Posted On October 10, 2022
You’ve got options.
When it comes to choosing a third-party logistics provider, the choices are plentiful. The transportation industry is full of third-party logistics providers and freight brokers, all with different specialties and services. And because many supply chain management partnerships span years or longer, it’s important to make sure the logistics business you choose will adequately meet and exceed your needs now and in the future.
We often talk with shippers who are unhappy with their current 3PL partners, or who don’t use a 3PL but are curious about getting started. We’ve put together a list of some important questions to ask a prospective partner to ensure the best fit.
Important questions to ask your third-party logistics provider:
As a freight broker, which carriers do you work with?
The main role of a third-party logistics provider is to help shippers find the best carriers for their needs. Often, that means the most cost-efficient option, although many shippers need to weigh other factors like transit time, customer service and risk of damage. So knowing which carriers and trucking companies a freight broker partners with is important for knowing what options are available to you.
But even more important than the carriers themselves is how transparent the 3PL’s answer is. Most of the time, shippers should look for third-party logistics providers that can work with any and all carriers, sometimes called “carrier agnostic.” If a freight broker is tied to only a small handful of carriers, it may be because they have financial incentive. In that case, the freight broker doesn’t have the shipper’s best interest in mind—a major red flag.
Will you make the routing decisions for us?
One of the main benefits of hiring a freight broker or 3PL is their expertise. A knowledgeable 3PL partner can make complex supply chains much easier to manage. But relinquishing all control of your logistics is risky—so the answer to this question is nuanced.
In some ways, you’ll want the freight brokerage you partner with to either simplify the decision-making process or even make the more straightforward carrier and routing decisions on your behalf. But no freight brokerage will know the intricacies of your business like you do—so there will be times when an option is presented that you don’t want to use. In that case, you’ll still want the power to make the decisions.
Look for a 3PL that makes decisions around logistics management easier—either by sharing their expertise or having a strong transportation management system like Pipeline or a combination both—but will still let you make the final call.
Are you asset-based?
This question is similar to the question about carriers, because it uncovers whether freight brokers are looking out for your best interest or are making recommendations based on what will be most profitable for them.
A freight broker that is asset-based, or moves goods with its own physical assets, will push its own network. In times when carrier capacity is limited, or the option is cost-effective, it’s not necessarily a bad option. You’ll just want to keep this detail in mind when reviewing prospective partners and considering whether you want to work with a business that isn’t carrier neutral.
What is your supply chain connectivity?
There’s a reason it’s called a supply chain—the many different components of transporting goods all need to work together for it to be successful. So, when you meet with a transportation services provider, you’ll want to get a sense of how your data will be stored and accessed.
Follow-up questions include asking what tools the provider uses for visibility into the entire supply chain and how your team can use those tools. Will people across teams at your company be able to access the tools and find the information they need quickly and easily? And will you have to work with an additional business beside the 3PL on the technology, or will the 3PL handle it all? These questions will give you a good sense of what it will be like to work with that company.
Beyond transportation services, what added value do you bring to my supply chain management?
Price will always be an important element in choosing a 3PL. But many freight brokers and logistics providers offer additional services and solutions that can be a boon to your business. The opportunity cost of choosing one logistics partner over another can mean your company loses out on important benefits
Consider how these added services might affect your business:
Invoicing, audits and overall efficiency
Your company’s logistics processes don’t end once the shipment arrives at its destination. Many 3PLs offer consolidated invoicing, meaning your team only has to pay one monthly invoice instead of five or more. Some third-party logistics companies also offer invoice audits, completing reviews of invoices to ensure your business isn’t being overcharged by carriers.
Not only can these services save your company money, they can also increase efficiency and allow your team to focus on other important tasks—raising productivity and potentially even revenue.
Supply chain technology and data
As the logistics industry—and world—continues to digitize, supply chains are following suit. And better supply chain technology gives companies a competitive advantage.
Depending on your needs, you might look for a logistics partner that offers a TMS, shipment execution platform and other technology. It’s even better if the company can extract data from the platforms to spot opportunities to improve. For example, Flat World’s supply chain management technology provides insights into how a company’s supply chain costs compare to other businesses in its market. We can also use the data to uncover trends in damage, incorrect carrier charges and more.
For any technology offerings, make sure you understand all the specs and capabilities—like what integrations are possible, and whether the platform is customizable to your company’s specific needs.
Warehousing and distribution
Most logistics providers can get your shipments from point A to point B. But sometimes, you’ll need storage options as well. A company that offers warehousing services and warehouse space can come in handy when you need to house additional stock for a busy season or store excess inventory until it’s needed. Look for a company with a network of warehouses in strategic locations around the country or globe.
Ongoing optimization
The difference between a good 3PL and a great one is this: consulting. Most 3PLs can connect you with reliable carriers for an acceptable price. But not all carriers can help you navigate snags in your supply chain due to unforeseen complications or continuously look for ways to improve operations. Ideally, your logistics partner will meet with you at least once or twice a year to review performance, make suggestions and set goals for future improvements.
Additionally, consider asking the 3PL companies you’re meeting with about what they’re doing to evolve their own processes, teams and technology.
How long are your contracts?
Sure, this question is simple—but it’s important. Make sure to understand the details of your contract, including what services are covered, any additional pricing and how long you’ll be locked in. Even better? A partner that doesn’t require contracts, and instead works hard ever day to keep your business.
What questions do you have for me?
This might seem like an odd question to ask, but the answer you get can be revealing.
The questions logistics providers ask—or don’t ask—will show how thoroughly they want to understand your business and goals. How deep will they dig into your logistics operations (and even other operations) to find solutions? And are they suggesting solutions that will actually address your challenges, or just suggesting solutions that will make them money?
The answer to this question can tell you whether you’ll get one-size-fits-all support, or customized services from a true partner.
And bonus questions shippers should be asking themselves:
In addition to asking providers the questions above, we have a few more questions we suggest asking—but we this time, they’re questions for you and your team to answer.
Is your current freight broker or 3PL always working in your best interest? If you’re getting the most out of your supply chain operations, are your vendors helping make that happen? And if there’s room to improve, can your current partners help close the gap?
Choosing a freight broker or switching to a new logistics provider is an important option that can affect your company’s bottom line for years to come. Keeping these questions in mind as you meet with businesses can help you make the right decision.
Have questions for Flat World? We’d love to discuss your logistics goals and perform an audit of your company’s logistics processes to help you find ways to improve. Contact us to get started.
