When and How to Change Your 3PL Partner？

Today, most eCommerce stores use 3PLs as part of their logistics. In fact, 86% of Fortune 500s rely on them in their supply chains. For many, outsourcing logistical aspects like warehousing, inventory, distribution, and fulfillment processes reduces costs while allowing the organization to shift its attention to core competencies and deliver a great product to customers. 

However, you can outgrow a business partnership: Your 3PL might not scale with you, you might have expanded beyond their capabilities, your provider may fail to keep up with changing technologies, or you could be seeing increased costs due to poor management or inferior service from the 3PL. It’s important to be able to recognize when you should move on from your 3PL for the sake of seamless business operations. This guide will detail those symptoms and explain when it really is time to cut ties and migrate to a new provider. 

‍

When to change your 3PL partner 

In most cases, if you’re unhappy with your partnership, that’s a clear indication to switch. However, it’s a good idea first to conduct a cost analysis of the issues versus migrating to ensure switching is the right choice. Other times, the signs that alert you to an impending split are less obvious but no less critical.

‍

Your 3PL isn’t scaling with you

Providers come in all sizes, and many specialize in certain niches or verticals. Some cater specifically to small brands or Amazon sellers. But, if you’re maxing out the capacity of your 3PL, are moving into a vertical or geographic region they don’t support, or are otherwise asking for things your 3PL can’t provide, it’s likely time to part ways. 

The good news is you may not have to shift everything at once; you could move part of your supply to a new service, test them, and then migrate everything else once you’re satisfied. That approach will cost more than switching all at once, but you’ll have the added certainty of proof of service. Many eCommerce stores even contract with multiple 3PLs, or you may eventually decide to upgrade to a 4PL to source everything you need from a single provider. 

‍

Costs are higher than elsewhere

If your costs are rising or are higher than you calculate they would be elsewhere, strongly consider changing providers. Flags to keep an eye out for include increasing costs without corresponding upgrades in service, hidden fees, or nontransparent billing. Look at economies of scale as well, such as if you could save money by moving to a larger 3PL. 

You shouldn’t abandon a reliable relationship for small savings on shipping. But you do want to review fees, the services you’re paying for, and if you’re saving the money you could be with another service. If the answer is no, start looking for a new provider. 

‍

Service levels are too low 

Frequent problems with service levels — like poor customer service, high rates of error or damage, or stockouts — above your original SLA are also a reason to switch. That’s especially true if you’ve already discussed what's wrong with your 3PL and they haven’t addressed your concerns. 

‍

Technological mismatch 

If your 3PL doesn’t work with your (new) software for inventory management, order management, customer relationship management, and the like, you’re adding unnecessary expenses and work. Sometimes you can get around this issue by simply building an API connector. In other cases though, technological mismatches can be a deal-breaker. 

Your 3PL should offer, at minimum, real-time tracking, data integration, and reporting that integrates with your own tooling. You want to be able to send customers relevant order information as well as generate reports for internal decision-making. 

‍

Inadequate compliance 

Industry regulations, security, and data protection are non-negotiable. If your 3PL can’t meet those requirements, neither can you. So, your chosen partner has to agree to standards that meet or exceed those set by your own organization. If not, you need to cut ties with them. 

‍

How to change your 3PL partner

Switching 3PLs is a large endeavor and so should involve significant research and planning: 

‍

1. Conduct a needs assessment 

Review your business needs to determine: 

• Service-level demands, such as delivery times, accuracy, and handling needs. Look at the regulations for each platform where you sell (e.g., Amazon, your own website, Walmart). You’ll also want to look at legal and consumer expectations in every geographic region where you operate. Then, formulate standards that meet the strictest of those rules. For example, if you opt for Seller Fulfilled Prime on Amazon, you’ll need a 3PL that can deliver within two business days to almost anywhere in the U.S. That standard should also accommodate almost anywhere else you sell. 
• Necessary services, such as warehousing, package prep for FBA, distribution, bundling and kitting, inventory management, supply chain optimization, or breaking down deliveries from China. Even if you currently handle some processes yourself, fully outsourcing your logistics could save you money. 
• Your current volume, as well as expectations over the next four to five years, including holiday peaks. If your 3PL can’t meet projected inventory and logistical volumes during that time, you’ll almost certainly have to switch again before those four or five years are up, which adds unnecessary costs. 
• Technological needs and required integrations, such as WMS, TMS, tracking, and inventory management. List the data you need and any specific tools you’re using to aid your search. 

A needs assessment should also analyze risk to gauge costs, the potential for delays or data issues, inventory discrepancies, and other hazards. You can then create contingency plans to minimize those risks and enable you to respond quickly without disruption or additional expenses. 

‍

2. Shortlist your options 

Research your options and create a shortlist of 3PLs to gain a better idea of what the market is like and which provider can meet your needs. That entails reaching out to ask for pricing and services, as well as looking at customer reviews. 

Often, you’ll need to send a request for proposal to your top choices and then compare their costs, service levels, compliance, scalability, etc. From there, you can pick one, negotiate terms, and define your SLA in writing, with delivery times, communication, and available technology included. 

‍

3. Plan your transition

Once you’ve chosen a 3PL, you’ll have to do the hard work of transitioning to the new provider. It’s usually best to take a phased approach to ensure you migrate without service disruptions, which encompasses tasks like: 

• Conduct a full inventory audit to ensure accurate stock counts and verify what you’re migrating. 
• Decide if you’ll ship all inventory directly to the new 3PL or migrate in stages. 
• Plan a phased transition to move existing inventory to the new 3PL and avoid disruptions to your business operations. 
• Set a timeline with milestones to track the progress of the migration and keep everyone involved accountable. 

Depending on your eCommerce store, you might prefer to move warehouse by warehouse, region by region, inventory type by inventory type, or through some other schema. If you have fast-moving stock, it might also be beneficial to ship new inventory to the 3PL and have it processed before you pull goods from your existing provider to ensure there are no disruptions or late shipments during the transition. 

You’ll also have to consider data migration. Your new 3PL should offer extensive assistance here, with some providing almost a full turnkey approach. This process will entail: 

• Importing information like inventory levels, order history, and customer information to the new system 
• Setting up integrations with your existing tooling
• Exporting and deleting information from your old 3PL 

This step can take months, especially if you have to build new connectors for your 3PL. However, both your new 3PL’s tech team and your old 3PL’s should handle most of the migration itself. 

‍

4. Move forward with your new partner

At this stage, your new 3PL should be integrated into your systems, and most orders should process automatically, so you’ll only have to monitor and ensure everything runs well. Specifically, you’ll want to verify: 

• New addresses and shipping locations are updated with all your suppliers 
• Supplier orders are adjusted for what the 3PL is providing (e.g., if you normally order boxes but your new 3PL provides them, you can terminate the old contract) 
• Staff are trained to use new systems and processes 
• Staff know who to contact and who’s responsible for what within the new 3PL so that if something goes wrong, there’s a clear chain of responsibility for faster resolution
• If you’re adjusting SLAs, make sure you update them on your platforms 

Communicate with your 3PL regularly to support seamless operations. Discuss your business plans for aspects like expansion and marketing so they understand your expectations and can scale to meet your needs or adjust to your growth. Additionally, establish ongoing KPI monitoring and a feedback loop with your 3PL to track their performance and ensure they continue to be a worthy partner for the long term. 

‍

Conclusion

A 3PL is a partnership and an investment. For a fruitful relationship, your partner has to grow with you, accommodate your shifting needs, and consistently deliver value. Switching 3PLs is a costly and time-consuming endeavor though, so be diligent and follow the steps outlined in this article to minimize headaches. Thoroughly assess your business requirements, select a provider with a long-term cooperation in mind, and craft a detailed transition plan to ensure a smooth migration. 

MyFBAPrep provided expert 3PL solutions that scale with your business, ensuring a smooth transition as you switch from your previous provider. Book a call with our team today to discuss how we can assist you.

‍

About the Author

Tom Wicky

Co-Founder / CEO

MyFBAPrep

Tom is an entrepreneur, startup advisor, and management consultant with over 20 years of senior management experience.  He is the Co-Founder and CEO of MyFBAPrep, the largest worldwide 3PL ecommerce warehouse network.  He managed the digital assets of local media companies across Europe as part of a $2 billion private equity investment led by Macquarie Bank. At the beginning of the Amazon FBA Marketplace, Tom built a data automation platform used to programmatically generate, manage and optimize over 1 million product listings on Amazon. He is a Boston sports fanatic and a recovering hot sauce junkie. Tom speaks Spanish and German and lives in Florida with his wife and three children. 

‍