In 2015, logistics costs totaled over $1.4 trillion dollars in the United States. With numerous 3PL providers offering supply chain services across North America, choosing the best-fit provider can be a daunting task. When evaluating providers, shippers should position their assessment with the goal of forming a partnership. Shipper’s evaluate many factors during their review process to find a 3PL including the provider’s cost and their overall service. It’s important that shippers identify and ultimately choose the provider that will add the most value to their business.
Through collaboration, 3PLs can offer shippers an extensive array of services to enhance their current supply chain. In fact, it’s best if these providers are viewed as an extension of a shipper’s existing internal team. When assessing providers, it’s important that they not only offer the services of interest, but also have experience with similar customers or companies in comparable industries. The 3PL can then share resources and best practices that can benefit all their customers. Overall, companies will benefit most from providers who have the flexibility and expertise to accommodate for unique requirements and seasonality2.
The service that 3PLs provide directly impacts the service the end customer receives. 3PLs that prioritize service levels can ultimately improve the service shippers can give their customers or end-users. In a recent survey by CapGemini, findings showed that 83 percent of respondents reported that they believe their 3PL has contributed to improving service to their customers3. Through technology, communication, flexibility, and visibility, shippers can receive insights to current performance and possible opportunities to improve their supply chains. An agile 3PL can quickly and efficiently alter operations to do what is best for the shipper, whether that be changing modes of transportation, timing of routes, or locations.
Shippers do not have to trade-off cost and service when determining the right 3PL provider. The rates for 3PL services are developed based on numerous factors which all begin with shippers communicating their needs and service expectations. Pricing variables can alter based on the services needed; for instance, transportation costs can be evaluated to include fuel cost or mileage driven. Another factor that could impact cost is the amount of labor that the operation will need to run efficiently. In these cases, 3PLs will account for the amount of drivers, managers, and other employees they will need to provide excellent service within their pricing model. Each provider may price their solution differently to include several different aspects, making it difficult to directly compare providers. One option to assess providers by price is determining how total landed cost would be impacted with each provider. Finding the true cost of getting products to end users with each provider can be beneficial to determine both obvious and hidden costs.
Once the cost comparison is made, it is best to then determine which of those providers can generate the greatest overall value. Although a 3PL may be the lowest cost provider, it is important for shippers to evaluate the 3PL’s capabilities and service levels. On the contrary, when shippers choose higher cost providers, it is important to understand how flexible and agile the provider can be, especially when exceptions and peak seasons occur. A shipper should not have to choose between services and cost, instead they should evaluate both variables to determine which supply chain solutions provider would deliver the best service for the cost or create the most value to their operation.