3PL selection has become a critically important decision for manufacturers and retailers as they seek the efficiency, flexibility and operational cost savings that third-party logistics providers can bring. Choosing a 3PL has historically been a difficult decision given the high number of logistics providers and the fact that, on the surface, service offerings seem quite similar. Heck, there are even consultants that do nothing but help shippers find the right 3PL partner.
But the 3PL selection process is evolving to a new and better place – one based on customer experience.
Referrals now drive the 3PL selection process
Today, the largest logistics outsourcing awards result from referrals and recommendations – not advertising, not trade shows, not Google searches.
People talk, and conversations now happen more often, and in more places, than ever before. Word-of-mouth recommendations used to be literally that – one person talking to another in person. Today, social media, industry forums, and other online networks provide more ways for you to learn which 3PL customers are happiest, and who’s responsible.
In the short-term stay industry, the most important currency is customer reviews. People choose to stay where others like them have had a great customer experience. Why should logistics be any different?
Outsourcing any part of your supply chain operations comes with huge risk. When someone attests to having a great customer experience with a 3PL – especially if it’s someone you know and trust – it goes a long way toward eliminating uncertainty and risk.
Historically, it’s been more difficult to assess 3PLs based on customer experience. RFP processes zoned in on price, scalability, industry experience and other selection criteria. But evaluations that don’t consider direct customer experience are flawed.
- Evaluating on price. Smart shippers understand the difference between price and cost. It’s impossible to predict long-term value during a selection process. According to the 2021 State of Logistics Outsourcing Study, “shippers and 3PLs will continue to move toward preferred and strategic partner relationships and away from transactional relationships.” Most companies seek 3PLs for long-term value creation, not the lowest cost per square foot or mile.
- Evaluating based on scale. No one wants to grow faster than their 3PL’s ability to keep up, but size has advantages and disadvantages. From a customer experience perspective, the largest 3PLs have the highest customer attrition rates. Shippers become disenchanted when, as a result of M&A activity, a 3PL shifts its strategy or simply becomes too big to provide the attention customers want. Look for 3PLs that combine scale with personalized service.
- Evaluating based on reputation. Bringing “name brands” into your RFP process is considered wise and low risk by many. But limiting your search to these supposed top providers could leave out some of your best potential partners. Today, you see 3PLs investing many thousands of dollars in advertising to become known as a top 3PL. Their ads encourage companies to vote for them in one of the many 3PL-ranking industry polls. Apply that thinking to the next local election in your area. Will you vote for the politician with the best ideas and the greatest commitment, or the one who has the best “get-out-the-vote” machine? Reputations must be earned, not bought.
Identify peers who are happiest with their 3PL, and find out why
The focus for 3PL selection needs to shift to customer experience.
When you base your choice of 3PL on the real experiences of peers, you move your search process from perception to reality, from subjective to objective, from second- to first-hand accounts of operational performance.
Today’s social and communication networks allow you to rely less on advertising and perceived reputation when selecting 3PLs, and more on the actual experience of companies like yours.
In the end, you can take a hugely complex, lengthy and high-risk 3PL selection process and boil it down to one question: Which 3PL users are the happiest with their 3PLs?
Not just “Yeah, they’re OK” kind of happy, but “The people at this 3PL are remarkably competent and committed” kind of happy.
Look for 3PLs that are laser-focused on delivering a great customer experience. Then leverage your extensive contact network to create the short list for your next RFP.
Looking for big logistics capabilities with a personal touch? Let’s talk.