to adjust a process or start a new process in response to a customer request? One of your challenges will be to make sure that your 3PL is keeping pace with the rapid and ongoing changes occurring in technology, and that its IT strategy and roadmap align with yours.

2) Can the 3PL keep pace with your growth?

Chances are the answer is “yes.” Flexibility and scalability are key. Your 3PL must be able to satisfy your current needs, as well as the needs your business will have as it grows. Preferably, you want to have a 3PL that can immediately take on that extra inventory. If your organization plans to reach new markets, it is also necessary for the 3PL to expand along with you. To address these versatility needs, a 3PL ought to collaborate carefully with customers to comprehend their planning and forecasting, and in response, convey as far as labor and support services.

3) A 3PL must be able to help companies manage high demand periods.

A 3PL must be able to help companies handle peak seasons, such as the holiday rush for the retail sector. Customers need to be able to increase their supply chains so that they can get to the market with accuracy and promptness. Then, when the peak season is over, scale back down and not have those carrying costs in their supply chain.

4) How stable is the 3PL financially?

This is a question you should ask of any potential partner, but this is especially the case since 3PLs are capital-intensive businesses. Historically, they have covered operating costs, lease commitments, and capital investments. A 3PL that is not financially secure may be focused on its economic situation rather than assisting you with your business. Financially prosperous associates should have the assets to put into you as a customer, and in their own operational abilities, to give the customer service you need.

5) Is the 3PL prepared for disasters?

Supply chain interference significantly influence your bottom line, so you should know how your 3PL partner is situated to take care of them on the logistics side. Despite the amplified risk of supply chain disruption, many companies are currently under-funding disruption-mitigation planning. Inquire about in-house planning for emergency preparedness, labor lacks/stoppages, technology breakdowns, weather-induced transportation issues, and other threats specific to your product line.