You've been looking to find a local, fresh produce store near your home. After an hour of Google searches and calling a few stores, you find just the right place. A few days later, you go to check out the store, only to find out it's been acquired by a national chain—and all the produce will no longer be locally grown.
Sure, it's the same type of food. But you won't get the same customer experience or be able to support the businesses in your own community.
This is the same type of sudden change that can happen when you're choosing a 3PL. Merger and acquisition activity is at an all time high in this space. Your chosen 3PL could be acquired abruptly, leaving you with a new provider that you may not have chosen otherwise. And though your contract may grant you the ability to exit the relationship, it may not be practical from a timeline or cost perspective.
This may not happen very often, but it still shows the importance of what questions you should ask potential 3PL providers when searching for one.
To help with the process, we compiled a list of questions you might want to include when talking to potential 3PLs. This is, of course, assuming they're also capable of the fundamental principles of running a warehouse—operating a safe environment, providing consistently high quality service, tracking and improvement of productivity, cost tracking and management, meeting service requirements, and maintaining employee morale.
Are They Financially Stable?
This may seem like a goofy question to ask to a business you're partnering with, especially if they're a large one, but nonetheless—it's important. If you've vetted the company, you'll probably know if their financials are in check, but then comes the question of their funding.
Are they funded by VC money? Could that mean trouble? Are they privately owned? Are they looking to be acquired in the future?
You should ask and explore all of these questions. You don't want to unexpectedly get hung out to dry by a company who's end goal is to sell or be acquired.
What's The Company Culture?
When selecting a 3PL, you should really get a feel for who you're going to be working with. Finding a fit that works to the benefit of both parties is what ensures efficiencies and effective use of any 3PLs services. Plus, if it turns out you just plain don't get along with the company and share the same vision, it's not worth partnering in the first place (even if they're the best at what they do).
One of our rules of thumb is this: Always have a face-to-face meeting. It's so important to shake hands with the people you're going to be working with day-in and day-out. If they don't want to meet, it's a red flag—it basically says they value signing the contract over creating a strong relationship. If possible, visit the operations run by the 3PL so you can see for yourself that the culture matches the claims.
How Does The 3PL Manage Talent?
Make sure to ask questions regarding recruiting practices, employee development, and how the 3PL manages turnover. This will tell you more than you think. If the 3PL doesn't manage their own employees well, how will they treat you?
Another area to be looking into is what 3PLs are doing to keep and retain top talents (or if they are getting them at all). In our industry, labor is competitive—you have to be the employer of choice, or you're not getting the top talent.
And the 3PL's talent is especially relevant if they're somehow going to be acting as an extension of your customer service team (which isn’t unheard of). When you’re hiring a 3PL, you may be hiring your own customer service reps. You’re not just choosing a logistics provider, you’re choosing representatives of your own brand.
How Are They With Technology Initiatives?
Technology has overtaken the logistics industry, and it's ingrained in just about everything we do. The trick is to not get sucked in with the "cool stuff" that won’t actually do anything for your business. There are a lot of glitzy and glamorous things people will use to draw you in. But just because they have a drone, doesn’t mean they are a truly innovative 3PL.
It's important for you to define which tech is cool and which tech will actually help you succeed. Here at Kenco, we have focused on building applicable tech. We implemented an Innovation Lab to research and test new emerging technologies and learn how they will best fit a 3PL (or if they will at all), because we think it's important to give our customers real solutions--not just empty promises.
What Metrics Should I Be Looking For?
Asking about the typical shipping accuracy metrics and financial improvements is a good place to start, but honestly, most 3PLs will deliver on those numbers. The thing is, metrics are only part of the picture. Some of the best and most viable information will come from customer references.
Both current customers and past customer references will really paint a picture of how the 3PL works with their clients. Let their customers tell you how satisfied they were or were not with the process. When asking for these references, specifically ask for someone for which the 3PL has recently done an implementation—within the last six months is a good starting point. That way you know exactly what you're getting your company into.
If you ask for a general reference, they may provide you with a name or letter from someone they did business with 20 years ago. Too much has changed in the logistics space in that time for you to get an accurate reflection of what you'll be experiencing.
To Sum It All Up
While these questions are important to ask, remember you do have the power to vet your 3PL. RFP's are time-consuming, but if you’re serious about finding a great partner to do business with, you have to put the time in.
To help with the process, choose the best 3PL for your company now with our eBook, Selecting & Managing a Third-Party Logistics Provider – Best Practices.