Your eCommerce brand is growing beyond your garage’s capacity. You’re looking for an alternative to take the load of fulfillment off your shoulders. Your head is spinning trying to figure out how a 3PL works and whether outsourcing fulfillment is right for you. You may not even know what to consider or how to choose a 3PL.
After all, it can be hard to compare rates, service, capacity, and other factors when looking for the right fulfillment center, and we hear you. That’s why we put together a quick list of questions you should get answers to before making any decisions for your business.
Questions You Should Ask Your 3PL
1. Will my selling platform integrate into your software?
This is a basic, but extremely important question you need to ask a potential 3PL. If their answer to this question is no, then they should be immediately disqualified. Any professional fulfillment provider will offer an out-of-the-box integration to smoothly bring orders from your storefront into their warehouse management system.
When the order is shipped, the tracking # will automatically update and alert your customer. This means you don’t have to worry about manually uploading hundreds of orders per day, allowing you to focus on growing your brand!
If you plan on selling B2B, make sure the provider has EDI (Electronic Data Interchange) capabilities as well. This will streamline the process of vendor requirements and third-party shipping labels and save you a lot of headaches!
2. What can I see/do from my account?
If your fulfillment provider uses fulfillment software for which you have an account, ask them what accessibility your account has to things like billing information, charges to your account, inventory levels, orders, and other components of your business. You should have the freedom to see anything that has to do with your inventory and finances.
No charges should be hidden, and if they are, you need to evaluate the transparency and honesty of the company you are looking into. Keeping you in the dark on billing means they can do whatever they want without you being able to see it.
When it comes to an operational viewpoint, it only makes sense for you to be able to edit orders, adjust platform integrations, and monitor inventory levels. The more you see, the more you can be on top of your fulfillment.
3. What shipping carriers do you use?
Depending on the size of your items, some carriers will be better than others. If you have a small, lightweight product, then a carrier like USPS will be a better option than UPS or FedEx. The opposite goes for large, heavy products. If the fulfillment provider doesn’t provide competitive rates for the carriers you need, you may consider looking elsewhere.
Here is a 3PL pricing comparison template you can use to compare costs!
Some other things to consider are postal workshare options where a package is passed by the carrier to USPS handles the final mile delivery. These include DHL eCommerce, UPS Mail Innovations, FedEx Smartpost, among others. If your fulfillment provider uses any of these carriers, you can be confident you are getting good shipping rates from a company handling significant volume.
4. What are your Service Level Agreements?
Service level agreements are critical to holding your fulfillment provider accountable for any guarantees they offer you. They should have a written list in their contract containing all of their SLAs. You should not only see specific numbers, but also a plan in place if they don’t hit those numbers.
Arguably the most important SLA is a fulfillment time SLA. Your orders should have a guaranteed cutoff for same-day shipping you can hold the 3PL to. Some providers will have a same-day SLA, while some may have a 48-hour SLA. The quicker you can get orders out the door, the faster they will get to your customers, so this is important.
You should also have an order accuracy SLA. If your fulfillment provider ships the wrong product, will you be reimbursed? Will they cover return fees?
Another SLA that is crucial is a receiving SLA. Your inventory doesn’t do you much good if it is sitting in the receiving department for a week. Make sure that the fulfillment provider you choose quickly and correctly receives your inventory so you can start shipping ASAP.
5. Do you handle returns?
If you offer returns, the answer to this question obviously needs to be yes. If a fulfillment provider doesn’t handle returns, then you will be responsible for your own returns which can be pretty overwhelming for some brands, and will be expensive to then just get sent back to your 3PL anyways.
If that is something you’re fine with, then no worries here! However, you most likely want to get all of the operations off your hands, so be sure to find a fulfillment partner that will take care of that for you.
6. Do you have an order volume minimum, account fees, or onboarding fees?
If a fulfillment provider has an order minimum or monthly spend minimum, make sure you know what it is. Some companies will try to keep those minimums hidden until you sign a contract, so be sure to keep an eye out! This also applies to account fees or onboarding fees.
If you are getting charged account fees, make sure they stay under $300/mo. Onboarding fees shouldn’t cost more than a few hundred either. However, it is easy to find providers who don’t charge these fees, so don’t think it is a standard practice to have to pay these.
7. Is your contract binding?
As an eCommerce entrepreneur, you never know what the future may bring or how a new fulfillment provider will pan out. As you explore the vast array of logistics partners at your disposal, you should beware of contracts that bind you to a specific term length.
Look for contracts with a termination clause that will allow you to exit the contract with a written notice. This is a valuable option to keep in your back pocket in the event that you decide now is not the right time for fulfillment or the 3PL isn’t working out for you!
8. How many clients do you have and how many orders per month do you ship?
You'll want to avoid a 3PL with only a few clients or low monthly volume since they are still a bit unproven, and likely don’t have processes built out externally or internally.
Speaking with a few of their current clients will help give you a better picture than the testimonials they have on their website of how it really is to work with them. If they are unwilling to connect you with any of their current clients, this is a red flag!
Getting a feel for the order volume the fulfillment provider currently handles is also important, because as an eCommerce brand, you want to grow! If a company isn’t used to handling clients with your projected volume, you will want to save yourself the trouble of transitioning to another provider down the road.
9. What is your shrinkage policy?
When your product is with your fulfillment provider, there may be occasions where the actual count of inventory is different than the expected count. There are many ways this can happen and it could be your fault, your supplier’s fault, or your 3PL’s fault. It could be the result of a clerical error, packing issue, or technical issue. Shrinkage allowance accounts for these discrepancies by defining how much of your product can be unaccounted for in the warehouse before your fulfillment partner needs to compensate you for your lost or damaged product.
If your 3PL is relying on good faith receiving (not counting each unit), they may not be liable for shrinkage for individual units, naturally. However, they should have at least a shrinakge policy for master cases. If they are counting every unit, there should be a strict shrinkage policy in place for % of units missing as this leaves the fault solely with the 3PL if there is lost product at this point.
Anything over 1-2% is egregious, so as long as it is 2% or less you should be okay. If their percentage is higher than 2%, it means they have more flexibility to lose and damage your product without giving you any type of compensation for it. Look for low shrinkage allowances so you are sure that your inventory is being handled with care.
10. Who will I be able to contact for support?
Mistakes can happen and technology can fail. When it does, 3PL support matters. Who will you go to?
Ask the providers you talk to what their support team is like. Do you need to open tickets? Do you email an account representative? Is there an automated chat option? Find out how their support operates, because when your orders aren’t syncing or the system is down, you will find yourself in a sticky situation if you are waiting hours for an email back from your rep.
OTW Shipping is a great example of how a support team should be set up. Each customer has a dedicated communication channel where they can tag specific members of the support team, depending on their questions, and get responses in real-time. The team is constantly monitoring these channels so there is never a delay in responses. Plus, you’ve got a line directly to the warehouse team so you have unparalleled transparency and communication.
Ultimately, look for a fulfillment provider that prioritizes your needs first and makes you feel like you are their only client!
Now you’ve read this list, you know what you need to ask, so get out there and find a 3PL! You won’t regret asking too many questions, but you will regret making an uninformed decision. Take your time, do your due diligence, and find the partner that feels right!
Looking for a Great 3PL?
OTW Shipping offers fulfillment services for brands who need a 3PL they can trust to do the job right and be transparent with billing and communication.
Our services are designed to mimic in-house fulfillment. Whether you are a startup or a global brand, you will have direct access to our warehouse team who handle your product every day.
Our advanced software lets you see every item on your bill and integrates with all your selling platforms for a seamless fulfillment experience.
Our best-in-class SLAs back up our promise to ship your product out on time and accurately.
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