Third-party logistics (3PL) companies have to deliver freight to their customers on time and undamaged. Finding a logistics company that is capable of consistently executing and safely warehousing products requires due diligence.
Warehousing is critical because customers are judging the companies from which they purchase goods based on the condition and timely delivery of those goods. Damages or delays reflect poorly on the manufacturer.
“A product manufacturer’s customers have no idea a third-party is involved with the storage and shipping of their order,” said George W. Reyes, executive vice president of AMWARE Companies.
Smart Business spoke with Reyes about how to find a 3PL that will uphold a company’s reputation for quality and attention to detail.
What troubles do companies tend to have with warehousing and logistics?
Product manufacturers, for example, rely on third-party warehousing and logistics partners to get the right product, the right lot number, and the right quantity — with the right labeling — to their customers on time.
It’s a very fast-paced business that requires a high degree of organization and accuracy to execute correctly and consistently. If the third-party provider makes mistakes, it reflects poorly on the customer because it’s their name on the product being shipped.
When executed correctly, 3PLs add value to the supply chain by labeling and prepping the products to be shipped. Regardless of those extras, it all needs to be done just-in-time and without error.
More and more, companies forego having their own asset-based warehouses because they’d rather invest that money in improved or additional manufacturing space. That’s why it has become increasingly popular to outsource warehousing and logistics to a third party. Outsourcing places the responsibility of product distribution to the third party, saving companies the huge costs associated with running a warehouse.
What should businesses consider as they look for outside warehousing help?
The condition of the warehouse (structure) is often overlooked by companies conducting due diligence to find the best 3PL provider. Businesses seeking to partner with a 3PL should look for a company that has a well-constructed, modern building.
The geographical location of the warehouse is another often overlooked component. Companies looking for a warehouse would be well-served to partner with one in a favorable geography to its client base. Cleveland is a fantastic market because products sent from the city can reach 70 percent of the U.S. population in one day or less.
Technology also plays a significant role in warehousing. For instance, does the warehouse use RF scanners for lot control, accountability and accuracy? There should be a sophisticated inventory management system that can handle the type of inventory needed for the product being warehoused.
Some manufacturers need a logistics provider that can accommodate a first-in-first-out process. That system needs to be fail-safe when it comes to picking the correct lot number and date of manufacturing. Sending the wrong batch can create a host of costly problems the manufacturer will be forced to reconcile.
Two other aspects to consider are quality control and inbound/outbound processes. Ask about inventory accuracy rate — some companies maintain rates as high as 99 percent. Also consider the hours of operation. Some warehouses keep standard business hours while other companies adjust to their customers’ hours of service.
How does price factor into the decision?
Price alone should not drive the decision to work with one logistics provider over another. It’s critical to conduct a background check on the warehouse provider. Companies looking to partner with a 3PL or warehouse should make sure they have quality facilities and experienced and knowledgeable staff capable of handling the distribution of specific products.
It can be surprising to some companies when they compare potential providers against their current provider and find out how little they were getting for what they were paying. Find a good partner that has your and your clients’ needs in mind, because if it’s a one-way street, the relationship is doomed. ●
Insights Logistics is brought to you by Amware