As your business grows, so do the complexities of managing logistics. That’s where partnering with a third-party specialist can become invaluable. 

Enter third-party logistics providers, or 3PLs for short. As your potential knight in shining armor – or at the very least, your solution to not drowning in a picking, packing, and self-shipping nightmare – choosing the right third-party logistics provider (3PL) is an essential step. They handle all the heavy lifting (literally) while you focus on what you do best – growing your business and keeping your customers happy.

But here’s the kicker: not all 3PL solutions are created equal. Pick the wrong one, and you might find yourself in a logistical nightmare, complete with delayed shipments, unhappy customers, and a headache that no amount of coffee can cure.

In this guide, we’ll walk through your options and provide helpful guidance on how to choose a 3PL provider that best meets your needs. So, with no further ado, let’s embark on your journey to finding the perfect 3PL for your ecommerce empire.

The benefits of a 3PL partnership

The benefits of choosing a 3PL provider that aligns with your business needs and goals should be fairly obvious. But, in case you need any more convincing before we start digging deeper (because, let’s face it, letting go of control can be hard), a recent 3PL industry study found that:

• 73% of 3PL users found partnering with a dedicated specialist resulted in more positive customer experiences.
• Using a 3PL has helps sellers provide new, innovative ways to improve logistics effectiveness. 
• 85% of survey respondents agreed that using a 3PL led to higher logistical cost-efficiency.

However, you can’t learn how to choose a fulfillment partner without first understanding the nuances of the various options available. So, let’s take a brief look at a couple of popular variations before moving on to what to look for in a 3PL partner. 

How to choose a fulfillment partner: platform-provided vs traditional 3PL solutions

During your 3PL research, you’ll likely encounter two main models. Each comes with its own set of perks and pitfalls, and knowing which is right for your business can make all the difference.

Fulfillment by major ecommerce platforms

Logistics solutions like Fulfillment by Amazon (FBA) and Shopify Fulfillment Network allow you to store products in the host’s fulfillment centers where they’ll be picked, packed, and shipped on your behalf. 

There are certainly merits to this model at first sight—namely, guaranteed speed and less logistical hassle for you. Plus, there are some added bonuses, like the potential for your products to qualify for Amazon Prime or the fact that you can offload customer inquiries and returns. However, it’s not all sunshine and rainbows, because:

• Storage fees can accumulate quickly, especially for slow-moving or specialized products.
• You’ll have limited control over packaging and branding.
• There are often extra fees for labeling, removal, and disposal of unsellable inventory. 
• Handling custom orders, product bundles, or promotional inserts becomes challenging. 
• Offloading customer service and returns management can be a double-edged sword because you’ll have less control over interactions and policies.
• You have limited inventory visibility, making it difficult to protect against supply chain setbacks like stockouts.

Stand-alone 3PL providers

Stand-alone 3PL providers take the logistical load off your shoulders without you having to relinquish as much control. So, they’re often a preferred option for entrepreneurs who are scaling but still want to take the lead on core tasks themselves. There are hundreds to choose from, but a few leading examples include:

• FedEx
• DHL
• EasyShip 
• ShipBob
• ShipWorks

Stand-alone 3PLs are experts in supply chain management and are often better suited than in-house solutions to adapt to your unique business circumstances, providing the resources and flexibility you need to:

• Handle increasing order volumes without sacrificing inventory or supply chain visibility.
• Retain control over packaging and branding customization. 
• Access a broader network of carriers and shipping options.
• Scale flexibly during periods of high seasonal demand.
• Negotiate services and pricing to better fit your unique business needs.

Dropshipping vs 3PL: what’s the difference

3PL solutions and dropshipping models both aim to simplify your fulfillment process, but they operate in fundamentally different ways. Here’s a quick overview to make the key differences clear. 

Dropshipping

The supplier owns the inventory until it’s sold. All you do is forward the order on, and the supplier ships the product directly to the customer. This option is best suited to:

• Startups
• Sellers wanting to test new products without committing to inventory.
• Sellers looking to minimize upfront costs and minimize logistical responsibilities.

3PLs 

Choosing a 3PL provider means you own the inventory, but your logistics partner picks, packs, and ships your order from their warehouse(s). It’s a much better option for entrepreneurs looking to scale with a reliable inventory and fulfillment strategy, and for those wanting to build a brand and maintain control over customer experiences.

How to choose a 3PL provider: Essential considerations

Have you considered the different models above and concluded that choosing a fulfillment partner is the best option for streamlining your operations, cutting costs, and providing the flexibility you need to scale? 

OK, great! Then, it’s time to concentrate on finding the perfect match and picking your winner! Here’s everything you need to know about how to choose a 3PL provider that’s best aligned with your needs and goals. 

Value proposition

Before we get down to the nitty-gritty of how to choose a fulfillment partner, it always pays to run a few manual calculations that confirm it’s is the right option for business growth and profitability on paper (or, more likely, a spreadsheet), rather than relying on logic and gut instinct. Here’s how to do it.

• Weigh the total costs – Consider the short-term cost and ongoing investment of partnering with a 3PL, including setup fees, warehousing costs, pick-and-pack fees, and shipping expenses. 
• Think long-term – Evaluate the potential savings and efficiency gains a 3PL can deliver over time in terms of reduced overheads, improved order accuracy, faster shipping times, and happier customers.
• Run an ROI analysis – Compare your estimates from the calculations above with your current in-house costs or platform-provided fulfillment options before making a final decision based on bottom line benefits. 

Omnichannel support

With a 3PL partnership firmly earmarked as the best option, it’s time to case out omnichannel capabilities. Remember, it’s not just about moving products from point A to point B. It’s about doing that with style, speed, and efficiency – whichever channel your orders come through. 

• Flexibility and variety of shipping options – Flexibility in shipping methods makes it easier to accommodate different preferences and keep costs in check. Top-notch 3PLs offer a smorgasbord of shipping choices to delight your customers, from same-day delivery to budget-friendly options. 
• National and international footprint – Ready to think big? A 3PL with a robust network spanning both domestic and global markets can help you reach customers far and wide, with reliable transit times and expertise in handling customs acting as extra cherries on top.
• Branding customization – How to choose a fulfillment partner that’s an extension of your brand?  Look for options that can add those little touches that make your brand memorable. Think quality packaging, personalized notes, and special inserts that can turn a simple delivery into a delightful unboxing experience.

Reputation and experience

Handing over the reins to a third-party logistics provider requires trust. After all, it’s your customer satisfaction scores on the line, not theirs. Here are a few primary considerations:

• Service level – Do your homework on the track record that lies behind the shiny logo and convincingly crafted web copy. Testimonials, case studies, and industry ratings can give you a clear picture of reliability and how each option handles logistics, customer service, and problem-solving.
• Industry specialization – Choosing a 3PL provider that knows your are of specialization inside out is essential because their expertise in navigating industry-specific challenges and regulations can make a big difference to both customer service and your bottom line.
• Agility – A nimble 3PL can adapt quickly to market changes and disruptions, keeping your business running smoothly. 

Scalability 

Scalability is about more than just handling more orders—it’s about doing so efficiently and cost-effectively. 

• Cost–effectiveness – Make sure your 3PL’s distribution network is strategically located based on your current market to optimize shipping routes and cut down transit times.
• Capacity to handle growth – How do youo choose a 3PL provider that grows with you? Easy! Ask enough questions to ensure they have the warehouse space, workforce, and technology to handle your business’s increasing order volumes without missing a beat.
• Geographic presence – It’s all about location, location, location! 3PLs with a well-placed network of fulfillment centers facilitate faster deliveries and lower shipping costs, making it quicker and easier to tap into new markets.

Technology and integration

Transparency, ease of use, and visibility are the most essential factors in ensuring that logistical operations run smoothly. You should consider the following features essential:

• Software compatibility – Choosing a fulfillment partner that’s tech-savvy is a no-brainer. Look for options that integrate seamlessly with existing systems like your sales platforms and warehouse management system (WMS).  
• Automated workflows – Customizable settings for automated order fulfillment and administration tasks help boost efficiency, slash labor costs, and eliminate manual errors.
• Real-time data sharing – Access to live data on inventory levels, order status, and shipment tracking lets you make informed decisions and respond swiftly to minor hiccups before they become more major issues. 

Common challenges working with a 3PL and how to avoid them 

Congrats! You can put a big old tick next to ‘work out how to choose a 3PL provider’ on that lengthy to-do list of yours! 

But hold up a sec because you’re probably not quite ready to kick into flexi time, set your out-of-office, and jet off to somewhere by the sea just yet. Why? Because while partnering with a 3PL unlocks numerous benefits, it’s not without its hurdles. 

Let’s dive into some common issues and how to address them so you can maintain smooth operations, achieve your full potential, and inch closer to those work-free, stress-free vacations to Hawaii, Southeast Asia, Outer Mongolia, or whatever other far flung destinations take the top spots on your bucket list.  

Building trust

Trust takes time to build, but is the foundation of any strong partnership. Developing a positive, long-term relationship with a 3PL involves open communication and mutual respect. Try to foster collaboration and transparency from the off by:

• Being honest about your needs and challenges, and encouraging them to do the same. 
• Emphasizing the importance of flexibility to allow for scalability and quick adjustments.
• Working together to find solutions that benefit both parties.

Communication

Miscommunications lead to errors, delays, and unhappy customers. Therefore, robust communication channels and protocols are a must to ensure everyone is on the same page. The backbone of your 3PL strategy should be based on the understanding that you’ll receive:

• Regular updates
• Transparent reporting
• Real-time data

Reliability and performance issues

3PLs have real, live humans working for them, just like you do. So, even the best providers will make mistakes sometimes. However, you can mitigate risk by: 

• Setting clear performance expectations.
• Establishing key performance indicators (KPIs).
• Conducting joint performance reviews that are structured, data-driven, and solution-focused.

Integration challenges

3PL integration can be a complex process – and one often fraught with technical difficulties. Here’s how to avoid unnecessary disruption:  

• Work with your chosen 3PL to develop a meticulous and detailed integration plan. 
• Conduct thorough testing before going live.
• Ensure support systems are in place for handling any technical issues that arise.

Cost management

Staying vigilant helps you to maximize the ROI from your 3PL partnership. You should:

• Scrutinize your 3PL contract for potential extra charges.
• Negotiate terms upfront for any new or unexpected hidden fees or charges.
• Regularly review your expenses and look for ways to optimize logistics processes further. 

Linnworks makes light work of managing 3PLs

At Linnworks, we know that learning how to choose a 3PL provider and manage the relationship can be tricky. For many entrepreneurs, it feels like juggling with flaming torches before you’ve even wrapped your head around the basics of the standard 3-ball approach. 

But fret not! Linnworks’ omnichannel capabilities make connection with a wide range of market-leading 3PL providers effortless, allowing you to manage all your logistics operations from a single dashboard. 

Seamless integration means fewer headaches and more efficient processes, giving you the freedom to focus on growing your business. In other words, juggling those flaming torches becomes thing of the past! 

However, 3PL integration isn’t the only draw card. With Linnworks’ advanced shipping integration functionality, you’ll also get:

• Real-time inventory management.
• Automated order fulfillment.
• Comprehensive warehouse management tools.

Ready to learn more? Join the Linnworks revolution today! Request a demo today to see how it works in action, or contact our helpful team with your questions to learn more.