Updated: 19th February 2021, Reading Time: 6 mins.
It can be a challenging and time-consuming task to find, compare and pick the right fulfillment providers (3PL) that are suitable for your business needs. You want to make sure that all your eCommerce, B2B and Retail orders are processed and fulfilled fast, at the best price possible with a reliable service that you can always count on, right?
Well, finding the right partner by yourself is not that easy. No worries though, there are a couple of ways to facilitate searching for suitable 3PLs. Simply check out our best practices and checklist from below:
- 3PL Definition: Finding the best logistics and fulfillment providers
- Checklist: Screening Fulfillment Providers
- Step 01: Pre-Screening of fulfillment providers
- Step 02: RFQ Process – Prepare Fulfillment Requests
- Step 03: Quotation & Pricing for Fulfillment Services
- Find the right 3PLs in Germany, England and across Europe: Get Started
What is 3PL fulfillment? And why are 3PLs important?
Before we start with our 3PL Guide, why would you consider searching for a 3PL in the first place? Well, here’s why: As a commerce business, you are most likely to encounter the challenge of getting your customer orders fulfilled and delivered in a timely manner and with great efficiency if you do all logistics activities in-house. Furthermore, when your business grows, handling all logistics processes in-house is rather difficult: It’s capital-intensive, slows down your potential to quickly scale and also makes your operations inflexible.
Instead, outsourcing your order fulfillment to a specialized logistics team could be the right choice for you and that’s when 3PL services come into place. Third-party logistics (3PL) refers to the outsourcing of logistics processes in the areas of warehousing, fulfillment and shipping. Based on operational needs, businesses can either completely outsource all logistics operations to 3PL partners for all target markets or simply choose a designated 3PL to handle operations for a specific region/product line while the rest is done in-house.
In addition, 3PL services can help businesses to achieve a better customer experience since it’s highly flexible to accommodate customized product packaging or other value added services that can shape the unboxing experience.
Finding the Best Logistics and Fulfillment Providers
Selecting a specialized third-party logistics provider (3PL) can be a difficult and time-consuming task. Yes, you can check references, but how do you truly know if the fulfillment providers in scope fit to your business case without making compromises? What about hidden costs? Tracking of SLAs? Operations and Supply Chain Managers often find themselves limited in their options and generally overwhelmed about key metrics and hidden stumbling blocks to look out for when diving into the search for suitable 3PL providers. No worries, we’ve got your back.
Even though each business and operational setup has its own respective needs and requirements towards a fulfillment provider, there are three general steps that can serve as a best practice guideline for a complex selection process. Simply follow these steps. Distribution logistics shouldn’t stop your business, but enable new business (pun intended).
One logistics provider doesn’t fit all. Assess all differences between fulfillment providers in terms of location, operational focus, flexibility, customization & IT systems. When starting the process of searching for potential fulfillment providers in your required target markets, it is vital to prepare a standard set of information before getting lost in multiple 3PL Q&As.
Bear also in mind, pricing and term structures can vary significantly between providers. Compare different quotes thoroughly and make sure you fully understand the term structure. But let’s go through the process step by step before we go into a deeper level. Here’s a simplified checklist that helps you in cover all considerations:
Checklist: Finding the right Fulfillment Providers
Download: Checklist Fulfillment Provider Screening
Step 01: Pre-screening Criteria
First, it is essential to understand the market dynamics. Make sure to fully assess the differences between fulfillment providers in terms of the following variables.
Choosing a 3PL close to your focus markets ensures fast and cost-efficient delivery to B2B- and end-customers, thus increasing conversion rates and lowering cart abandonments due to long delivery estimates.
In case your sales volume is significantly growing in a new market, it’s also strategic to think about opening a second, local fulfillment center at a certain point. Following best practices to offer free shipping at a certain shopping basket value, expensive cross-border shipping rates will still eat up your profit margins. Remember: the shorter your last-mile deliveries, the greater the customer experience. Once order volumes of cross-border markters reach sufficient volumes, decentralized warehousing will support your business in the long run. Here’s a short guide to flexible warehousing.
Given the complex nature of logistics operations, a 3PL can barely offer high competitiveness across all product categories and sales channels and customer types. While some fulfillment providers might rather focus on a diverse operational setup, others specialize in deep expertise for a specific product portfolio. Therefore, consider your current products and potential new launches when screening fulfillment providers. For example, if you currently launch a non-fresh product (e.g. protein bars) but are planning to launch fresh food products that need cooling, also consider what your screened fulfillment providers are capable of not only for your current setup but for future potential product pilots.
Once again it highly depends on your current business, ready-to-market products and long-term strategy on how you evaluate this factor. But keep in mind that it is essential to understand the degree in which a logistic partner will support your operations in reaching your B2B and eCommerce customers not for single projects but on a daily basis for all customer orders. We also have some great guides on how to find the best fulfillment providers specialized in Cosmetics Fulfillment and Food Fulfillment in case this is your product category.
Order volumes in eCommerce can be quite unpredictable and demand may vary strongly based on promotions or seasonality. Thus, it is very important to select a 3PL that offers flexibility in two directions – minimum requirements and room for growth.
Your provider should be quite flexible in terms of minimum order volumes or contract durations, which is especially relevant when launching pilot projects. Equally important is the continuous flexibility to expand operations at a certain 3PL in order to keep your service level promises once you have started scaling your operations.
Customization & Value Added Services
When establishing a direct to consumer brand, the end-customer experience is key to your success. Your customers should have an unboxing experience they will never forget. Many 3PLs offer the flexibility to re-pack goods, to use your branded packaging materials or to insert specific gifts/inlays or personalized marketing flyers that make your customers want to buy again from you.
As the trend towards individualization increases steadily, the reliability and importance of specific value-added services (like laser engraving or flocking) offered by your 3PL should also continue to grow.
Particularly within E-Commerce, the technical integration between your system and the warehouse management system (WMS) of the logistics provider is very important. Orders and inventory levels should be received in real-time to avoid disappointing customer experiences from unexpected stock-outs.
Step 02: Set-up of an efficient RFQ Process
In the beginning of a request for proposal (RFQ) process it is vital to prepare your own information in advance before reaching out to multiple different 3PLs. We have compiled a checklist with a couple of questions that will help you prepare the most relevant information. This facilitates the overall RFQ process since you’ve done your homework already:
Order Sources and IT Systems: E.g. Shopify, Amazon, Netsuite
- What systems and sales channels do you currently use?
- What systems would you like to implement in the future?
Product Descriptions: Type, Number of SKUs, Special Handling or Certification Requirements
- Do your products require certain ISO-compliant storage?
- Do you products need temperature controlled warehousing and fulfillment services?
Sales Volume per Distribution Channel (B2C, B2B, FBA, FBM) and Seasonality in Demand
- How much do you sell to B2C customers?
- How much do you sell to B2B and Retail customers?
Special Picking or Custom Packaging Requirements
- Do you products require special care during pick & pack processes?
- Do you want to use standard, sustainable and / or branded packaging materials?
- Do you require special labeling, or other value added services like flocking or engraving?
Carrier Selection, Delivery Preferences (e.g. Eco-Friendly, Standard, Express) and Destinations
- Do you have a preferred carrier like DHL?
- Do you require special shipping services like 2-Man-Handling or additional transportation insurance?
Return Handling Requirements, Incoming Goods Handling and Storage Needs
- How do you want your fulfillment providers to handle returns?
- What service levels should be applied in terms of damage control or visual inspection?
Service Level Requirements (e.g. Cut-off Times or Specific Reporting)
- How fast do you want your products to be fulfilled and delivered?
- How do you track service level agreements and what performance metrics do you want to measure?
Step 03: Quotes and Pricing Structure
After receiving quotes based on the information package from Step 02, you will realize that prices can vary significantly between logistics providers depending on the five factors named in Step 01. Therefore, you should always collect three different quotes to compare price points before finalizing a decision.
Even though 3PLs use different names in their pricing calculations, they mainly fall into the following buckets:
- IT Costs for setting up and maintaining the integration between your shop system and the systems of the warehouse.
- Incoming Goods cover the quality control at the warehouse ranging from simple visual control to a detailed completeness check and are highly dependent on your product.
- Storage refers to occupied pallets and shelf spaces per month.
- Pick & Pack (also known as commissioning or fulfillment) represents the order-specific collection and packaging of individual products to prepare them for shipping.
- Shipping refers to the costs related to the delivery of the product to your end-customers by selected carriers.
- Return Handling can include multiple different services like receiving, controlling, polishing and re-stocking of returned products.
- Value Added Services are often customization services and can vary a lot depending on your needs. The pricing is mostly based on time consumed and the machinery used for one specific service. It is advisable to ask for a pre-calculation.
- Working Hours refer to human labor costs within a warehouse and fulfillment center for extra work not yet covered in the cost buckets above.
If you want to fully understand average costs and price ranges of logistics services, we have an extensive guide on The Biggest Cost Drivers during Warehousing, Fulfillment and Shipping. Check it out, there’s also a couple of valuable insights on the hidden costs involved when working with most fulfillment providers.
Get Started: Find the best Fulfillment Providers
Once you’ve received all the essential information from the 3PLs that you included in your selection process, it makes sense to prepare a master comparison sheet to benchmark the most critical factors against each other.
Finding the right fulfillment providers for your individual operational needs is very important for the success of your business. However, Operations and Supply Chain Managers feel often overwhelmed with the task of finding a suitable logistics partner to scale your business. No wonder, it takes some serious amount of time and effort to search, find, compare, evaluate and select the right fulfillment providers.
Our team at everstox knows about the challenges and struggle of finding perfect logistics partners for your target markets. That’s one of the many reasons why we’ve developed our Logistics as a Service platform and connected 3PL network across Europe. We have specialized in building strong relationships with trusted Tier 1 3PL companies across Europe and can quickly provide you with multiple quotes of pre-selected partners upon request.
Moreover, our 3PLs are connected to the everstox Cloud-Technology offering you full operational visibility, direct control and other digital tools to measure SLAs, plan demand and add new products and SKUs for daily logistics operations.
If you are currently looking for new fulfillment providers, and would like to expand your operations into new markets simply get in touch with our team.
Did you find this article useful? You can also check out the following resources in the area of:
- [Guide] Bulky Goods Logistics: How to handle Bulky Goods and Freight?
- [Guide] Cosmetics Logistics: How to find the best logistics partner for Cosmetics?
- [Guide] Food Logistics: Find Best Food Fulfillment for Businesses in Germany and Europe
Max and the marketing team at everstox take care of researching, evaluating and writing all logistics insights that we gather from our day-to-day operations. If you have any questions on our thought-led articles, guide’s or any other blog-related topic, feel free to get in touch with our team.
Head of Marketing