Investing in third-party logistics (3PL) requires huge trust. Essentially, you’re placing everything you’ve built in the hands of an external company and hoping they’ll be able to manage vital parts of the supply chain well, while satisfying your invaluable customers. New 3PL providers are springing up all the time, largely due to the unstoppable growth of ecommerce (worldwide sales this year have been forecast to top $3.5 trillion this year). However, with the surge of logistics providers come bad practices and poor standards, which you may not be aware of.
Is there a mismatch between the price you are being charged and the value of service you are getting in return? We explain how you can tell if you’re being overcharged.
Understand the pricing model
The most obvious place to start is the cost estimate that was given before anything was signed. Have figures ballooned since then and why? Be wary of logistics providers who deviate wildly from the original estimate – these companies should be in complete control of their numbers and account for the many surprises that occur in business.
Fully understand the pricing model and ask how that model will change as you grow. Examine every cost and get to grips with each fee for each service – remember that the provider will be used to people haggling over contract details before all parties commit. For example, you may have better shipping carrier rates and insist your warehouse partner accept them, or you may want to impose different penalties if shipments aren’t fulfilled on time.
Negotiating the best deal for yourself may protect you from overcharging, but be cautious of surprisingly low costs. If the insurance is oddly low, for example, they could be cutting corners and you will end up having to pay for it if disaster strikes.
Beware of hidden costs
Whether it’s warehouse, distribution or transportation-based services you’re after, ecommerce logistics provision is a complex business with countless features. While it’s tempting to believe that some costs are unnecessary and invented simply to obtain more money from the client, a lot of the time surprising fees are down to poor communication. A reputable logistics provider should ensure total transparency and that all charges are presented, explained and agreed upfront.
Of course, there are some dishonourable companies out there who rely on you not knowing about ‘extra’ fees. We recommend asking for a full list of charges, requesting the response in writing. Find out about all assessorial charges – whether that’s liftgate fees, insider delivery charges or after-hour pickup costs. Question whether there is a Warehouse Management System fee and a regular administration charge. Exit costs are known to catch out retailers too.
Whatever the charges are, all of them should be included in the logistics provider’s initial estimate, eliminating the chance of any unwelcome shocks further down the line.
Pay for maximum efficiency
A reputable logistics provider should be a professional, efficient, highly skilled operation. The truth is, unfortunately, that too many 3PLs fail to deliver a decent standard of service for streamlined prices. This is mostly down to inefficiency and lack of expertise.
Most providers haven’t developed ‘lean’ techniques that could save up to 40% in warehousing costs and 30% in transportation costs. With a few simple adjustments, providers can help you achieve significant savings instead of overcharging you for a sluggish operation. Perhaps there are excess packaging costs, incorrect classification and paperwork, and too many damaged shipments. Or perhaps there’s an issue with staffing: are you paying for a poorly managed operation?
Our advice is simple: always go with a trusted global ecommerce logistics provider who prioritise maximising efficiency – and don’t pay for anything less.
Sprint Logistics is an established global expert in end-to-end supply chain processes, providing invaluable benefits to businesses and their customers by reducing cycle times and costs. With a complete range of ecommerce logistics services, we offer smart, cost-effective and maximum-efficiency solutions you can trust.
If you would like help and advice with your ecommerce logistics, contact us today.