3PL Selection—don’t let your people be penny wise and pound foolish
Third Party Logistics providers (3PLs) are many and diverse. Supply chain organizations often find themselves comparing price differences of 1–2% in service offerings, and they are missing the opportunity to save 5–15% in real costs. 3PL selection is a supply chain decision and an optimization opportunity. A good network study can compare 3PLs’ offerings in the terms you want to consider:
- Total landed costs
- Customer service time
- Qualitative considerations
The best approach to 3PL selection is to start with a network study. This will identify not only the optimum footprint of sites, suppliers, ports of entry, and modes of transportation. What supply chain leaders will quickly see is that optimum is not a point but rather an area. For example, your optimum East Coast distribution point might be Charlotte, NC but anywhere from Atlanta, GA to Roanoke, VA is equivalent in terms of cost and service time.
The network study will give a zone of acceptability for a node. Then the task is simply to find 3PLs that can support warehousing and freight in that area. Using Logility’s network design optimization makes it easy to revisit each possible iteration of a network in order to know its specifics.
Watch an actual 3PL selection in this short clip:
With Logility, Supply Chain Leaders can make decisions and proceed with confidence that they have made the best overall decision regarding 3PL selection.