Partnering with a third-party logistics (3PL) provider to manage your logistics operations can help take your company to the next level. But sometimes, you may find that the 3PLs you are working with are not meeting the needs of your business.
There are numerous reasons why a company might choose to change 3PL providers, but how do you know if it is the right time for you to begin evaluating other options? There are a few pain points that you may be experiencing, which can help signal that it’s time to start looking for a new 3PL partner.
In this blog, we explore the five signs that indicate it’s time to switch 3PL providers.
#1: Your third-party logistics service’s delivery speeds are lagging
Your customers expect fast order delivery. Some 3PLs can meet these customer expectations and offer ship speeds as fast as one day, as Amazon’s Multichannel Fulfillment (MCF) service does. MCF is part of the fulfillment arm of Amazon Supply Chain Services (ASCS), an end-to-end logistics solution that offers businesses the ability to add supply chain services across warehousing, ground freight, or fulfillment as needed. Since MCF is part of the world-class ASCS network, average MCF “click-to-door” speeds are over 50% faster than other retailers.1
To assess if your 3PL’s delivery performance is meeting industry benchmarks, you should monitor key performance indicators (KPIs). They include the time it takes for your order to leave the fulfillment center (or “click-to-ship”) and the time it takes from order placement to delivery (or “click-to-door”). A drop in your 3PL’s ship speeds could harm customer experience and lead to a decrease in customer retention. Customers today expect lightning-fast shipments, and a 3PL like MCF is most likely to ensure fast and reliable delivery: With MCF, 98.2% of Standard orders are dispatched within three business days.2
Beyond click-to-delivery speed, your 3PL’s delivery performance is also affected by lead times. Track your inbounding speed and note your 3PL’s speed and efficiency in moving your goods from “dock to stock”—i.e., receiving products and preparing them to be fulfillment-ready. If your 3PL is not meeting your need for speed, it may be time to consider changing third-party logistics providers.
1NielsenIQ, Delivery speed data from Insider Intelligence comparing US purchases made on Amazon.com to other US retailers, September 2023
2Based on the average number of days from order placement to dispatch for all MCF Standard orders placed in the contiguous United States from January 2024 through June 2024.
#2: Your 3PL provider’s operating costs are high, or you have additional fees
Comparing 3PL providers’ pricing can be difficult due to the variety of pricing structures available. The most important thing is that you get an understanding of the total cost of your 3PL’s services. Break down your fees into buckets that include fulfillment, transportation, and storage. Then you can determine if your 3PL is offering affordable prices for the level of service it’s providing.
It’s always a good idea to carefully audit your invoices. You may find that your 3PL has added fees to your invoice that they may not have discussed before you started working with them. Some 3PLs will charge you hidden fees like a manual labor or technology fee—these can add up and take a toll on your bottom line.
ASCS, on the other hand, has transparent fulfillment pricing with no hidden fees and can even offer discounts on bulk or multi-unit orders. You can even estimate your costs ahead of time with the MCF fee calculator. If your 3PL is not competitively pricing its services, it may be time to change 3PL providers.
#3: You are experiencing inventory management issues with your 3PL service
Effective inventory management—which can enable you to reduce storage costs and improve on-time delivery performance—can be a complicated task for businesses.
A well-resourced 3PL provider, such as ASCS, can help you optimize your inventory using state-of-the-art technology and up-to-date data on best sellers and excess stock. With real-time inventory tracking and accurate demand forecasting, you’ll be best prepared for peak season or unexpected surges. Since MCF consolidates your inventory into a single pool and distributes it across the ASCS network, it’s better positioned to be close to your end customer—and allow you to expand into new markets quickly when you’re ready to scale.
If your 3PL does not offer this level of visibility or advanced inventory forecasting, it may be a sign that your 3PL partner is not providing enough support on the inventory management front. Your 3PL should help with inventory management across your supply chain—from warehousing and distribution to customer fulfillment.
If your 3PL is not helping you effectively manage your inventory, it may be time to consider making a switch.
#4: You want to scale your business, but are not sure if your 3PL services can support your growth
When your business is expanding across new sales channels and markets, you want to take advantage of that momentum instead of worrying whether your logistics operations will support and sustain your growth. Working with a 3PL service provider that can’t keep up with the changing needs of your growing business can make your operations unmanageable and inefficient. As your business scales, you may find that your 3PL is lacking in the following areas:
- Infrastructure: Expanding across new sales channels means more customer orders, requiring more space to store inventory. If your 3PL has limited storage capacity, that’s a sign that you may have outgrown that provider. Storage constraints will not be an issue with Amazon—by working with ASCS, you can leverage its robust physical footprint, with over 2,000 facilities, including more than 200 fulfillment centers across the US.
- Geographical footprint: If you have recently entered a new geographic market, ask yourself if your 3PL has the presence to scale, domestically or internationally. Switching to a 3PL that has a global logistics network, like ASCS, will ensure you’re well-positioned to reach your current customers quickly and scale with ease.
- Technology: As your business grows and your needs become more complex, you should ensure that your third-party logistics provider employs state-of-the-art technologies that empower you to optimize your end-to-end logistics operations. Your 3PL should be on the cutting-edge of the latest technological advancements in the logistics space, from warehouse robotics and automation to demand forecasting. With ASCS as your partner, you’ll benefit from Amazon’s superior technology innovation. Amazon utilizes more than 1 million robots in its warehouses to ensure accurate packing, picking, and shipping of all packages.
If your 3PL cannot support your business as it scales, it may be time to consider switching providers.
#5: Your 3PL’s customer service leaves much to be desired
In today’s business world, supply chain issues are bound to happen. When these problems arise, you want a reliable 3PL provider that is always “on call” and able to assist you in getting your operations back on track as soon as possible.
Some 3PLs only cater to large customers, leaving small- to medium-sized businesses unable to get the help they need, when they need it. A dedicated 3PL partner, like ASCS, will build a relationship with you and provide the customer service level your business requires. With ASCS, you can avoid the frustration of working with chatbots or waiting endlessly for your provider to resolve urgent issues.
Is your 3PL overpromising and under-delivering on their SLAs? If you noticed your 3PL isn’t performing up to expectations, or that there has been an increase in damage claims, missed or late shipments, or other 3PL-related errors, your provider could be causing more issues than solving them. If they’re missing the mark on support services, it may be time to consider switching providers.
When it’s time to change 3PL providers
Deciding to change 3PL providers is a major decision. If you’re noticing any of the signs highlighted in this blog, you should evaluate your current 3PL, research other providers out there, and decide if you want to switch.
Changing a 3PL provider could give you the peace of mind that your operations are running smoothly and efficiently and could help fuel your businesses’ future growth.
