The True Costs of 3PLsWritten by Neal Willis
It’s often difficult to measure all of the benefits of using a 3PL, especially in monetary terms. Just like a freight rate and freight cost can be entirely different, so are the services and costs of different 3PLs. Some 3PLs charge upfront flat fees for their freight management services, some 3PLs invoice their clients a flat fee per invoice for processing each freight bill, and some 3PLs make their money by brokering loads and adding a flat fee or a certain percentage markup to each shipment, among other means. There’s virtually no limit to the number of ways a 3PL can earn money for their services, while at the same time there’s no real limit to the number of value added benefits a shipper can realize by using the services of a 3PL.
As they interact with your customers and vendors on a daily basis, a 3PL’s staff often becomes the face of your company and functions as an extension of your business. Some 3PLs lure shippers in by promising low rates and then cause great disruption to operations by employing low quality carriers with poor service records, instead of quality carriers that the shipper and their customers are accustomed to using.
Poor service and quality can cost companies more than just a headache in the short term and can lead to lost business and a bad reputation in the long run.In order to calculate the true costs of using a 3PL’s services, you’ll need to factor in such things as customer service and satisfaction, on-time performance, data accessibility, technology, and efficiency improvements, to name a few. For example, if you’ve never utilized the services of a 3PL and start using one that causes you to spend more time tracking down shipment information than you previously had to spend with your old carrier(s), then you could very well be costing yourself more money in the long run when the cost of your time is factored into the equation.
Customer service, damages, technology, efficiency enhancements, etc. all play into the cost of using a 3PL. Poor performance in one or more of these areas can cause a spike in freight costs that far exceeds the difference between the highest and lowest cost carrier options for any given shipment. Just as the least expensive freight rate may not yield the lowest overall cost, the less expensive 3PL may not be the best value overall. It’s important that you do your research and ask the right questions.