Five Basic Questions To Ask When Evaluating Any 3PL ProgramWritten by Neal Willis
Clear communication and clearly defined expectations can set the tone for any solid business partnership. As a shipper, you probably don’t want to get locked in to lengthy contracts with poor quality carriers, especially if it means paying higher than necessary rates. Asking any 3PL a few questions upfront before engaging their services can spare shippers an immense amount of money on the back end, not to mention all the headaches that come with poor service.
WHAT TYPE OF CONTRACT IS INVOLVED?
Contracts are sometimes used by 3PLs not only to lock in rates for their clients, but also to lock in the clients themselves for certain lengths of time. When a contract is involved, often times the 3PL will simply request a 30 day advance notice of early termination from the shipper. Some contracts, however, may contain penalties for early termination, so be sure to thoroughly review all of the implications of an early ending to the relationship with any potential service provider.
IS PRICING LEGITIMATE AND CONFIRMED?
When presented with an estimated savings amount by any 3PL, ask for proof of the pricing being secured. If the pricing has already been secured with the carriers, then the carriers who have extended it should be able to confirm with you direct that it is genuine. It is very important to confirm that the projected savings from using a 3PL are legitimate and already negotiated at the time of a proposal before any type of contract is signed.
WHAT FREIGHT CARRIERS ARE SAVINGS BASED ON?
A 3PL may show savings but fail to mention they are only attainable when using their specific carriers. If a 3PL presents a savings estimate and asserts that you can continue to use your incumbent carriers, make sure to verify the savings projections they have presented are based on those carriers. Ask if you’ll be able to continue using your carriers while still experiencing the proposed savings amounts.
ARE THERE PENALTIES FOR USING CARRIERS OUTSIDE OF THE PROGRAM?
You most likely don’t want to face paying a penalty for using lower quality carriers with high rates. Some contracts used by 3PLs contain penalties for underutilizing their carriers or for any carrier usage outside of their program. Make sure carrier usage outside of their program is discussed and that the repercussions for non-preferred carrier use is fully disclosed.
WHAT ARE THE ACCESSORIAL CHARGES AND WHEN DO THEY APPLY?
Savings estimates can look great, but make sure the savings that are presented to you in a 3PL service proposal includes all relevant accessorial charges. Additionally, you’ll want to make sure the price of any accessorial charge you may encounter is disclosed upfront, and you should also know when certain accessorial charges could be applied.
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