Third Party Logistics: 6 Tips for Choosing a 3PL

Experts offer advice on how to prepare for evaluating and choosing a 3PL that is a perfect fit for your operations.


The 3PL should have the ability to maintain impeccable control of your inventory so lots are maintained properly, says Carl Neverman, vice president of client solutions for LA-based Weber Distribution. “We like to have our customers provide us with details on the shelf life of their products. We developed reporting capabilities that create buckets that can send alerts when there is an overabundance of product or when a product has so many days of shelf life left.”

The big item everyone wants today, notes Patterson at Saddle Creek, is for a 3PL to demonstrate ongoing process improvements and cost improvements. “A 3PL should be able to show they continually bring value to the partnership.”

4. KEEPING PACE WITH GROWTH

A 3PL who is flexible enough to grow with your business is critical, notes Marelli. “You need to have a company that can accommodate your requirements in your current growth mode, as well as those requirements as you grow. If you acquire a company that increases your footprint by 30 percent, you don’t want to have to go out and re-bid the network; you want your 3PL to be able to absorb that additional business.”

Riviana Foods has been using Weber Distribution for the last four years. Weber had purchased the 3PL that had been servicing Riviana Foods and has been the supply chain solution provider since that time. “We ask our customers to open their books and share forecasts with us so we can match the space and labor requirements to meet the business needs. More importantly, we need to know what their expectations are so we can match our deliverables to what they require today and into the future,” says Neverman.

It is important for a prospective candidate to be able to expand into other areas where you might be establishing new markets, advises Marelli. “Some 3PLs with no national presence might expect their clients to fund the necessary infrastructure in a new market, but we won’t do that.”

Marelli advises knowing what the 3PL’s bench strength is.

“When my business grows, I want to know what succession planning regime they have in place. I want them to be able to take the best practices for the business they currently do for me and deploy those same practices to my new site,” he says. “This requires that the people working in the current operation relocate to manage the new site—or they will train new personnel to effectively manage the new operation.”

5. MAINTAIN CONTROL

Stevens reports that a top priority for Darifair Foods is knowing its 3PL can come through to save the day for them if a truck has a breakdown or an accident. “This is why we look for an asset-based 3PL who also uses other carriers. If we have a problem with a non-asset-based, we don’t have the same control of recovery as we do with an asset-based company like Keystone Logistics. In the past, we have let 3PLs go because they fell down on service.”

Darifair will pay more for service that provides the peace of mind that its deliveries will be made on time, Stevens reports. The company supplies to major national restaurant chains—like Applebee’s, Ruby Tuesday, Wendy’s, and Chic-fil-A—through their respective DCs. “These DCs expect a load at a certain time on a particular day and if we miss the time, we get into trouble; if we miss the day, we are in even bigger trouble.”

6. ASK ABOUT FINANCIAL HEALTH

Cubberley suggests determining if the 3PL is capable of handling a large amount of money through their system in a negative cash flow situation. “In this industry, you are operating in a negative cash flow for the most part because you always end up paying your carriers before you get paid,” he says.

“Our experts advise asking prospective 3PLs for their P&L data over the last several years so you can see any trends that might be informative to your ultimate decision.”

Make sure your 3PL is financially healthy, has stable leadership, and has good relationships with its banks. “Ask about their growth objectives year over year because if they take on too much growth, that could sacrifice the business they already have,” suggests Marelli.

In the final analysis, a 3PL has to be a good fit with the culture of its clients, notes Neverman at Weber Distribution. “Our role is to be a trusted advisor as well as solutions provider. We always have to be thinking of creative ways to get our clients’ products to market cheaper, smarter, and quicker. There needs to be a reciprocal degree of trust in each others’ expectations and deliverables,” he says. “The relationship is really a strategic part of having profound knowledge of our partners’ business and being aware of their shifting expectations so we can always be there for them when they need us.”

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