By Kathleen Sullivan Garman, SullyGarman & Associates
As a merchant, sales and marketing drives your growth, but operations can break your business.
One of the most important decisions you will make in your commerce journey is which 3PL partner will be the right partner for you. We take the term “partner” very seriously. The warehouse staff are the last people to touch your product before your customer does. They hold your very valuable inventory assets and they can make or break how a customer feels about your company.
Choosing the wrong partner can literally leave you and your business with a bad case of PTSD. Your approach to picking the next partner will be colored by your past bad experiences, and will inevitably create some blind spots when it comes to making your next choice.
Whether you’re a first time 3PL client, or you’re wanting a new partner, or even expanding beyond warehouses you’re already using, it’s important to conduct the right kind of search.
of Shippers that report use of 3PLs has contributed to improving service to customers
Source: NTT Data
of Shippers are increasing their use of outsourced logistics services
Source: NTT Data
Starting a 3PL Search
A brand can be looking for a new 3PL for a variety of reasons. Self fulfillment is outgrowing their capacity, there are financial savings in outsourcing, a brand is unhappy with their current partner due to mistakes, missed targets and pricing disagreements. If any of those sound like you, this book is for you. Finding a 3PL can feel overwhelming and time consuming, but with the right tools and processes in place, you may find just the fit you need.
Consider the timing of your search, plan the search for 3 months before you want to start onboarding. Keep an eye on peak seasons for your brand and make sure you’re making the switch at a time where there will be the smallest impact possible. For example, you do not want to be onboarding with someone new during peak holiday season but you do want to start immediately after when your inventory level is lower and the cost of switching is reduced.
Pro Tip: NEVER USE GOOGLE TO FIND A FULFILLMENT PARTNER!
A random warehouse provider whose paid ad caught your attention may not be the right fit for you.
🎮 Take Control
You have some work to do before you even start your search. Every 3PL will want to know the project scope and learn more about your company. They will all give you a form to fill out. All in different formats but looking for the same info. Before you start those chats, prepare your own scope document.
We’ve got your back – Click here for a free scope template
Be as transparent as possible, remember they want to be your partner too, but in order to meet your needs, they have to know what the requirements are.
Business Overview: It’s important to be transparent about your business, both as it stands today and your future goals. Your product mix, your leadership, your plans & objectives and what the goal is for this new partnership.
🗺 Geography: Near a port? Near your factory? Tax implications for cross border (see our blog on Section 321). Make sure you analyze the rest of your supply chain as part of this step. Where you’re manufacturing or importing from, timing of manufacturing runs, cost of freight from factory to warehouse, even temperature needs. If you are selling something meltable, you can’t pick a warehouse in Texas that doesn’t also have ambient temperature regulation in place. Your geography will be key to making sure the costs of your shipments will be efficient.
🖥 Tech stack: Are you on Shopify? Woocommerce? Magento? TikTok? Using an ERP? Using EDI? This is a critical piece. If your warehouse doesn’t have an integration you need it may cost more to get onboard. What shipping speeds do you offer in your sales channels? Having ALL your tech stack in there will be important. To avoid manual processes for order management and inventory you will need them to have an API integration to your sales channels and your inventory management software. If you’re selling B2B via EDI you’re going to want to make sure they know that as well. Keep in mind what you want for “future” tech stack as well.
🤕 Your current pains: Make sure they know what you want to fix now, what needs improvement, what aligns with your goals. Being specific here will give you a chance to fix the things that are holding you back.
⏰ Timeline: In a hurry? Have a shipment on the way with no destination? Got into a big fight with your spouse because you’re fulfilling out of the garage and they want to park the car there? Having expensive problems with your current warehouse? Warehouses will phase in new customers to avoid too much pressure on the daily operations so knowing your plans will also help them to know if they can accommodate you.
🔢 All the numbers: They need average order size, value, return rate, order distribution by channel, peak sale months, projections, historical values, number of SKUs. – you can NOT give them too much of this information at this stage, this section is the absolute key to making this decision on both sides. Whatever operational data you are tracking and analyzing should be defined. You cannot give too much information at this point. The more they know, the better your proposal will be customized for your business.
📦 Inventory: Tell them about your products – Share whether your products are on pallets or shelved, labeled or barcoded, require cold storage, barcoded individually or in bulk. How is your inventory synced? How will products arrive at the warehouse? Work with your factory or supplier to get the right information if you don’t have all the answers. They can usually provide you with some production efficiencies that will streamline receipt of inventory by the warehouse.
🗳 Special projects: Do you need kitting done? Special boxing? Thank you notes? Lot or expiration date tracking or labeling? Make sure you ask them the details on how they handle requests like this. Some warehouses will be more accommodating than others.
📦 🚛 Packaging & Shipping: This is one of the more critical parts of the conversation – Is fulfillment processed on certain days only? Do you require extra staff during high volume or promotional periods? Are shipping boxes branded or generic? What kind of dunnage do you use inside? Is kit assembly required? Are your products fragile or shipped cold? Do you prefer sustainable packaging? What delivery promises are made to the customer?
📈 Forecasts and projections. Give the 3PL some indication of expected business volumes by day, month, and the coming year. Break it down by number of SKUs, units, shipments, pallets, weight, or other applicable dimensions. It’s also helpful to split this forecast by sales channel, as some D2C channels will have higher volumes than others, and B2B may ship multiple units per order.
Save this Ecommerce Operations Profile as a PDF, so it can’t be altered.
How to Find Your Magical Unicorn
📣 📣 Again, NEVER USE GOOGLE TO FIND A FULFILLMENT PARTNER! A random warehouse provider whose paid ad caught your attention may not be the right fit for you.
The key phrase is “may not be the right fit for you”. So if you can’t go with the company paying to get your attention via ads, how can you find a great warehouse that is a fit?
📄 Step 1: Scope By creating that scope doc, you understand your own needs and requirements. High volume and want a distributed network? A #4PL or a #3PL with multiple locations may be a better fit for you to move inventory closer to the customers. Do you have special requirements? Want personalized services? A small boutique 3PL will be better for that. B2B with EDI? Complicated tech stack? Narrow down what you need so you know what to prioritize.
👀 Step 2: Go Hunting
- Your best option for finding a warehouse is through networking. There are many groups to join on LinkedIn, as well as on Reddit, Slack, Facebook, Twitter and other social sites. Gather trusted recommendations.
- Join a group for D2C or B2B merchants, ask who they are using. Find out who they love, who they don’t, and most importantly, WHY. Just because they work well for someone else might not be the same for you. If you’re shipping something Hazmat or Coldchain, a warehouse that doesn’t have those services will be a waste of your time.
- If you have software partners, ask who they recommend. Are you using software for #oms, #ims or #integration? Ask what 3PLs they work with, how happy are the merchant clients and how easy would it be to integrate into your existing tech stack?
- Look on lists created by other merchants, partners and vendors. We here at SullyGarman have a huge list of vetted warehouses and are happy to introduce you for free.
- Follow #3pl, #supplychain, #logistics and #ecommerce companies. Make contacts, see what they post, look for areas where their values align with yours. Take meetings with them, ask for details. Fulfill (Fulfill.com) | 3PL Finder is a great resource.
- Online directories can be handy but ⚠️ be wary of those that are simply paid ads but do not offer any breakdown on the services, locations and special features of each warehouse.
- Trade Shows often have 3PL exhibitors and you can meet the team up front to ask questions.
Make a short list. Identify 3-5 providers that may be a fit based on your initial research. They’re in the right location, their minimums meet your volume projections, they service other merchants in your same vertical, and know how to handle your type of product.
Drive the RFP process. Once you’ve chosen the fulfillment providers to interview, start by providing them with your Ecommerce Operations Profile. This will save you valuable time and trouble. If they ask you to fill out their forms, gently redirect them to what you’re providing. Any remaining questions they may have can be addressed with a quick phone conversation.
Their responses to your RFP will hopefully address how they will fulfill your operational requirements, solve your pains and problems, meet the implementation timeline and budget, and help your business attain its future forecasts and objectives.
The bottom line is, personalize your search.
This is going to be a long term relationship, make sure you have done your research. A shortcut here will lead to time and money wasted and a lot of stress.
What to Ask a 3PL to See if This is a Fit
1️⃣ How do you integrate with my eCommerce channels?
The smoother the connection, the better.
- – Ask whether they have experience with the sales channels & tech stack you’re using.
- If they say yes, then ask them
- What data they pass back and forth (orders, inventory, fulfillment tracking, product catalog at a minimum!)
- What type of visibility will you have
- Ask for a demo of their WMS dashboard
- If they say yes, then ask them
- – Ask whether they have experience with the sales channels & tech stack you’re using.
2️⃣ Where are the warehouses located?
Location matters for shipping speed, proximity to an import port or your manufacturer and even tax consequences.
3️⃣ What’s your average order processing time?
Quick processing = happy customers. It’s that simple.
4️⃣ How do they handle inventory management?
Mandatory: Automated systems for inventory that pass that data back to your sales channels to prevent overstock.
5️⃣ Every product is unique.
If you’re selling perishables or fragile items, the logistics can be vastly different from apparel. Find out how they handle your specific products.
6️⃣ Customer support
What is the response time, how they communicate (ticket, slack, email, call, text). This is a key piece of whether they are a fit or not. Will you have your own CS manager or do they use an online ticketing system?
Can they do branded packing slips? What do their mailing labels look like?
8️⃣ Will they scale with you?
How do they handle peak seasons or spikes in orders? How much space is allocated for your SKUs?
9️⃣ What about returns?
Be sure they have an efficient process that aligns with your brand’s promise.
🔟 Site visits:
This isn’t just about the warehouse being tidy. It’s a chance to see their operational efficiencies, team culture, and security measures. Happy employees mean a well run company.
👍 👎 Recommendations. Ask them for professional references, but also tap into your network. Find backchannel references. Check online reviews. Search if the warehouse has been sued by previous clients or employees. Find out what kind of culture they foster by seeing how people talk about them online.
$ Talk about pricing
Notice this is last, because it should be the least important part of your search. The other intangibles are the things that will make you stay or leave.
However, pricing can impact cost of goods so you still need to ask:
- Inbound fees, storage fees, pick-and-pack fees, software or maintenance fees, integration fees, special requests like kitting, packaging, fill, labeling or other hourly project fees.
- Monthly minimums?
- Do they give commercial shipping rates or use yours?
- Ask for a sample invoice, find out how detailed or transparent they are.
👋 Other questions? There are more details to get into, backorders, chargeback defense for B2B, EDI details, special hours, cycle counts…
⭐⭐⭐Next up is rating them against each other.
How to compare your top warehouse choices
You’ve done your scope, your search has identified your top 5 choices, you have your list of questions for them, you have meetings set up. How to figure out which one is your best fit?
We use a rating rubric. Click here for your free copy. It has a page for each warehouse you interview, all the questions you want to ask them, a place for notes and most importantly, a checkbox that scores their answer.
👉 Does NOT have capability and can/will not implement = 0 points
👉 Does NOT have capability – is willing to implement = 1 point
👉 Demonstrates Industry standards – Proficient = 2 points
👉 Exceed Expectations = 3 points
This gives you a good idea how they align with your requirements. But it’s not nearly enough info to make a decision.
After that meeting, give them a deadline for proposal, then come back to this document after it’s been received.
It’s time to dive deeper with each of your top choice providers. Ask them the questions from column A in your rubric. Put detailed notes in the Notes column on what they tell you. These conversations can all start to run together so it’s important to keep all their features and benefits straight. From their answers, you can more systematically score their capabilities. The rubric also serves as a common structure for these calls so you’re sure to cover all of your main requirements.
It may be useful to include links to any marketing materials that the vendor provided such as videos and collateral for your team to review, along with their full RFP response. It’s easier to have all these documents linked from one place than searching in your email inbox or various drives.
📎 Page 2 of the rubric gives you a place to enter YOUR score between 1-5 on their:
- Proven record,
- Customer Service,
- Returned the proposal on time.
These are the intangibles that will really showcase the warehouse outside of just a pricing comparison. Because really, the price is pretty similar across warehouses. It’s the rest of the conversation that is going to show whether this is a long term fit for you.
🔢 It also subtotals Page 1 & 2 and gives you a total ranking for each warehouse.
What About Cost?
Lastly, of course, we have a page in the rubric to compare pricing. You can use a common number for orders, size, weight, etc and compare them across warehouses. If they all use a different format for their pricing, send them YOUR pricing comparison blank sheet (click here for free template) and ask them to input the numbers on that. In order to project and budget you need an apples to apples comparison. Then you can take their proposal off of the spreadsheet template you gave them and input it into the rubric to give you the complete picture of each warehouse proposal.
Everything important should be negotiated up front and well understood by both parties. This “prenup” contract should define the SLAs that you will use to measure the partner’s success.
Why? Because breaking up with a fulfillment partner that isn’t working is like a divorce! Painful for both sides, expensive, and sometimes acrimonious.
These tools should give you a good shortcut to making a correct and informed decision on your new warehouse.
Also in this series:
- Negotiating your warehouse agreement
- Setting your warehousing SOP’s
- Onboarding with your new warehouse