How to Choose the Right 3PL Warehouse Provider for Your Business

Like any other business partnership, choosing a third-party logistics (3PL) provider requires careful consideration of several factors. Making the right choice can boost profits, while getting it wrong can lead to customer dissatisfaction and severe damage to your bottom line. 

Key Takeaways:

• The best 3PL providers combine traditional warehouses, DCs, fulfillment centers, and carrier partnerships to provide a full suite of logistics services.
• Businesses should look for 3PLs who can provide on-demand warehousing, scaling storage needs in order to avoid overspending.
• Look for providers who offer business-to-business (B2B) and business-to-customer (B2C) fulfillment to meet all of your distribution needs.
• Location and reach of distribution are two of the most important factors businesses owners should consider when choosing a 3PL.
• A provider that offers additional services such as kitting, inventory management strategies, and returns processing can easily help you adapt as your business grows.

Join us as we lay out the most important considerations business owners should take into account while choosing a third-party logistics partner.

Warehouses, Distribution Centers, and 3PLs: What Are the Differences?

At first glance, warehouses, distribution centers, and 3PLs may seem interchangeable. However, understanding their differences is crucial to building a logistics strategy with business goals.

• Warehouses primarily store goods long-term, focusing on inventory management and limited order fulfillment.
• Distribution Centers facilitate faster movement of goods, serving as hubs for product assembly, order processing, and retail distribution.
• 3PL Providers go beyond storage and distribution by offering integrated logistics solutions, including transportation, inventory forecasting, and even customer returns (reverse logistics).

In the chart below, I’ve compiled some features of these different facilities for easy comparison.

Since 3PLs incorporate warehouses, distributors, and carriers into a network of facilities and fleets, they can scale services appropriately for businesses large and small. However, not every 3PL is created equally. Before picking a provider, you’ll want to evaluate a few factors to ensure you’re getting the best possible service at a price that lets your business keep growing.

Top Five Considerations for Choosing a Third Party Logistics Partner

When choosing a 3PL, the sheer number of factors for business owners to consider can be overwhelming. However, the most critical elements generally fall into five categories:

1. Location
2. Carrier Relationships
3. Available Warehousing and Distribution Strategies
4. Automation and Modern Technologies
5. Value-Added Services

Let's examine each of these considerations in detail.

1. Location

The geographical location of your 3PL directly impacts shipping speed, freight costs, and customer satisfaction. A strategically located provider ensures fast delivery to your target markets, reducing lead times and improving the overall customer experience.

Breaking down the importance of location comes down to two key elements:

• Proximity to Customer Base: Choose a 3PL with facilities close to your most profitable customer regions. This minimizes shipping costs and ensures timely last-mile delivery.
• Regional Taxes: Be aware of states that impose inventory taxes, as this can drive your warehousing costs up. In some cases, t’s worthwhile to sacrifice some proximity and avoid these taxes.

Of course, a smart warehouse location strategy is only useful if the 3PL has the carrier relations necessary to move goods out quickly and efficiently.

2. Carrier Relationships

The strength of a 3PL’s carrier partnerships determines their ability to adapt to market fluctuations and ensure competitive shipping rates. A diverse carrier network enables greater flexibility, especially during peak times such as holidays and tax return season.

Full-service 3PLs should also have access to carriers with specialized equipment like reefer trucks for perishable goods that require specific temperature and humidity conditions while in transit. 

By working with a diverse carrier network, a 3PL can more easily implement distribution strategies that save money and time for its clients. 

3. Available Warehousing and Distribution Strategies

As a business grows, its need for multiple storage and distribution options increases. A robust 3PL should offer a wide range of warehousing and distribution strategies tailored to different inventory types and fulfillment models.

Some common warehousing fulfillment strategies are:

• FIFO (First In, First Out): Ideal for perishable goods.
• LIFO (Last In, First Out): Suitable for non-perishable, high-turnover items.
• FEFO (First Expired, First Out): Ensures products with expiration dates are prioritized.

Distribution strategies are equally important to meeting consumer expectations while reducing unnecessary fuel costs. These include the following:

• Milk Runs: Consolidating deliveries from multiple shippers to a single destination.
• Hub and Spoke: Centralized distribution to regional centers
• Direct Shipments: Uninterrupted delivery of freight from one location to a retailer/end user.
• Multichannel/Omnichannel Fulfillment: Offering delivery and reverse logistics via multiple channels, such as home delivery and returns to brick-and-mortar facilities, gives your customers options other businesses might not offer.  

A flexible provider capable of implementing multiple warehousing and distribution strategies will help your business remain agile even when difficult situations arise.

Related: What is a Bonded Warehouse?

4. Automation and Other Modern Technologies 

Modern 3PLs rely on advanced technology to improve the accuracy and visibility of their operations for their clients and partners. Automating processes via specific types of software and/or hardware plays a critical role in reducing labor costs and preventing errors. A few examples of these technologies are:

• Warehouse Management Systems (WMS): A WMS tracks inventory in real-time, reducing the chances of stockouts and overstocking.
• Electronic Data Interchange (EDI): Facilitates seamless communication between distributors, shippers, and carriers.
• Automation Technologies: Robotics, automated picking systems, and advanced conveyor systems improve productivity and speed in warehouse environments.

By working with the most up-to-date technology, 3PLs drive efficiency across the supply chain, ensuring fast order processing and reduced fulfillment errors.

Related: Types of Warehouse Management Systems

5. Value Added Services

A top-tier 3PL offers more than just warehousing and shipping—they provide value-added services for their clients. As a business owner, these services can free you up to focus on marketing, customer research, and other ways to grow your enterprise.

These are just a few of the services a third-party logistics provider can add on top of their traditional offerings:

• Kitting and Assembly: Bundling products for shipment
• Reverse Logistics: Processing returned goods
• Inventory Planning and Forecasting: Helping businesses maintain optimal stock levels
• Customization and Labeling: Tailoring packaging to meet customer requirements

These services improve the customer experience from purchase to delivery, differentiating premium 3PL providers from basic warehouses.

Grow Your Business With Fulfillment and Distribution

Choosing the right warehouse provider is a cornerstone of supply chain success. By focusing on the elements we discussed above, you can be certain your 3PL provider will position business for scalable growth and enhanced customer satisfaction.

Fulfillment and Distribution is a strategic partner offering comprehensive 3PL services to businesses of all sizes. These services include:

• Full 3PL warehousing
• Retail fulfillment
• Reverse logistics
• And more

Call us today at (866) 989-3082 or get a risk-free quote online. We’re standing by to help fulfill all of your business’s logistics needs.