Episode Details

How to Select a 3PL with Joe Lynch and Adam Robinson

Published 7 years, 1 month ago

Asset based 3PLs own physical assets like trucks, planes, warehouses, etc. Pros: Since they own their assets, these 3PLs are able to use their own equipment to service customers. Truck availability is not a problem. Cons: Asset based companies typically have a limited service area compared to non-asset based companies that broker shipments through partner carriers.
Non-asset based 3PLs use the assets from other logistics companies. Pros: If the 3PL is good at procurement, they can build a large network of partners / carriers. Cons: Since these 3PLs are dependent on their partners, they may sometimes struggle with difficult lanes. These companies also lack operational knowledge because they do not own assets.
Asset light 3PLs own physical assets and also partner with other logistics companies similar to non-asset based companies. This is a relatively new model and is considered superior to the other models (asset based & non-asset based). Asset light companies have the best of both worlds – assets and brokerage capabilities. Wall Street values asset light 3PLs higher than asset based or non-asset based companies.

Dun & Bradstreet. D&B is a business credit rating service. The most important measure is the Paydex metric. Paydex is a numerical credit score for the promptness of their payments to creditors. Look for a 3PL that beats the logistics industry average. In other words, select a 3PL with a higher D&B Paydex score than their industry peers.
Older, more established companies are less likely to have cash flow issues than newer companies. New, fast growing companies burn through a lot of cash, which can cause slow payments.

Specialization. Choose a 3PL that specializes in LTL and truckload. 3PLs that specialize in other services like air freight, sea freight, warehousing, etc. will often sell over the road services as a side business.
Similar Customers. Look for a 3PL that has a customer base that has similar requirements as your business. The familiarity will reduce the learning curve and risk during the startup phase.
Transactional vs. Strategic. High volume LTL shippers should hire a 3PL that has a focus on strategic shippers. Transactional shippers typically don't ship much and they don't commit to any one logistics company. Transactional shippers almost always pay more than strategic shippers. 3PLs that have transactional shippers are often not use to the requirements of a strategic shipper. Strategic shippers ship more than transactional shippers and they typically require customized solutions and a dedicated team.
Customized Solutions. Larger shippers almost always require a customized solution. If you are a high volume LTL shipper, you should pick a 3PL that understands your unique requirements and can customize their service to meet those requirements.

TMS capabilities vary greatly. Any system will quote, track, audit and pay for shipments, the best systems do so much more.
The best TMS will do route planning, consolidation and optimization, which will save a lot more money than just negotiating good rates.
Hire a company using one of the top systems. Also, make sure the 3PL you hire has their own dedicated TMS people on staff.

Operational excellence refers to the best practices and activities that get the desired business results including, but not limited to:
Lean Processes Well defined processes to manage the business. A process orientation will enable cross training and co