7 Questions To Evaluate Potential 3PL Providers Before HiringWritten by Paul Forand
Choosing a third-party logistics firm is a major undertaking, especially given how many there are. With all the Johnny-come-late lies in the shipping world, how do you find one that can truly deliver the goods?
We've got seven questions that can help you sort out quality 3PLs from all the rest.
Seven Questions You NEED To Ask Before Hiring A 3PL
1. What type of contract is involved?
This could also be "Who is paying YOUR fees?" There are many different 3PL operating models in the industry. Some 3PLs charge you directly by adding a percentage or markup to the carrier freight bills, some charge flat fees for their services, some are paid by the carriers on commission, some charge you a percentage of the savings, and some use a combination of these.
2. Are there any penalties for using carriers outside of your program?
In other words, make sure there isn't a lock-in or exclusivity clause in the contract. Or, if there is, make sure you're getting a good discount in exchange for it.
You don't want to get blindsided by fees if one department uses the wrong carrier.
3. What freight carriers are the savings actually based on?
If they're saying they can save you X% over some other number, find out where their numbers actually come from. Pricing is often very opaque in carrier rates, which makes it easy to invent marketing points that aren't based in hard data.
Advertised savings should have a solid basis for the claim. If their advertising math is fuzzy, their accounting math is probably fuzzy too.
4. Can you have the carriers confirm that the pricing is legitimate and confirmed?
Some third-party agencies will promise prices without truly knowing if they can get those prices or not. If they can't, they claim fees or circumstances beyond their control and up the bill. Once they have your freight, there's not much you can do about it.
They should be able to provide proof that they have direct contracted rates set up with the carriers they use. This also provides another guard against fuzzy math entering your final bill.
5. What fuel surcharges & accessorial charges apply, and were they included in the proposal?
Your 3PL should be willing and able to discuss ALL relevant fees, service charges, and fuel surcharges in advance. These should all be presented clearly in their proposal.
Be especially wary if the 3PL seems unconcerned about what you are shipping. The extra fees attached to certain cargo types (e.g., HazMat) are high, especially if they require special handling. If they aren't getting details on the materials up-front, they may be trying to set you up for added fees later on.
6. How long will pricing be locked in?
Most 3PLs are contracted for a certain period of time, but the rates they charge may or may not be locked into that same period. Much like Wireless carriers, you need to watch out for bait-and-switch contracts where the "locked in" price disappears after a few months.
Ideally, you should be looking for year-long price locks, but few 3PLs are willing to offer this.
7. What claims liability limits apply to their rates?
Some 3PLs will end up adding surcharges to their bills that amount to being an insurance policy, whether it's explicitly described that way or not. Find out how the materials are insured, who's paying for the insurance, and where the hand-off happens in terms of legal responsibility.
Or, for more information, contact Re-Trans Freight for a free cost-savings analysis. See for yourself what one of the top 3PLs in the business can do!