In today’s retail environment, speed to market is critical. Fashion products have short lifecycles, as the consumer demand of millennial shoppers is rapidly changing. Companies must focus on methods for keeping up with customer service, yet still control costs. Outsourcing the supply chain management to a third party logistics supplier (“3PL”) offers cost saving benefits and inventory management and supply chain visibility from manufacturer to retailer.
Choosing the right 3PL can be challenging and time consuming. Companies must first understand their unique needs and the value of a 3PL, taking into consideration rapidly advancing technologies, emerging world markets, and extended supply chains — factors that place increasingly critical decision-making demands on logistics. In our global economy, the challenges of providing seamless supply chain solutions across geographical and cultural boundaries have increased. Overall logistical requirements, vendor choices, and other variables can make the decision to outsource to a 3PL one that is fraught with downsides, if not carefully considered.
The following are ten important areas of focus as you search for the right 3PL.
- Determine what’s most important to your customers and then put a 3PL evaluation team in place to seek out the 3PL best positioned to provide those services. The team should have representation from finance, supply chain/logistics, IT, sales and purchasing.
- Seek out 3PLs that specialize in your industry and meet the unique needs of your company and your customers. You should also select a 3PL that has a proven track record with the services that are most critical to you customers — whether it be warehousing, distribution, fulfillment and co-packing, or an integrated system that can fulfill all of these criteria.
- Make sure the 3PLs you consider are in a geographical location suitable to cover your customers’ needs.
- Look for a proven track record with similar existing companies as clients — their reputation will indicate their expertise, efficiency and reliability as a 3PL.
- Seek 3PLs with strong industry references. For you to consider working with a 3PL, it should have glowing reviews from its clients. Be sure to ask specifically about warehouse security, technology, dependability and flexibility.
- Look beyond finance — price is important, but finding a 3PL that is the right fit can add value beyond cost.
- Determine whether the 3PL is scalable to meet your needs as they relate to both growth and contraction, whether caused by seasonality or customer demand.
- Inquire if the 3PL has the technology to integrate with your systems.
- Evaluate whether the 3PL is financially sound. Find a provider that has financial stability; you don’t want your operations interrupted due to the 3PL’s internal financial situation.
- Determine how the 3PL meets e-commerce needs.
It’s essential that companies do their due diligence when selecting a 3PL to be certain that their choice is the right fit. The last thing a company wants to do is to switch 3PLs a few months later and interrupt its business operations.
The 3PL evaluation team should review the bids and then management should select the top 3PLs for site visits, interviews, and more detailed reviews of the 3PL’s finances. Remember, it’s important to make sure your customers’ needs align with the specific competencies of the 3PL candidates.
If you have any questions or would like to discuss your particular situation, please contact Michael Sacco at 212.842.7032 | Msacco@friedmanllp.com.