The 4 fears of outsourcing your fulfilment: No 4. What if we fall out?

What if your third party fulfilment provider goes out of business or you fall out with them in a major way?

This is a legitimate fear. Your third party logistics (3PL) provider will hold your valuable stock and if they get into trouble financially or fall out with their suppliers or with you, that means that you’re in trouble also. Your stock won’t move until you move it to another provider and this could be a huge hassle and very damaging to your business.

LOW BARRIER TO ENTRY
The fact of the matter is, there is a relatively low barrier to entry into the 3PL business; it’s fairly easy to rent a warehouse, create a website, and then suddenly be in the 3PL business. It’s possible to have fairly inexperienced and not very capable people set up a 3PL business and do it badly. This means there are, how shall we say, some less than competent outfits out there. Doing 3PL, as with anything in life, does take skill and experience, and you really don’t want your stock sat in some cowboy outfit’s warehouse.

SEPARATING THE WHEAT FROM THE CHAFF

But how can you, the customer, tell the difference? There’s a number of clues.

CLUE 1 – ROCK BOTTOM PRICES
The less experienced and stable outfits will normally offer rock bottom prices, and this is how they entice people in. They will market themselves as such. Watch out for people just offering their main sales pitch which is ‘we’re cheaper’. Cheaper isn’t necessarily better. In fact, most of the time it isn’t.

CLUE 2 – NOT BEEN IN BUSINESS FOR LONG
If they’ve only been around for a couple of years, and they haven’t been tried and tested, it’s a competitive market space, so a company that’s been around for quite a while is obviously doing something right. But if they’ve only been in business for a few years, it’s a warning sign. It doesn’t necessarily mean that any company that’s new is bad, but it’s just something to watch out for.

CLUE 3 – HOW THEIR PEOPLE MAKE YOU FEEL
What feeling do you get when you speak to their people? Is there a super slick sales talk that sounds good and they’re saying all of the right things, but your gut tells you that you’re being sold to? That’s probably not a good sign.

Instead, do they seem genuine, despite perhaps not having that super slick,polished salesperson delivering the sales pitch to you? That’s probably a good sign. Do they seem to genuinely believe in what they’re doing? Human beings are actually incredibly skilful at discerning whether someone’s genuine, so pay attention to that gut feeling you get.

CONCLUSIONS
If you choose a 3PL provider that doesn’t sell on price, has a good established track record, has been around for a while, who your gut is telling you is trustworthy, then you probably won’t go too far wrong. There’s always a risk with any core supplier that they might go out of business, or get into financial trouble. And that’s always a problem for any business. This risk can be reduced by simply choosing wisely, and making those kinds of decisions often comes down to a feeling rather than cold, hard logic.

Do I trust the person with my business? If that feels wrong, then it probably is the wrong 3PL partner for you!