What to look out for when outsourcing your Logistics Services

When looking for an outsourced logistics provider, look for one who does not themselves outsource key functions.

Using an outsourced logistics provider or 3PL can do wonders for some companies. It can turn third party logisticswarehousing and distribution over to experts and let you carry on with the rest of your processes. It can even cut costs. Since a specialist 3PL can be expected to be more efficient at it than a generalist business, you can save money while both partners profit. Since most 3PLs work with many businesses, they can operate large facilities and benefit from the economy of scale. At least, that is how it is supposed to work.

So what services can you expect from a third party logistics company?

Many of these outsourced logistics providers offer add-on services like freight forwarding and shipping. If they are done in-house, so much the better. But a lot of 3PLs outsource add-on services, and this can have some serious drawbacks if they don’t handle them correctly.

Adding a fourth party to the deal of course adds layers of complexity and communication problems to what should be a smooth transaction. The presence of another company’s overhead and profit needs reduces the potential margins of the other two partners, as well. At the very least, find out if you are contracting with a logistics provider who has their own labour pool, warehouse and fleet of trucks or not.

A shipping problem should be handled quickly and with a strong focus on customer service. Your 3PL answers to you on this, but who does their outsourcer answer to? You won’t be able to demand answers or action directly from the people getting between you and your customers, and this can cause a lot of trouble. If all the assets you depend on answer to the same person, you don’t end up playing ‘He said, she said’ while your customers look for alternative suppliers.

If your 3PL contracts out for shipping, they are almost certainly charging you at least a little more than their provider is charging them, even if it is only enough to pay for the extra level of oversight it requires. They probably aren’t getting premium rates with an outsourcer anyway. It all means extra costs for you. If you do use a 3PL who outsources, make sure you aren’t paying a margin on the extra services.

I don’t mean to say that you can’t get a good deal with either type of 3PL. I just mean to say that you should know what you’re getting and what you’re paying for.





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