Monitoring KPIs is an important part of your operations and this is especially important for tracking and managing 3PL performance.
Top 6 Reasons Why Companies Change Their 3PL Provider
Utilizing a 3PL to handle your supply chain is one of the best ways to reduce costs and increase efficiency. However, you should keep in mind that as your business scales, you may find that your 3PL is no longer the best fit and should consider looking for a new partner.
Are you satisfied with your current 3PL provider?
If your answer is no, you should begin preparing to switch 3PLs. As a fast-growing D2C brand, choosing to utilize a third-party logistics company (3PL) can be an effective way for a brand to continue to scale its business. Utilizing a 3PL to handle your supply chain is one of the best ways to reduce costs and increase efficiency. Doing so will also save you a significant amount of time and energy to focus on growing your brand through product development and marketing. However, you should keep in mind that as your business scales, you may find that your 3PL is no longer the best fit and should consider looking for a new partner.
Reasons to Change a 3PL
There are many reasons why a company may consider changing its 3PL as each company has its own unique requirements and business logic. In most cases, one or many issues can be enough to cause a company to begin looking to make a change. You might be considering switching a 3PL if you find that they aren’t living up to what your company needs and it may be due to a combination of reasons for why you’re ready to make this move.
1. Your 3PL provider uses inadequate technology
In today’s world where technology is constantly changing and advancing, it’s important that your 3PL can provide adequate technology that isn’t out-of-date. Your 3PL should have technology that will help your business scale. If however, they can not keep up with the growing demands of your business, you should consider finding an alternative with a more compatible technology solution or move to a new 3PL.
2. Your 3PL provider is not measuring and reviewing KPIs
As a growing D2C, you’re likely monitoring your shipping KPIs but if your 3PL is not, that might be reason enough to consider changing your shipping strategy and look for a new 3PL. It’s important to work with a 3PL that understands how KPIs affect the bottom line and knows when and how to make improvements to reach your goals.
3. Your 3PL isn’t able to deliver the ecommerce demands of your customers
Ecommerce has undoubtedly become more complex and the expectations of a customer have grown significantly. Today, customers expect faster shipping and their willing to pay extra to get it. Brands are forced to compete with Amazon and the like when it comes to shipping so if they can’t fulfill the expectation for faster shipping, their sales will suffer. That’s why it’s important that your 3PL provider can support this demand efficiently. If they cannot meet this, it’s best to start looking for one that can.
4. You’ve observed rising shipping and fulfillment costs
Cost is one of the major reasons why businesses consider changing their 3PL provider. A 3PL should continuously work with freight carriers to get better rates to pass along to you but these are not the only costs you need to factor. The overall fulfillment costs for warehouse labor, space, technology may really be taking a toll on your bottom line. Other 3PLs might be more competitive with their pricing to earn your business so if you find the costs with your current 3PL are far too high for what value their delivering, you may want to start shopping around for better rates.
5. You’ve experienced service failures with your 3PL
A customer expects to have a package arrive on time and expect tracking updates as well. If there are any delivery delays, this can cause a negative experience for your customer and could potentially lose trust in your brand. In addition, a brand relies on the 3PL to provide important inventory and fulfillment information from order updates to shipment tracking information, to inventory availability. So, when a 3PL fails to provide promptly and accurately, it can have a negative impact on various departments of your business from operations to customer support and to even marketing. How can marketing promote without the risk of overselling if they can’t get real-time visibility into available inventory?
6. You’ve outgrown the capabilities of the 3PL
At some point, you may come to a time where your business has simply outgrown your 3PL services. You may have such a change in order volume compared to when you first came on board with your 3PL and will eventually see that you have outgrown the capabilities of the 3PL.
Transition to a New 3PL
Deciding to make a switch to a new 3PL can be overwhelming as it tends to require a lot of research and evaluation to find the right fit. Then, once you find the right 3PL Companies, it can be a daunting task to transition to new 3pl services. That is why it is important to have a solid action plan that breaks down the process into more manageable tasks or phases for an orderly transition.
It is important to make the transition if you find your current 3PL to no longer meet your needs even if the transition is intimidating. Once you make the transition, you will quickly realize how the move has benefited your brand regardless of the time and costs required for the transition. You will see soon after that it was all worth the time and investment.
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