What should I consider when evaluating a 3PL/fulfillment center for my business?
- Get quotes from at least 3 different 3PLs
Make sure you carefully model out the impact of the fees on your specific business. Each 3PL prices their services differently and what one doesn’t charge for, another does so price comparisons can be difficult. Don’t always go with the largest/most well known option. I obtained quotes from 3 different 3PLs when we were moving our operations. The largest/shiniest option was 2 to 3x more expensive per month then the other 3PL’s we spoke to for largely the same services. In many cases, a smaller 3PL is able to offer more customized services then the largest can. For example, the 3PL we went with did not offer frozen storage at the time, which we needed. We actually had a freezer in our facility that we would no longer need which they took and put near our inventory and used that for frozen. In that way, we were able to maintain our frozen offerings when the 3PL didn’t actually offer that (just a note — they now offer it so we no longer need to use this, but it was a great selling point for us at the time).
2. Be realistic and ruthless when comparing the benefits and costs of both options (see above discussion).
When considering moving to a 3PL, the other option is to build your own fulfilment capacity. For us, that meant potentially signing a long term lease, hiring additional employees to pack and learning how to manage the logistics piece. We modeled out the costs, both the cash and time requirements, of both options and decided that for us and the stage of business we are at, a 3PL was both the cheaper and more efficient option to allow us to invest the time and money to grow. We continue to revisit this decision at least annually and compare our monthly costs with the 3PL to what a small warehouse would cost to make sure this is still the best choice for us.
3. Get References.
I know nobody is going to give a reference that will give a poor review, but I’ve found references are great for understanding HOW to work with someone. If a vendor gives you a reference, that’s someone who is happy with them, which probably means they’ve figured out how to work effectively together. I want to know how because that can save me a ton of trial and error and let me focus on those things that are unique to my situation.
SwitchGrocery has grown quite a bit since we first moved to a 3PL and we are at the point where our fulfillment, while not perfect, runs smoothly a majority of the time, saving us time and most importantly, keeping our customers happy. If you have any questions, please reach out, either on Linkedin or email at bryan@bryanhorsley.cpa.