6 Secrets to Finding the Right 3PL
To help mitigate a potential capacity shortage, many shippers are turning to third-party logistics (3PL) providers to help cover lanes that otherwise would be difficult to fill. If you are looking to partner with a 3PL, these guidelines can help you secure a beneficial service provider relationship.
1. Choose carefully. Until recently, Internet access and $10,000 was all it took to get a broker surety bond and become a transportation broker. The U.S. Congress, however, recently passed legislation that raises the surety bond price to $75,000, effective in summer 2013. This is good news for shippers, as the new requirements will likely be too high for fraudulent brokers to acquire a new surety bond.
You must, however, still do your homework. Ask 3PLs for customer references and a work history before entering into an agreement. If the company has been in business fewer than two years, consider moving on. The Transportation Intermediaries Association (TIA) is a good resource for qualified, legitimate 3PLs, because TIA requires all members to abide by a strict code of ethics when dealing with carriers and shippers.
2. Use 3PLs for more than just a back-up plan. Being choosy about 3PLs is wise, but don’t treat them only as a back-up plan for a last-minute load that needs covering. A common misconception is that 3PLs can always move a load at the last second. While 3PLs can often find the capacity needed in a pinch, it’s not a guarantee, and you could be missing out on many benefits 3PLs can offer if you only use them this way.
Instead, treat 3PLs like any other carrier. Give your 3PLs an opportunity to service your typical lanes, and see how they stack up against your other carriers.
3. Ask what the 3PL does best. Like most companies, many 3PLs excel in certain niches, such as flatbed, less-than-truckload, or global shipments. Most companies started off focusing on one mode, then added others along the way.
Ask 3PLs about their mode and lane strengths. Depending on office and yard locations, a 3PL can likely guarantee capacity in some areas of the country, while offering substantially lower rates. This knowledge will help you better match your transportation needs to the right 3PL.
4. Use your 3PLs as solutions providers. One great thing about 3PLs is that you can use them as much or as little as you want. Use them as you would an asset-based carrier to handle only specific lanes, or treat them as an extension of your supply chain. Many 3PLs can operate as an outsourced traffic department, and can manage as much or as little of the shipping process as you need.
5. Less does not necessarily mean more. When receiving quotes from transportation providers, consider more than just price. While 3PLs can often offer a substantial savings over asset-based carriers, consider the quality of carriers being used to move your freight. Ask 3PLs about their carrier selection process, and be wary of those that use conditional carriers. A good 3PL will, at minimum, make sure all carriers are insurance verified, and have a satisfactory safety rating, established business history, and authority that is in good standing.
6. Consider claims handling. Most 3PLs don’t like to admit it, but accidents do happen—so make sure you’re working with a 3PL who has your best interests in mind. A good 3PL can help facilitate a claim, and act as a liaison between you and the carrier on your behalf. Some 3PLs carry insurance so if the carrier defaults on a claim, the 3PL will step in and cover the cost of the claim—but this is not standard practice.
Ask the tough questions, learn your 3PL’s policies, and get everything in writing so you set the proper expectations before you seal the deal.