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3PL Outsourcing

Flexibility AND Scalability: A Scarce Combination Among 3PLs

Alex Stark | October 17, 2019

Check out the marketing claims of many third-party logistics providers (3PLs) and you’ll see the words “flexible” and “scalable” used regularly, and often together.  The fact is, most are good at one or the other, but not both.

If we define flexible logistics as the ability and willingness to quickly adapt to market- or customer-driven changes, it’s often the smaller providers that are best able to do this. The ultimate decision maker is probably directly involved with the account, so decisions are made fast. You’re likely to be a large and valued customer of such providers, so the willingness to “jump through hoops” to support change will be higher. In general, smaller providers will be more customer-driven than process-driven. 

The flip side of that coin is that such providers won’t have the same depth and breadth of experience and services and the same geographic reach as larger 3PLs, therefore limiting their ability to scale.

If we define scalable logistics as the ability to support a business as it grows in size, product line and geography, it’s often the largest providers that shine brightest. Such providers will have operations and expert resources across the country or across the globe. As you grow, you simply leverage more and more of their existing infrastructure and resources.

The downside is that larger 3PLs become slower and more bureaucratic as they grow, and ultimately less flexible.  

So what’s a shipper to do?

“Rightsizing” your 3PL

The concept of rightsizing can apply to 3PL selection. You need a provider that offers both flexible AND scalable logistics. But it’s difficult to find one that offers both to the same degree.

What you want in a flexible partner

  • scalable logisticsCulture fit. This is a tough one since you almost have to work with a partner to make this determination. Pay close attention to all your interactions at every level of the company at different locations and across different functions. Does it feel like they all share the same operational approach and values? Many larger providers actually became large by purchasing smaller companies, all with different brand cultures. Be careful of the provider that’s changed all the building signs but remains a patchwork of different cultures and systems. You can’t create a culture; a culture just is.
  • Fast approvals. When the need requires, you want an agile 3PL partner that can enable rapid change. That requires quick decisions – on buildings, equipment, systems, contracts, labor, etc. Determine how far removed you’ll be from the ultimate decision maker. Some 3PLs have a lengthy approval process that spans many levels of management, while others empower associates on the front lines and give them the freedom to make decisions based on what’s best for the customer.

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  • Willingness to customize. As 3PLs grow, they want and need the benefits of scale efficiencies. One way to do that is to standardize processes. “When we do THIS, we do it in THIS way.” Honestly, that can be a good thing, for them and you. But it becomes a problem if your business requires a more customizable approach. Here’s an example. Fulfillment By Amazon (FBA) is a great solution for some e-retailers. It’s a huge and efficient fulfillment machine with more warehouses and a faster delivery capability than anyone else in the U.S. But brands need to recognize that FBA does not offer a customized process. Let’s say that, for everyone who orders product A online, you want to insert a promotion for product B in the shipping box. Sorry, that’s not happening. Your process is FBA’s process. Fast, uniform, out the door.

What you want in a scalable partner

  • In-place distribution infrastructure. As market growth requires an expansion of your distribution network, you ideally want a partner that has a presence in the markets where you need help. The alternative to tapping into a scalable logistics infrastructure is either working with a new provider (new relationships to manage, new systems to integrate) or pushing an existing provider to enter new, unfamiliar markets.
  • Easy data integration. Look for partners who can walk the talk when it comes to exchanging data between your two systems. The provider’s size does not necessarily correlate with a sophisticated IT capability. Vet providers carefully in this area or it can come back to bite you.
  • Genuine interest in your business. The largest 3PL providers will have virtually unlimited scale – a hugely attractive benefit. But their interest may be limited to serving only the largest companies out there. If that’s not you, you could end up being the proverbial small fish in the big pond.
  • Stories of scale. Make sure any provider you are considering can talk, in specifics, about how it helped other companies like you grow. It’s one thing for a builder to say “I can add 3 bedrooms to your existing home by adding a second level;” it’s another for him show you three homes where he’s done exactly that.
  • Strategic support. A scalable logistics provider must do more than provide the services and physical infrastructure to support the next step in your supply chain journey. It must help you figure out what that next step is. For instance, does the provider have engineers with the right tools to analyze the most economical location for your warehouse expansion? The challenge of scale is as much intellectual as it is physical.

The right choice

So, do you want your 3PL to be big and capable? Or fast and agile?

Duh, you want both, of course.

Many 3PLs will claim to have both in equal measure.  Most don’t.

Choose wisely.