Choosing a 3PL Service Provider in North America: Key Selection Criteria
The current business environment has compelled large and small companies to pay close attention to the logistics components of their general strategy. Clients’ and supplier’s locations, environmental issues, government regulation and the development of technology have changed how companies manage their logistics. Finding the correct logistics services provider can spell the difference between success and failure for manufacturers and retailers. Understanding the selection criteria to choose a 3PL Service Provider will help you to make the right decision.
What is a 3PL?
3PL or Third Party Logistics Provider is a company that provides non-asset based transportation services, as well as warehousing and inventory management services, among others. A Third Party Logistics Provider is the meeting point between the shipper (eg. manufacturers or retailers) and the solution to its transportation and storage needs.
More about Logistics providers classification here.
Choosing a 3PL Service Provider in North America: Key Selection Criteria
Cost of service
Because transportation and warehousing are input to the production cost of most goods, it is not a surprise that most companies consider price as the most important factor to consider when choosing a 3PL.
However, cheaper isn’t always better. Experienced Supply Chain Managers, Purchasers, and Logistics Experts know that in the logistics world, you get what you pay for. Make sure your 3PL offers not only good rates but, most importantly, high-quality and cost-effective services.
Mexicom Logistics has a wide network of affordable carriers in Mexico, the USA, and Canada, however, we only work with the ones that we know will offer a reliable service to our customers.
When shipping freight across North American borders, transportation costs include:
- Door-to-Door transportation service.
- US-Mexico Border crossing fee.
- Customs brokerage service.
- T&E Bond. (Only applicable when shipping from Canada to Mexico)
- Handling costs at border crossings such as Laredo.
- Additional charges that may apply.
- Storage fees (monthly or weekly)
- Inbound fees
- Outbound fees
For more information, you might want to read our post on what is included in an All-Inclusive Less Than Truckload freight rates.
Reputation
Reputation is one of the key criteria used by American 3PLs users. Reputation is the opinion or belief a person or a business has regarding a person or business. Intrinsically, a 3PL reputation is qualitative and subjective as it depends on individual perceptions.
“It takes many good deeds to build a good reputation, and only one bad one to lose it.”—Benjamin Franklin
According to Robert G. Eccles, professor of management practice at the University of Oxford, when assessing reputation, the more contextual, objective, and quantitative the approach to evaluating character, the better.
Determinants of a 3PL reputation are:
- Number of years in business
- Number of customers
- Long-term relationships with customers
- Geographic spread – Is the 3PL specialized in North America?
With more than 15 years in business, Mexicom Logistics enjoys a great reputation among its appreciated stakeholders. Customers from Mexico, the US, and Canada rely on us to move more than 3500 loads across North American borders every year.
Operational performance
High operational performance assures effectiveness and efficiency. There is a variety of factors linked to 3PLs strategical and operational targets. For example:
- Billing system efficiency and flexibility
- Quality-Customer Satisfaction
- Information sharing and mutual trust
- Shipment accuracy
- Responsiveness
- Volume/Equipment availability
- CTPAT Carriers
- Transit permits
- 24/7 satellite tracking systems
Tips on the 3PL evaluation and selection process
Follow the next steps to evaluate your 3PL candidates: Prepare a list of your key evaluation criteria according to your needs. (Use the criteria mentioned above as a starting point)
- Make sure this list is aligned to the corporate and supply chain strategy
- Weight the evaluation criteria according to your priorities, use a scoring system.
- Use your criteria list to screen your 3PL candidates
- When creating your Request for Proposal:
- Be as specific as possible.
- Describe in detail the project and tasks to be performed.
- Specify evaluation criteria
- Provide proposals guidelines
- During the selection process, make sure your finalists meet your selection criteria.
- Involve your team in the selection
- Meet your finalists and prepare a list of questions for them.
- Check customer references
- When making a decision, remain as objective as possible but also choose the person you feel more comfortable working with.
Sources:
Click to access 58c0ff59b1622.pdf
https://hbr.org/2007/02/reputation-and-its-risks
https://www.researchgate.net/publication/227420721_Assessing_performance_factors_for_a_3PL_in_a_value_chain
Click to access Gartner_Article_3PL_Evaluation_Selection.pdf
Contact Mexicom Logistics
+1 514-667-0174
info@mexicomlogistics.com
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