While the nation and the rest of the world continue to stumble through a period of economic recovery, many businesses are thinking twice about investing large sums of capital in plans such as warehouses.
Instead of fronting up all that cash for a new premises, many are choosing to instead opt for 3PL (third-party logistics), to avoid the hefty upfront costs and perhaps try and see out the economic downturn.
So what is 3PL? Third-party logistics firms allow companies to outsource their logistics and warehousing in a flexible manner, allowing them to scale up or down their operations depending on their needs.
For more information on why more businesses are choosing to outsource like this, check out this post from Masters Logistical.
But how can you find a warehousing partner that you can trust? After all, it’s quite a big leap of faith to put your goods in the hands of another company and hope that they get everything right.
So what do you need to ask yourself before choosing a company to handle your logistics?
Why are you choosing to outsource?
Firstly, you need to identify specifically what it is that you’re looking to get out of this 3PL arrangement.
Do your research about the 3PL companies that you’re looking at, and try and find out if you know anyone they’ve worked with before so you can get a first hand account of how they work.
While the cost is obviously of great importance to you, don’t necessarily just go with the cheapest provider.
Take into account the approach and experience of your 3PL provider, and bear in mind that this is a long term and important decision you’re making, so don’t cut corners just to save a couple of quid!
Weigh up the finances
Ultimately, it’s the financial cost that’s going to be the biggest factor in making your decision, so make sure you compare all of the firms that are out there to make sure you’re getting the best price, and weigh up how your monthly costs would stack up against the big capital outlay of setting up on your own.
As we’ve pointed out, you shouldn’t necessarily make your decision just based on cost, but it is of course a big factor on your business.
3PL providers are usually quite flexible when it comes to costs, and will bump your price up or down depending on your contract and your needs.
Known the benefits…and the risks
While we believe outsourcing your logistics is a great idea, thanks to its flexible contracts and low capital outlay, there certainly are risks, and it’s important to be wary of these risks and to not get sucked in by a sales spiel.
You’re essentially putting the success of your business in the hands of another firm, which is a situation that could make you understandably wary.
Check out their track record and make sure that they have a proven pedigree, and try to gauge what kind of feel you get from them. Are they the kind of people you feel like you could trust with handling your stock?
Find a provider who complements your business
While you don’t necessarily have to work with a 3PL provider who has experience in your specific industry, it does help.
For example, if you have a specific operation you’ll be requiring them to carry out, it makes sense to check if they have previous experience doing so.
The number one mistake you can make when choosing a third-party logistics company is making your choice based purely on price.
While it’s understandable that you want to get the best deal possible, you have to take into account the service that you’ll be getting.
Try to use a broader range of criteria when making your decision, and look at the quality, price, location and reputation when reaching your decision.