7 Questions to Ask Your Third-Party Logistics Provider

Written by Neal Willis

Third Party Logistics Provider

When it comes to selecting a third-party logistics provider, asking a few questions before making your decision on a logistics management system can help you avoid disastrous problems, such as being locked into lengthy contracts with poor carriers. Listed below are seven questions shippers should ask potential third-party logistics providers when evaluating service proposals.

Are Contracts Involved?

Contracts are commonly used by third-party logistics providers to lock in customers for certain lengths of time, so they can better plan for their revenue generation. Ask the 3PL if they require a contract. If they do, make sure the contractual terms are fully disclosed up front before signing any agreement. Oftentimes, when a contract is involved it simply requires a 30-day notice of early termination; however, along with the advance notice, some contracts require the terminating party to pay an early termination fee.

What Freight Carriers Are Providing Savings?

While it’s true that savings might be available, they aren’t always based on carriers you’re expecting. 3PLs sometimes fail to mention that savings are based on specific carriers that you may or may not be aware of or care to utilize. When considering a proposal from a 3PL, ask if projected savings are based on the carriers you’re expecting to use. If a 3PL declares that you can continue to use your current carriers with their program, ask them if you can do so and still experience the proposed savings they are presenting with those very same carriers.

What Carriers Can Be Used?

Some 3PLs levy penalties for using carriers outside of their program. Although the fees may be small, many small fees can quickly add up to one big fee. Make sure you thoroughly discuss carrier usage and ask about the ramifications of using carriers outside of their program. 

Can You Confirm Pricing? 

Some third-party logistics providers promise savings and ask that you sign a letter of authorization so they can put the pricing in place. The letter, more often than not, merely serves as their authorization to approach the carriers on your behalf to try to obtain the pricing they have promised; nothing has been secured at the time the letter is signed. When presented with savings, ask the 3PL if they can have the anticipated savings confirmed with you by the carriers they are proposing to put in place for you.

What Are the Accessorial Charges?

Always ask if the savings data presented by a 3PL includes the relevant accessorial charges associated with the savings proposal. The savings may look good, but make sure you’re comparing apples to apples. It’s also smart to ask for a list of accessorial charges and for examples of when they could be applied.

What Are The Liability Limits?

While the savings are enticing, they may come with a catch. Deeply discounted pricing is sometimes extended in exchange for lower carrier liability coverage for lost and/or damaged freight. Ask what their liability limits are for damages and lost freight.

How Do You Make Your Money?

Most businesses operate with the hopes of earning a profit or, at minimum, with the expectations of covering their expenses. Ask the potential 3PL provider how they make their money. A reputable 3PL shouldn’t have an issue with discussing how they get paid for their services.

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