How to Switch Third-Party Logistics Providers: Guide for Your New Partnership

The idea of switching third-party logistics providers is intimidating. There are close to 70,000 3PL businesses in the U.S. However, knowing your business needs and what to look for in potential 3PLs makes narrowing down potential options easier.

Discover everything you need to know about changing third-party logistic (3PL) providers.

8 Signs That It’s Time to Change 3PL Providers

Change is always a dangerous business move, which may be why you hesitate to change third-party logistic service providers. However, ask yourself the following questions:

1. Has there been inconsistent or late deliveries?

2. Has your provider lost deliveries?

3. Are customers receiving damaged goods?

4. Is your current provider struggling to meet your growing business needs?

5. Is your provider constantly out of stock?

6. Are your provider's costs going up without service improvements?

7. Is there a consistent lack of communication and transparency?

8. Is your provider behind on the latest technological logistic advancements?

   
   

If you’ve answered “yes” to more than one of these questions, then it’s time to consider changing 3PL providers.

What Makes a Good Third-Party Logistic Provider?

If you’re wondering what makes a good 3PL provider, look for these characteristics within your potential new providers:

1. A solid professional reputation: Any 3PL company can say they are the best available without proof. You want a 3PL that has worked with other companies in your industry. See if you can find not only customer thoughts but also vendors and employees. That will give you a full view of how they run their business.

2. Reliability & proven track record: You want a 3PL provider with testimonials that show they offer reliable service and supply chain accuracy. If there is a lack of testimonials, then you want to move on. 

3. Advanced technology & integration: Any potential 3PL provider should showcase the technology they use to run their business. You want a company that seamlessly integrates with the current technology you already use or plan to use in the future. 

4. Flexible & scalable solutions: Evaluate whether this potential 3PL company can handle the various fluctuations in the commerce industry. Review its inventory volume limits and organizational capabilities.

5. Strong carrier & warehouse network: Potential 3PL companies should have a vast network of warehouses and carrier stations. Depending on your warehouse needs, you should see if their network is cross-country or spread out within a specific region. This ensures faster and safer deliveries. 

6. Excellent customer support: Any high-quality business has established customer support. Signs of quality customer service are responsiveness, clear communication, and the willingness to solve problems.

7. A focus on security: You need a 3PL provider that protects both your products and data. Cybersecurity is becoming increasingly important in the logistics industry. Pick a provider that mentions their security precautions.

8. Additional services: A 3PL provider should be more like a partner than an outsourced service. Look for additional value in the other services, such as picking and packing, product returns, or brokerage services.

5 Steps for Switching to a New Third-Party Logistics Service Provider

Here are the five steps to make switching to a new 3PL provider go smoothly.

1. Asses Your Current Challenges

   If you haven’t already, define your issues with your current 3PL provider. This will tell you what you need—whether that’s more inventory space or more value for your money. We’ve already discussed the signs that your current provider isn’t working anymore, so this should be easy.

2. Choose a New Provider

   Once you know your needs, research and find the perfect 3PL provider for your business or logistical needs. Luckily, we already gave you a list of factors to consider during your search.

   Proper research involves checking references, asking for demos, and thoroughly reading contract terms. This is the best way to understand what working together will feel like. Before signing anything, you want to be sure that you will get the services you need within your budget. 

   
   

3. Develop a Transition Plan

   A transition plan should lay out every step between ending your current contract and changing to your new provider. Having a written plan is good for you, employees, and stakeholders. Transition plans typically have:

   
   

   1. A timeline for moving cargo from one warehouse to another: This includes a move-out date for your previous provider and a move-in date for your new provider. 

   2. A written order of products to move first: You’ll usually start with slower-to-sell products since high-selling products would leave the warehouse naturally.

   3. A data migration timeline: You want to ensure this is done before the end date of your previous provider.

   4. A list of potential risks: Even the best-laid plans can go awry. Identifying potential risks ahead of time will better set you up to solve problems if they arise.

   
   

4. Communicate with Everyone

   As the transition plan goes into place, you must communicate constantly with employees, customers, stakeholders, and your old and new providers. You may need to warn customers that potential delays may occur while changing providers, or train employees to use the new provider. 

   
   

5. Monitor the New 3PL Provider’s Performance

   To ensure you choose the right provider, set milestones and KPIs to reach once the change has been finished. These goals can be spread throughout the quarter or year, depending on how you run your business.

   
   

   Do you want to expand your inventory by a certain date? Establishing such goals is how you can know your new provider is meeting expectations and growing your business at the same time.

   
   

Change Is Always Hard

Changing 3PL providers can seem like a scary step to take, but it doesn’t have to be! As long as you do your research and due diligence, the transition should be minimally disruptive to your business. If anything, it will be the move that takes your business to the next level.

If you’re still unsure about what kind of logistics provider you need, read Looking for Logistics Help? 5 Things to Consider.