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September 19, 2022

13 Criteria to Choose the Best 3P Logistics Provider

Logistics service providers play a vital role in the supply chain management system and international trade.

The logistics sector has proliferated over the years due to the increasing demand from businesses across various industries. As a result, there has been a rise in the number of logistics service providers leading to fierce competition between them. Moreover, the logistics sector is projected to expand at an unprecedented rate over the next decade.

Selecting the best service and the most appropriate mode for your goods will affect not only the freight costs and the delivery times but also the overall customer experience. Selecting the right partner that can deliver on its promises is crucial to the success of your business.

What is a Logistics Partner?

A logistics partner (LP) is a company or individual that provides logistics services to other companies. The LP may be a third-party logistics provider (3PL), forwarder, broker, or agent. A logistics partner can provide one or more of these services:

  • Transportation management
  • Warehousing
  • Customs clearance
  • Insurance
  • Forwarding
  • Freight consolidation
  • Inventory

Logistics Service Providers (LSPs) today use digital technology to improve customer experience by offering faster, safer, and cheaper services. Additionally, they use digital technology to monitor all transport activities, prepare and approve shipping procedures, and perform online tracking of shipments. These innovations allow service providers that prioritize innovation to become leaders in all aspects of transportation.

In fact, according to a report on the state of logistics outsourcing, 73% of 3PL users believe that 3PLs offer “new and innovative ways to improve logistics effectiveness.” This is a clear indication that logistics service providers could play a vital role in your organization’s success.

Why You Need a Logistics Partner

With the rapid changes in global markets today, companies must be able to provide uninterrupted services to their partners across the entire value stream. A logistics partner helps you extend your company's reach by providing the necessary storage, transportation, and other logistics services to get your products to market quickly and efficiently.

Here's why you need a logistics partner. To:

  • Offer different service options
  • Be able to provide fast and affordable shipping options
  • Get ahead of your competition in a highly competitive environment
  • Focus on your core business
  • Increase sales volume by increasing the efficiency of your supply chain processes
  • Create a successful, efficient, and sustainable supply chain
  • Increase profit margins by increasing overall profits through cost savings in transport and storage costs
  • Enhance the quality of service for customers by making their experience consistent across different parts of the business

Many small businesses in the shipping industry choose to go at it alone. They don't partner with third-party logistics (3PL) providers, preferring to keep their shipping in-house. However, working with a 3PL (or even a 4PL) can bring a number of benefits.

However, vetting logistics service providers can be difficult. Many logistics companies make grandiose promises, but not all of them can deliver on those promises. The following are 13 selection criteria that will help you decide on the best logistics service provider for your business.

13 Selection Criteria for a 3PL Provider

When you are ready to engage a logistics service provider, it is important to do your homework and understand your specific needs as well as the capabilities of the providers you are considering.

While research outlines numerous factors that you should consider when vetting a logistics provider, we’ve narrowed it down to 13 selection criteria:

#1 Reliability

Your logistics provider is responsible for delivering your order to its final destination. From making sure shipments arrive on time to ensuring that fragile goods are handled with care, reliability should be at the top of your list when choosing a logistics partner. Their reliability will be determined by their ability to meet your needs and expectations as well as their own internal processes and procedures.

Inquire potential logistics providers about their on-time delivery record, claims history, and damage rate. You should also ask for references from current or past clients that you can contact to get a first-hand account of their experience.

#2 Diversification of Logistics Services

Depending on the size and scope of your business, you may need a logistics provider that offers a wide range of services. A full-service logistics provider will be able to offer you transportation, warehousing, distribution, and other services as needed. This one-stop-shop approach can save you time and money by streamlining your supply chain.

In order to make sure that your shipment gets where it needs to go safely and efficiently, you'll need to pick a provider who can handle a range of logistics services.

#3 Adaptability

A good logistics partner will be able to adapt to your changing needs. As your business grows and evolves, your logistics needs will change with it. Your logistics provider should be able to grow with you and adjust their services as needed.

When you are speaking with potential service providers, ask them about their ability to scale their services up or down as needed to adapt to your growth, especially during peak season. Additionally, the ideal logistics partner will help you understand your business better so that you can make informed choices about which products and services to use.

#4 Costs

Logistical services often directly affect the cost of the products.

The logistics company you choose should, therefore, be able to offer you competitive prices without compromising on quality or service.

Be sure to ask for quotes from multiple logistics providers and compare the prices side-by-side. In addition to transportation and warehousing costs, be sure to also ask about any additional fees that may apply, such as fuel surcharges, accessorial fees, and minimum charges.

#5 Location

The location of your company's headquarters should be taken into consideration when choosing a logistics partner. If your company is located near a major airport, then proximity to your warehouse is an advantage. This means that you can ship goods more quickly than if you had to drive them to the airport first. It is also helpful to look at the location of your customer base. If most of your clients are local businesses, then you might want to consider a local logistics provider.

#6 International Service Network

The size of your logistics provider's international service network is important to consider if you do business internationally. A logistics partner with a large international service network will be able to offer you more comprehensive coverage and better rates. Even smaller, local shipping providers can offer excellent service by being included within the international alliances they're associated with. The ability to access a global distribution network and fulfilment centres in major cities allows you to reduce costs of shipping and significantly decrease the duration of your deliveries.

Try to select a logistics provider with a global distribution network for speedy and inexpensive solutions to any issues that could arise at your final destination port.

#7 Pricing Structure

A major factor that will influence your decision when choosing a logistics provider is their pricing strategy. You will want to be sure that the provider you choose has a transparent pricing strategy that is easy to understand. They should be able to clearly explain what factors influence the final price of their services. For instance, if there is no transportation charge, then it means that transport fees are already included in the overall price. It is also important to understand the terms of the contract so that you know precisely what the costs related to each option are.

The provider you choose should offer a variety of pricing options to meet your needs. Ask about all of the available pricing options so that you can make the best decision for your business.

#8 Sales and Customer Service

The services measure the effectiveness of your logistics partners in the sales and after-sales phases. First, the most appropriate delivery option should be offered at an affordable price, and then effective support should be given throughout the entire process until the customer gets the goods. When dealing with international shipments, it is important to notify customers about each step of the transport, including customs clearance, storage, and transfer. Also, ask the logistics company if they have a complaint handling process. This will help you know how well they deal with complaints from their clients. Customer satisfaction is the main factor in ensuring continuous operations.

#9 Tracking and Delivery

Track your shipment every step of the way until it reaches its destination. Find out how often they update the tracking information. Is it daily, weekly or monthly? Once you get the tracking details, find out the exact location of the consignment. Check if they send regular updates about the status of the shipment.

#10 Inventory Management

In order to keep track of all the items shipped, it is necessary for the logistics provider to maintain accurate records. Therefore, make sure that the company uses modern technology like barcode scanners, RFID tags, and cloud storage to manage their inventory. These tools will help them to keep track of all the items shipped and ensure that they are delivered on time.

#11 Insurance Coverage

Most logistics companies offer insurance coverage for the cargo being transported. But, make sure that they cover the entire value of the shipment. Also, check whether the insurance covers damage caused to the shipment while moving through transit.

The logistics company you choose should have a valid insurance policy that covers all the possible risks during transit. This will protect your valuable consignment from any damage or loss during the journey.

#12 Technology Integration

Make sure that the logistics provider offers integration with other systems within the business. You need to ensure that the system used by the logistics partner integrates seamlessly with yours. Partnering with a good logistics provider allows you to focus on other aspects of the business. These days LPs support cloud-based software with reporting features that not only let you manage the process remotely but also help you make better business decisions in the future.

#13 Security Measures

Finally, security measures are one of the most important aspects of choosing a logistics partner. The best ones use advanced technologies to prevent theft and reduce fraud by providing 24/7 security monitoring.  They also have a team of experts who constantly monitor the security systems to ensure that they are working properly.

Finding The Logistics Service Provider That Fits Your Needs

Logistics service providers are an important part of any business. They provide transportation and logistics services that keep your products moving smoothly from production to the consumer.

However, selecting the right logistics service provider can be a daunting task. By partnering with a good logistics provider, they can help take some of the burden off your shoulders. By considering all the factors we've outlined in this article, you can find a logistics company that fits your needs and helps your business run smoothly.

But, sometimes it's helpful to talk to experts who can help out with the search. At Cargoflip, we provide expert advice and resources to help businesses find the right logistics partner and streamline their logistics operations. Contact us today to learn more about how we can help you find the right logistics partner for your business.