5 Tips for Evaluating Logistics Service Providers

During the last decade, companies have increased their spend with outsourced logistics service providers in the United States. This increased spending and continued growth in the logistics services industry have led to continuous improvement within the field, and also rising consumer expectations.

As a business owner looking to select a best-fit provider for your company, there’s a lot to consider to ensure that freight is handled efficiently and with great care. When evaluating providers, it’s important to keep these tips in mind:

  1. Align on information management tactics.
  2. Monitor carrier delivery metrics.
  3. Discuss differentiating credentials.
  4. Review security capabilities.
  5. Prioritize a transparent, honest relationship.

Companies that effectively review logistics service providers using these criteria will be able to attain high-quality service and start a meaningful relationship with their outsourced provider.

1. Align on Information Management Tactics

A strong information tracking and management system is key to an optimal, efficient logistics operation. Despite the importance of a stellar IT system, the logistics industry can be archaic. When comparing one provider to another, IT competencies can vary greatly.

This variance in technical capabilities can exacerbate the complications that can come from a carrier or 3PL using software that doesn’t match your company’s needs. This is particularly visible in the 3PL space. While 93% of companies agree that IT capabilities are a necessary element of 3PL expertise, only 55% of shippers are totally satisfied with 3PL IT capabilities.

The gap between those seeking information management and those who are satisfied with their current logistic provider’s IT resources demonstrates the need to evaluate information management tactics early on in a partnership. The wide varieties of capability levels in this area make information management an essential differentiating factor between an acceptable logistics provider and a truly impressive one.

Information management drives the just-in-time principles that shape the modern supply chain. Understanding the IT abilities and comfort level with technology demonstrated by both your current logistics provider and their competitors is essential to understanding whether or not your shipping needs are being met as well as they can be.

2. Monitor Delivery Metrics

Delivery metrics offer measurable ways to determine the effectiveness of your provider’s delivery services, highlighting specific areas for improvement when necessary. When working with an outsourced logistics service provider, one of your top priorities will be ensuring that shipments consistently arrive on time and without damage on either the sending or receiving end.

Delivery metrics clearly paint this picture for you and your team through numbers and statistics, making it easier to objectively evaluate a carrier or 3PL. These metrics will speak directly to the results your provider is delivering for your company. Regularly tracking delivery metrics against predetermined goals set by your team will help you monitor your partner’s performance on an ongoing basis.

If the company you’re working with doesn’t provide you with their own metrics, it’s advantageous to work to track these metrics for your own shipments. You or your service provider should be actively tracking:

  • Shipping time
  • Order accuracy
  • Delivery time

While setting up tracking capabilities may lose you time in the short term, it will equip you with the ability to strategically adjust processes that are yielding negative results. Becoming more nimble in this way will help you save in the long term.

By being conscious of delivery metrics, you can find logistics partners that will save you from wasting time on hold with an OS&D representative by providing service at a level that satisfies you and your customers.

3. Examine Relevant Credentials

While you may consider your shipping and logistics need to be pretty standard, it’s important to consider your potential need for certain certifications from a service provider. These credentials are also able to distinguish potential partners as best-fit candidates for your company.

For instance, you may not think that your company will be shipping or receiving hazardous materials, but any part of a given shipment could be deemed hazmat. According to the US Census Bureau, 11% of truck shipments in the nation are considered hazmat freight. Furthermore, US DOT estimates that 7% of all trucks are transporting some quantity of hazardous material.

Hazardous materials regulations in the United States are set forth by the DOT’s Pipeline and Hazardous Materials Safety Administration. The rules may be challenging to keep track of without credentials and experience on your end. A carrier or 3PL that maintains the necessary hazmat certifications and understands the government guidelines can save you from navigating difficulties like these.

Ensuring that the logistics provider you’re working with is well-versed in the hazardous material handling regulations will save you time and headache when trying to meet delivery deadlines. Their expertise will also provide you and your customers with a sense of safety while ensuring that your freight arrives in its intended state.

Hazmat certifications are just one of the possible distinguishing credentials that can be attained by a logistics service provider. Consider your shipping priorities and seek out those with certifications that align with your needs.

4. Assess Security Capabilities

Security has become a significant area of focus in the supply chain industry, as the volume of small parcel deliveries continues to increase along with the e-commerce boom of the past decade. This issue is reinforced by consumers being further drawn to online shopping during the COVID-19 pandemic. As a result of this market landscape, package theft remains a problem for shippers.

In 2019, 50% of consumers said that they did not receive at least one of the packages they ordered online. By selecting a logistics partner without excellent security systems, you run the risk of disappointing customers and losing freight.

Especially if you’re shipping valuable items, you need to trust that your logistics provider can provide you with the security and traceability necessary to limit the loss of freight during transit and deal with customer concerns in the event freight is lost.

When evaluating the quality of a logistics service provider, you can learn about their security quality by asking:

  • How is freight tracked by the carrier?
  • What level of visibility technology is used and offered?
  • How affordable and versatile are the shipping insurance offerings?

This information will give you the necessary glimpse into security protocols to determine whether a logistics company is able to deliver the package security you need.

5. Emphasize Transparency

In all of your outsourced relationships, you will cultivate the best connection with a team by developing an honest, transparent partnership early on. This is especially true in logistics, given the importance of their role in your company.

While logistics providers do not directly affect your customers’ perception of the products you offer, they can easily enhance or tarnish your reputation with your customers. For instance, it’s one thing for freight to be damaged or missing. It’s much more severe when your company isn’t aware of the issue before customers complain.

Your logistics partner will be representing your company in its ability to transport and handle your products. Customers will associate any shortcomings with your brand, not their outsourced services. As consumers’ patience with delivery times wanes and desire for a wider array of products grows, transparency from your chosen carrier or 3PL is essential to maintaining and growing your customer base.

You must be able to quickly ascertain information about your shipments in a way where you can easily communicate this information to your customers. If your logistics provider can provide you with your desired level of transparency, you should be able to maintain a strong partnership with them for years to come.

Logistics Providers Represent Your Company’s Services

When evaluating your logistics service providers, it’s essential to consider them as part of your team. Holding them to your standards will manage their expectations as your relationship grows.

Companies interested in effectively matching their needs to a provider should consider the importance of IT, delivery metrics, package security, open communication, and relevant certifications. A logistics company that performs well in each of these areas will be more likely to bring a stress-free, successful partnership to the table.

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