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Looking at 3PLs? Nine Questions to Ask

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Many companies are moving in the direction of having 3PL warehouses manage their inventory and order fulfillment processes as well as provide value-added services if they aren’t already. This is enabling these companies to reduce their space requirements and become more streamlined. Another result of this wave of the future is that there may be a reduction in employees required for operations.

In my experience, I have seen both ends of the spectrum in terms of more advanced technology and EDI capabilities for some 3PLs and less advanced technology or legacy systems and limited EDI capacity in other 3PLs. The costs of using 3PLs and their capabilities have to be considered prior to decide to outsource your operations to any one of these facilities. Not only the cost of the services they provide, but also the impact of the data flow to and from your existing systems and out to your customers in the form of customer invoicing (EDI 810) and advanced shipping notices (EDI 856). Another aspect to think about as well is the data flow to and from freight companies and freight consolidators.  New interfaces and application bridges may need to be designed and built to support the business and the cost of these new projects needs to be added into the business process budget.

Here are just a few things to consider when selecting a 3PL:

  1. How long has the 3PL been in business?

The longer they have been in business the more experience they will have with supporting your fulfillment of orders and EDI functionality.

  1. Will they allow you to tour their facility?

Tours can be a useful way of watching the facility in action to see if there are any improvements required prior to forming a partnership with this 3PL.

  1. How are their support personnel to work with?

What are their support hours?  Will you have a dedicated customer service rep or will you be calling into a call center?

  1. Do they have any client references that you could speak with?

Interviewing current clientele will allow you to discuss the relationship that they have with the 3PL and get an idea of how effective they really are.

  1. What customers have they worked with before in terms of shipping container requirements for GS -128 labels(formerly UCC-128)?

If they can easily accommodate your customer label requirements as the orders are being shipped directly to your trading partner community, it is one less thing that you do not need to maintain.

  1. Are they EDI capable and to what extent? What EDI transactions do they support? Are they able to send shipping data directly to your trading partner community in the form of customer ASNs (EDI 856)?

Not all 3PLs utilize the standard EDI 940 Warehouse Shipping Order and send EDI shipping information to their clients. There are some 3PLs that use their own customized versions of an EDI Purchase Order 850 and EDI ASN 856 to handle their receipt of orders for shipment and shipping information as well as 861 Inventory Adjustment transactions to handle inventory adjustments as required. This most often leads to the design and programming of customized interfaces to a client’s ERP system. This can be a costly undertaking if not properly investigated, planned, and estimated to meet the requirements of older generation 3PLs.

  1. Do they utilize a VAN, FTP, or are they AS2 capable?

Some 3PLs are more advanced than others and can support some of the newer communication protocols while others may be limited to FTP functionality.

  1. What accommodations do they have for frequency of data transmissions?

3PLs need to be able to process orders and provide shipment data on a timely basis so that customer ASNs can be built from shipment data and quickly be sent to the trading partner community.

  1. Do they have a test system to test transactions prior to implementation and maintenance going forward?

The use of a test system vs. a production system allows for transactions to be tested without impacting the process flow in the production environment.

As you can see in selecting a 3PL, you must ensure that the functionality that you are looking for to automate your processes is operationally, economically, and technically feasible prior to committing to a contract. Also you should evaluate a few alternatives so you can compare different 3PLs to each other.  Your company may not choose the least expensive alternative based on your comparison of features and what your priorities are.

So while 3PLs offer a wide variety of services and have varying degrees of capabilities, evaluate them very carefully so that all of your company’s business requirements will be met and keep in mind those additional costs of going in this direction and handling the data flow.

Good luck to you and your journey to warehouse picking and shipping automation!

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