Some top tips for keeping (or getting) your 3PL relationship on track
Throughout our careers, we’ve seen hundreds of Brand <> 3PL relationships. They all start the same way: excitement about the new partnership, some relief that the prior situation (an old 3PL, fulfilling in-house) is coming to a close, and a decent-length leash that each partner gives the other to have its growing pains.
But after this common start, the outcomes diverge significantly – based on our industry experience, in the lower to mid-market (brands doing $5M - $200M in topline revenue)
~25% of 3PL relationships end in early termination
~60% of brands remain with their 3PL, but have a negative NPS score
Just ~15% of brands would recommend their 3PLs (Promoters on NPS scale)
Struggling with a 3PL is extremely common. Whether you are just starting a new relationship or are years in, here are a few tips we have to make sure your 3PL is enabling your growth and profitability:
Look at how you operate your own business: Think through aspects of your business that might be making your 3PL’s life difficult. This could be anything from how your inventory comes in, special requirements and quirks, sales channel expansion … the list goes on. If you’re not sure, ask your 3PL – they’ll be happy to tell you. Removing any “excuse” they might have is your job!
Communicate: Sure, respond promptly and thoughtfully when you’re asked for information, but this is really deeper. Don’t avoid the hard conversations – regularly ask the 3PL’s leadership how they view your account: does it look like what they’d expected during the RFP process? are they meeting their own profitability/margin goals? what are their business priorities? And similarly, as your business evolves, over-communicate how these changes will look and what your plan is. Planning will alleviate many issues.
Forecasting: This is hard to get right and certainly a blend of art and science but is critical to how your 3PL partner prepares for supporting your account. The most successful 3PL/brand relationships sync on forecasts often and discuss marketing calendar, inbound volume, outbound volume (per sales channel), returns and storage volume. 3PL’s know it’s hard to get this right but the more you are communicating and “truing up” your forecast the better they can prepare to have the right level of labor, space and supplies ready to support you.
Visit: Get on site, meet your operators, and really understand how the operation works. Note, this doesn’t mean show up, take a 15-minute lap around the warehouse, and go hang out in a conference room or go out to dinner. Really immerse yourself and understand the ins and outs and build those relationships.