How to evaluate an ecommerce fulfillment partner
Shopping for any business service is a high-stakes evaluation, especially when it’s one that affects the value delivered to your customers. But for eCommerce businesses, choosing a fulfillment partner is one of the most important and difficult decisions to make. After all, the chosen fulfillment company will be responsible for receiving, storing, picking, packing, and shipping your product to customers.
Essentially, the fulfillment company is responsible for ensuring that the value created by your marketing team, web developers, product engineers/procurement team, and customer service representatives, is actually delivered to your consumers in the expected condition, as fast as possible, without any flaws.
Finding the partner that’s going to not only bolster your business but grow with you and even add value requires some serious consideration. Let’s sort through the do’s and don’ts looking for the right logistics partner for your business.
Define exact and measurable KPIs
When measuring the performance of your business, you gather as much data as possible so you can look at the big picture and assess certain aspects of how it’s running. Well, you need to do that with your third-party logistics (3PL) provider, too. Start with KPIs, or key performance indicators. These will help you evaluate the performance of their service.
There are several factors that can be measured as KPIs, and they should be measured through logs. Logs tell you everything about the storage, packing, handling, and shipping, and can be configured through a barcode scanning system or timestamps.
Talk to your 3PL about what kind of tracking system they have in place. If they don’t have one, run the other way.
Tracking your 3PL’s KPIs is insurance for you, so you can track how quickly and efficiently they’re getting your products out the door. If they don’t have a tracking system in place or refuse to give you that information, you shouldn’t trust them with your business. A 3PL that works on time and efficiently will happily give you access to whatever you need to evaluate how well they’re doing their job.
Meet your 3PL partners and visit their facility
A boardroom meeting isn’t enough. It’s important to visit the actual facility where your products are going to be shipped. See how they run their business before you hand over yours.
While the technology they have in place is important, visiting the facility will give you a sense of their standard operating procedure. Pay attention not only to how workers are managed but if they’re incentivized to be more accurate and efficient. These are the people who care for your product—they should be treated (and trained) well. You should also pay close attention to the systems they have in place and the overall efficiency of those systems.
Do the workers look like they’re getting packages out the door quickly, but maybe not picked accurately? Is the warehouse clean and organized? These are important questions that you have to see to answer for yourself.
On that note, I always suggest making a surprise visit to the facility you’re considering. That’s right—just show up. Why? You should be able to walk in any day and their business, systems, and employees should be working smoothly. If you show up and they try to avoid showing you the floor, you should be worried.
In the end, though, this visit is supposed to leave you feeling excited about the partnership. The 3PL should welcome you with open arms, showing you around the facility and explaining what your product will go through as they get it out the door for shipping.
Ask if they are prepared for the worst-case scenario
I’m sure you have a plan for the worst-case scenario happening to your business. And the truth is, so should your 3PL. Sometimes the internet goes down, systems overload, and workers call in sick.
So, what’s their plan for your products when that worst-case scenario unfolds?
Be sure to ask your potential 3PL how they plan to keep things running smoothly in the case of a disaster, low workforce, or malfunction. Specifically, you want to know:
- Do you have a backup generator if the power goes out?
- If the power goes out, does our order flow halt?
- Are there backup internet service providers? How many levels?
- Is there an internal IT department?
- Or is there an external IT department (that can cause delays)?
Ask about their ability to scale up
When shopping for a logistics partner, you need to look ahead. In the long term, and possibly even the near future, your business is going to grow.
So, will your 3PL be able to handle it? Do they have the capacity to scale and provide your business with everything it needs to handle that growth? What ecommerce fulfillment guarantees do they offer?
Not only that, you need to consider the seasonality of your product and bubbles around the holidays. How does your 3PL expand with you when you need it?
The last thing you need when business is booming is to be slowed down by a 3PL that just can’t keep up. So, ask them these questions:
- If our SKUs expand, what happens?
- How do you handle seasonal, or periodic, increases in scale?
- Do you have a predetermined, scalable workforce to handle extra packaging?
- What does that include? Off-hour shifts? Weekend shifts?
Don’t choose a 3PL because it’s close to you
Having a logistics partner near you isn’t necessarily an advantage. Because while your business might be located in Miami, your customers could be all over the country. If you choose a 3PL that’s close to you and not your customers, chances are it’s going to cost your logistics partner a whole lot more to ship to your customers nationwide.
3PLs negotiate great prices with shipping companies for you, so take advantage of that. If your customer base is nationwide, choose a 3PL that’s centrally located so they are equidistant to your customers. On the flipside, if your customer base is generally on the East Coast, you should consider a 3PL there.
Don’t be afraid to ask for a trial period
Sometimes the best way to judge something is to just give it a try. So, don’t jump into a contract; instead, ask for a test drive.
This is a great solution if you’re on the fence or trying to decide between a couple of 3PLs. Chances are, a fulfillment company with a great track record is actually going to be happy to try to win over your business with a trial.
If you go for a free trial, also be sure to get your measurable KPI’s, so that, at the end, you can really evaluate all aspects of the partnership and make sure it’s a good fit.
Don’t lock yourself into a long-term contract, ever!
You’re looking for a partner, but you don’t have to make a long-term commitment. You don’t hear that often, do you?
Even if you find a 3PL that you love and go on to work together for years, you shouldn’t bind yourself to a long, overarching contract at any point.
Over time, you might realize that you need a 3PL that has greater agility to handle your growth, or maybe that your current 3PL is just not running its operation the same. By opting for short-term and renewable contracts, you always have a way out if your business grows or the situation changes.
Plus, along the way, you should continually keep track of your KPI’s to evaluate your business partnership. If things go awry and there’s no solution in sight, you won’t have to worry about sticking around in a situation that’s hurting your business.
Don’t put price over value
Everybody wants a good deal, but you need to look at a 3PL as an investment. More often than not, a low logistics price means you’re cutting back on something. So, if the price seems too good to be true, you have to ask them how they got so low.
Is their price low because they’re not implementing the technology that ensures accurate picking? Does their price affect customer service? After you get to the bottom of what the price gets you, you need to weigh the pros and cons of that with what your business needs.
At the end of the day, you’ve done a lot of work to get your customers to your website and buy your product. The last leg of the race relies on your 3PL, who is going to pack and ship that product efficiently and on time, helping you create a return customer.
So, if it costs a little more to get the most efficient packing, implement the best tracking, and keep customers coming back for more, consider it an investment that will pay off.