3rd party warehousing (also known as 3rd party logistics or 3PL) can help you store and manage your goods as your business scales. Outsourcing to a 3rd party warehouse can bring expanding businesses many benefits, including cost reductions. However, when choosing which company to go with, there are guidelines and best practices to consider to ensure you get the best results.
Let’s take a look at a few best practices for selecting and managing a third-party warehouse.
Best practices for selecting a 3rd party warehouse
Assess your needs and goals
When deciding to integrate with a 3rd party warehouse, it’s important to assess your current and future business needs and what you would like from a 3rd party warehouse.
Develop a plan for your 3PL selection process
Once you’ve set your goals, you can research potential 3PL partners and put together a checklist of criteria they need to match.
Your checklist of requirements might include:
- Financial stability
- Efficient global operations, such as freight forwarding services
- IT services
- Cross-docking services
- Strategic expertise
- Long-term storage in a UK bonded warehouse
- Support for growth and scaling
- Multilingual connections
From your checklist, you can develop a set of related questions to assess whether or not the 3PL company hits the criteria.
Evaluate and interview 3rd party warehouse options
When you’ve completed your checklist, it’s time to shortlist several 3rd party warehouses to visit and gather more information about.
Site visits are crucial for both you and the 3PL. It gives them a chance to understand the sort of work they’ll be outsourcing, and it allows you to see how they operate. If visiting a number of sites, it’s best to stick to a schedule so you can explore each option fully.
Being open and sharing your needs and criteria with the 3PLs will give anybody not suited to your business the chance to back out. Once you’ve visited and evaluated each company against your criteria checklist, you’ll be in a good position to make an informed decision.
The next step is to provide the companies with a request for information (RFI) before making a formal proposal.
Proposals
After reviewing the RFI submissions, you’ll want to put together a formal proposal detailing your needs and expectations from the chosen 3rd party warehouse. There are a few types of proposals:
A Request for Quote (RFQ) is a good option if you are looking for a short-term, standardised process.
If you’re looking for something longer-term, a Request for Proposal (RFP) can help you compare 3PLs when you have a specific vision of what you need and would like to see what they can offer. You can schedule a face-to-face presentation before deciding.
A Request for Proposed Solution (RFPS) is the best option if you have little knowledge of logistics and would like the company to advise what they can offer and how.
Finally, a Request for Partner (RFP) is ideal for when you would like more complex services and a strategic relationship with the 3rd party warehouse.
Best practices for managing a 3rd party warehouse
Once you’ve built a partnership with a 3PL, there are some best practices that can help both sides succeed and reach their respective goals.
Contracting
Fair and balanced contracts can support both parties. It’s helpful to include your business managers and those of the 3rd party warehouse in the negotiations. During negotiations, consider realistic contract lengths, fair payment schedules, and exit management for contract terminations.
Performance measurement and management
Measuring performance metrics, such as service level agreements (SLAs) and key performance indicators (KPIs), is an important factor in ensuring both sides of the partnership grow and reach goals.
Every business is different, so you’ll need to choose appropriate metrics for your specific aims. Define targets, how you will calculate your measurements, and where the information will come from so the 3rd party warehouse partners are clear on expectations.
Governance
Successfully governing an ongoing partnership with a 3PL is about collaboration and agreeing on a management structure both sides of the agreement are happy with.
Try to avoid micromanaging, as this can cause conflicts. However, it’s a good idea to have some input into how things run. The relationship structure between your business and the 3rd party warehouse will vary, but identifying it early on can help reduce issues down the line.
Many companies find it helpful to have regular meetings or communications with the 3PL team to keep communication open.
At first, choosing and managing a 3rd party warehouse partnership can seem daunting. Every business is unique and has individual goals and requirements that some 3PLs may not fulfil. At Amco, we specialise in integrated operations, warehousing, and transportation services. We aim to work to your specific needs and are happy to upscale and customise our services to do so.