Third-party logistic providers (3PLs) play an essential role in both a company’s operations and their supply chain. Companies searching for operational efficiencies that lower transportation costs and incur a healthier bottom line should first build an effective 3PL relationship. This can significantly impact the growth and success of a company, while expanding logistics capabilities.

The 3PL selection and evaluation process is crucial to achieving a valuable partnership, matching the 3PL’s core values with the company’s needs and creating a source of competitive advantage.

What should 3PLs be doing?

As technology continues to evolve and e-commerce continues to grow, businesses have the ability to be more demanding and selective with their logistics partner. Therefore, 3PL companies are forced to adapt quickly and proactively seek ways to service customers more efficiently, taking an innovative approach and providing value-added services that separate them from their competitors.

As part of developing long-term relationships, 3PLs should invest in the training, leadership support, industry expertise and development of their people. 3PLs that know their staff, their values, working capabilities and strengths are able to better match up the staff with clients and establish more meaningful and dynamic partnerships. A 3PL that pushes their staff to nurture client relationships, proactively suggests new procedures/strategies, provides industry benchmark analysis and presents performance metric analytics demonstrates a greater commitment to clients and their business.

Key performance indicators (KPIs) are valuable for a business, as they outline their strengths as well as areas for improvement, which helps a company measure success in reaching desired targets.

What to look for in a 3PL partner

3PLs tend to have a wide range of services, and consumers should evaluate and truly understand how the relationship aligns with their business needs. The key identifiers of a valuable 3PL partnership include a combination of a trusting relationship, strategic planning and availability of technologies and tools that can elevate businesses to the next level and promote overall growth.

Operational efficiencies can be obtained when a logistics network is available that allows utilization of shared assets and operational costs provided by the right 3PL partner. 3PLs that provide a full-service approach and bring value-add components as part of their core services will have a greater impact on a business’ overall operations and future success. As a complement to the basic trucking and warehousing services, these provide a more streamlined process when transporting and storing goods. Some of the value-added services can include cargo consolidation, full truckload (TL) and less than truckload (LTL) shipments (allowing more frequent and flexible delivery schedules), multi-modal transportation, multi-location distribution and warehouse storage capabilities, multiple pick-and-drop capabilities, specialty packaging, labeling, customs brokerage, reverse logistics and last-mile deliveries. The overall services and competencies that a 3PL can provide allow a business to leverage the 3PL’s expertise and resources, and lower operational business risk while reducing operational costs. Therefore, choosing the right partner is essential to all businesses.

Transportation optimization through greater visibility and technological innovation allows logistics providers to enhance utilization of assets, plan more efficiently when setting up routes, minimize miles, reduce fuel costs, better utilize and allocate drivers, reduce empty miles, better track shipments, automate lot control, manage cold chain operations and mine data. 3PLs who use transportation and warehousing management systems (TMS, WMS) are more responsive to changes. Having a 3PL that has not simplified and facilitated their services through technological advances is a major limitation/weakness. Businesses should look for continuous improvement, choosing a 3PL that shares the same value.

The partnership between a business and their 3PL impacts the supply chain in many ways. Finding the right partnership will strengthen the business’ KPIs, and allow the business to focus on other strategic areas.