Introduction
The number of third-party logistics (3PL) companies is growing faster than ever, as demand for 3PL services from businesses across numerous industries continues to rise. The size of the global 3PL market—which is expected to reach US $1.36 trillion this year—is projected to increase to US $1.78 trillion by 2030, according to a recent report.
The ecommerce industry is a huge part of this growth. In fact, ecommerce businesses account for almost 53% of total 3PL revenue, and around 60% of all shipments made by ecommerce companies are handled by 3PLs.
The question for most ecommerce companies today is not if they should outsource their logistics operations to a 3PL, but which one they should work with. There isn’t a straightforward answer: in the US alone, there are currently 24,406 3PL providers.
With so many options to choose from, how can you find the right 3PL provider for your ecommerce business? In this guide, we’ll walk you through four critical steps to find the right provider that meets your business needs and helps you manage your ecommerce fulfillment at scale.
To select the right provider, you need a good understanding of what your business stands to gain from working with a 3PL.
Typically, there are two primary reasons companies start searching for a new 3PL provider:
There are many other factors that may compel your ecommerce company to look for a new 3PL. Before you start your search for a provider, you must establish a clear understanding of the main reasons why you need one.
Once you have a solid grasp of the reasons your ecommerce business needs a 3PL, you can start researching providers.
Broadly speaking, there are two types of 3PLs:
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Traditional 3PL companies
Also known as “contract logistics providers,” these 3PL companies employ a traditional, structurally rigid, and capital-intensive approach to delivering outsourced logistics services. Although many traditional 3PL companies have massive global logistics networks and provide comprehensive, customized supply chain solutions for companies across various industries, they typically require customers to enter into long-term contracts. Traditional 3PLs are suitable for large enterprises that consistently have a high volume of goods moving across their supply chains—and need a global 3PL player to help them manage their end-to-end (E2E) logistics operations. -
Newer, more flexible 3PL companies
With the rise of ecommerce over the past decade, a new type of 3PL has emerged that offers more flexible, on-demand logistics services—with no long-term contract commitments. Although this new model of 3PL can provide logistics solutions for companies across any industry, they often focus on working with ecommerce companies, as demand for 3PL services from companies in that space is so strong. Many of these new 3PLs are smaller players, which cater to small- and medium-sized businesses (SMBs) in specific locations. Others, like Amazon Supply Chain Services (ASCS), are major global operators with massive worldwide logistics networks. ASCS, for example, offers businesses access to a complete suite of 3PL services and solutions—from inbound transportation to warehousing to fulfillment and distribution—powered by the latest technology that is designed to scale with businesses as they grow.
As you research, you should create a list of 3PL providers that can help your business thrive at scale—so you can focus your attention where it’s needed most.
After you conduct your online research, you should begin evaluating different 3PL companies, focusing on criteria such as:
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Range of services
3PL companies offer an array of logistics services—from warehousing and distribution to picking, packing, and shipping orders, kitting, inventory management, and reverse logistics and returns. It’s imperative that you pinpoint which areas of your logistics operations you are looking to outsource and identify those 3PLs that have service offerings that match and meet your needs.
Consider a provider who can help you provide fast, reliable services, like Amazon Multichannel Fulfillment (MCF), the fulfillment arm within Amazon’s 3PL, ASCS. Whether you need a provider that can handle the entire fulfillment process from end to end or one that allows you to choose from a broad range of services, ASCS might be a great fit.
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Global presence
It’s critical that you carefully evaluate your prospective 3PL’s logistics network to ensure they have a footprint in, or near, locations where your customers and suppliers are based, or in those markets you are looking to expand into. By working with a 3PL that has facilities and resources in the right locations for your business, you can strategically position your inventory, so that you can improve on-time delivery performance and inventory turnover, and cut costs for storage and fulfillment.
For example, when you engage ASCS as your 3PL, you get access to Amazon’s world-class logistics network—which stretches across 27 countries and has over 2,000 facilities (including more than 200 fulfillment centers) as well as nearly 100,000 trailers, containers, and planes, and 1.5M+ associates and partners—and you can leverage this network to fuel the grow of your ecommerce business around the globe and across various sales channels. And because fulfillment is just one part of ASCS’s broader E2E supply chain solution, you also get access to other services that your business might need, like ground or air freight, storage and distribution, and more. -
3PL Pricing models
One of the primary benefits of working with a 3PL logistics provider is that you can reduce your logistics costs. This is only possible, however, if you choose a 3PL with a pricing structure that works for your ecommerce business. It’s imperative that you study your prospective 3PL’s rate cards to gain an understanding of their pricing structure. Remember to look out for hidden fees and surcharges, which can often add up and negatively impact your bottom line, as well as the terms of long-term contracts, which often stipulate volume, throughput, and other requirements. At the end of the day, you want to choose the 3PL that can offer the highest quality services at the lowest cost, as this will benefit your bottom line. -
Relevant logistics and 3PL experience
3PLs serve different types of companies and industries. Make sure the 3PLs you’re evaluating have relevant experience working with companies similar to yours in terms of size, industry, and location. Amazon’s supply chain network was actually built over the past few decades because Amazon faced its own struggles with 3PLs and other supply chain providers as it grew and strived to support its retail business. So, Amazon worked on building its own solution, which means ASCS has an intimate understanding of its customers’ pain points and needs.
You may want to ask the 3PLs you are considering to provide case studies and, if possible, to speak with their current or past customers. To learn more about ASCS’s client experiences, visit -
Carrier relationships
Most 3PL companies rely on external carriers to handle their transportation and shipping services, but a handful of providers are carriers themselves. ASCS, for example, has its own network of carriers and partner carriers, allowing for precise control over every step of the shipping process. This also gives its customers flexibility to scale up or down and the agility to withstand demand volatility and supply chain disruptions.
If the providers you are evaluating don’t have their own carrier network and fleet, you should find out which carriers they work with, how much those carriers charge for their services, and how much capacity those carriers can offer that 3PL’s customers. If your provider is a carrier themselves, that can be a huge advantage for you as a customer, as you can have a direct relationship with the carrier and oftentimes get a better rate or more flexible capacity limits. -
Technology
Many 3PL companies use cutting-edge technologies, such as warehouse robotics and demand forecasting systems, to automate and optimize logistics operations. By working with a 3PL that invests in and utilizes industry-leading technologies, you can transform your E2E supply chain. For example, if you engage ASCS as your 3PL, you can benefit from Amazon’s commitment to continuous innovation. Since 2020, Amazon has invested more than $30 billion in its network.
Also, on the technology front, you should check to make sure that:- The systems that your 3PL uses can be easily and effectively integrated with your order management, enterprise resource planning (ERP), and other systems. Some 3PLs, like ASCS, offer services with free-to-use integrator apps and other integrations that can swiftly and seamlessly connect the back-end systems that you and your 3PL use.
- Your 3PL will safeguard the security of your data and other IT assets. Learn about Amazon’s supply chain services achieving ISO 27001 certification, demonstrating a commitment to upholding industry-leading IT security best practices.
By taking the time to evaluate the 3PLs that you’re considering based on the criteria and other factors, you should be able to narrow down your list to a handful of prospective providers.
You should start reaching out to the 3PLs on your shortlist to arrange a meeting and take a tour of their facilities (if possible), tell them about your company’s challenges and goals, and determine if they would be a good fit for your ecommerce business.
After completing the evaluation process, connect with stakeholders across your organization and choose the 3PL provider you think will work best for your company.
This is a high-stakes decision that will have an enduring impact on the performance of your business in key areas, like on-time delivery, customer satisfaction and retention, and profit margins, so it’s vital that you choose carefully and wisely.
Here are a few pieces of advice that can help guide you in your decision-making process:
- Think long-term when choosing a 3PL. You should select a provider that can not only help you conquer the logistics challenges that you face today but can also help your business scale in the future.
- You can choose more than one 3PL. Many ecommerce businesses partner with multiple, although some do opt to work with only one 3PL provider. And if you choose to work with an E2E supply chain expert like ASCS you can have all your operations under one roof.
- Choose a provider with flexibility and agility. Given the supply chain challenges and volatility over the past few years, having a flexible 3PL is essential. Choose one that you think will be able to consistently provide flexible, first-class logistics services—no matter how supply and demand conditions change.
Although price is important, you should consider which provider is going to drive the most value for your customers. As legendary investor Warren Buffett said, “Price is what you pay. Value is what you get,” and these words of wisdom hold true when it comes to 3PLs.
Choose the 3PL provider that you believe can help you delight your customers, drive growth, and handle complex and time-consuming tasks with ease.
