There are tens of thousands of 3PL (third-party logistics) providers in the US and each of them have slightly different software, pricing, and services. Choosing the right fulfillment option can make or break your business. So, how do you, as a growing eCommerce business, find the right 3PL for you?
Before you do anything, you should determine if it is actually time to use a 3PL.
Factors to Consider When Choosing a 3PL
Capabilities - Do their services match your needs?
Capacity - Can they handle your volume as you grow?
Service - Do they have adequate SLAs?
Support - Will getting help feel like pulling teeth?
Pricing - Are their rates competitive?
Find a 3PL Provider
1. Gather your supply chain information and 3PL requirements.
Just like every business is unique, each 3PL is unique. For example, if you sell apparel, you will not have the same needs as a CPG company. There are certain 3PLs designed to handle high-SKU/high-return models like apparel, whereas a food company will need lot # tracking, an FDA-approved warehouse, and potentially cold storage.
If you have additional needs outside of basic pick & pack, know that many fulfillment centers do not manage things like B2B, FBA prep, kitting, and so on. Beware the 3PL that says they can do it all - in this industry, you can do either a few things well or everything poorly.
2. Run your search using your filters and requirements.
Using a narrow set of parameters will help you find the right fit more easily. Otherwise, you will get bombarded with the same few 3PLs that spend $ to show up first with ads.
If I ran a cosmetics company and I needed kitting, I could search for “cosmetics fulfillment and kitting”. If you are looking for a specific location, you can add a state to your filter as well.
3. Avoid falling for sponsored/biased lists.
Whatever you do, avoid the “best 3PL” lists. These are often paid and sponsored listings, so the lists do not have much integrity to them. There are a few unbiased options out there, like this list from Lumi (although far from comprehensive and there is no requirement to list your company, at least reviews are verified). Many people have posted on Reddit looking for great fulfillment centers, so you can browse there as well for some less biased results.
Another option is to simply post on platforms like Reddit or Twitter looking for recommendations from your network. Most of the best 3PLs are tough to find because they can’t compete with the ad spend of the few big-name 3PLs in the US.
4. Create a vetted 3PL list.
For any 3PL you look at, you’re going to first want to make sure they offer the services you need. Most of this information should be found on their site. If there is any information you can’t find, you should reach out to them to find out.
Of those that fit your needs, you should check their reviews on Google, Reddit, Trustpilot, and any other places you can find. Again, you will want to avoid any reviews that seem fake or seem sponsored.
Once you have gone through this process, you should have narrowed down your list to 3-7 vetted options you can now request quotes from.
5. Request and review quotes.
We recommend keeping a spreadsheet of your notes on each of the 3PLs you talk to. You should note things like how quickly they respond, how helpful/knowledgeable they are, and anything else that sticks out to you.
Each 3PL is going to have a different pricing model that makes it really tough to compare pricing. Since the models are so different you should not be comparing apples to apples. While one company may have lower pick fees, they may have higher storage fees that offset the difference. To make this easier for you, there is a 3PL comparison template we’ve built that compares a variety of different pricing models to give you your true fulfillment cost per order.
6. Consider customer service.
In addition to pricing, you should also factor customer service into your considerations. You get what you pay for in fulfillment and there will be a plethora of times you will need questions or issues sorted as quickly as possible. Switching 3PLs is really expensive, so it is better to pay a little more for great service than start penny-pinching and get burned by poor service.
At this point, you should be able to knock out a few options.
7. Find out about their technology.
While great reviews and pricing is awesome, you’ll want a 3PL that can scale with you. Many mom and pop 3PLs run on a very basic WMS (warehouse management system), or even something as simple as ShipStation. This may be viable for some brands, but a fully capable WMS makes for more efficient integrations, processes, and ease of use for you.
In addition, they should integrate with all your current and future selling platforms, as well as any ERP or EDI connections.
8. Verify their warehouse capacity.
Get a gauge of how many clients they have and the volume they handle on a daily basis. Many businesses experience rapid growth and their family-owned 3PL can’t keep up with the increase in volume. This doesn’t mean you should go with the biggest 3PL you can find, since you’ll definitely compromise on customer service there, but it is something to consider.
Note: 4PLs are a new trend in logistics that essentially involves a company building a network of independent fulfillment centers that use their software. The model is fairly new and there are still many kinks to be worked out including vetting warehouses, enforcing standards, and managing client relationships with additional companies involved. For now, we would recommend sticking with a 3PL that owns their warehouses for a seamless experience.
At this point, you should be able to narrow it down to 2 or 3 final options.
9. Speak to some of their clients.
You won’t get a better review than from a 3PL’s actual clients. They are more likely to be honest with you when you ask them about the pros and cons of the 3PL. No fulfillment center is perfect, but be on the lookout for any red flags on your list.
10. Review the contract.
The final step in the process is to obtain a contract and review the fine print. Many 3PLs will promise the world, but their contract shows a different story and exposes many hidden fees.
Discuss with the 3PL what SLAs they have in place and how those are enforced. You should be wary of many 3PLs who advertise things like “2-day shipping” and “same-day shipping” if they do not have anything in place that holds them to those standards. Other things to consider include shrinkage, receiving, and cycle count policies.
Looking for a Fulfillment Partner?
Reach out to our team of experts at OTW Shipping. We'll see if we are a good fit and if not we have an awesome network of great 3PLs we can connect you with.
We offer eCommerce fulfillment services developed with DTC brands in mind. Most 3PLs treat client relationships like transactions. We designed OTW Shipping to feel like in-house fulfillment. We're your own personal warehouse team!
Our core value lies in our personal approach to fulfillment. With your own "Slack-like" channel, you'll have direct lines to our warehouse, support team, and leadership for immediate assistance whenever you need it. From startups to small businesses to global brands, you get the same unrivaled support.