How to Choose a 3PL Partner: A Hands-On Guide for Growing eCommerce Brands

Your order volume is increasing, your warehouse is busy, packages are flying out, and it’s looking like you’re ready to move from in-house to outsourced fulfillment. But while you know what a third-party logistics provider is, do you know how to choose a 3PL partner that will enhance your brand, cut your costs, and scale with your business?

This guide goes beyond “Everything eCommerce Brands Need to Know About 3PLs” by providing a practical framework for evaluating partners and choosing the right 3PL for your eCommerce brand.

Recap: When It’s Time to Partner with a 3PL

Moving from in-house to outsourced fulfillment is a huge step in your eCommerce business’s journey, giving you the capacity, time, and capabilities to scale at speed. Key indicators that your business is ready to partner with a 3PL include:

• Rising order volumes that strain your staff and warehouse
• An increase in shipping delays and errors
• Difficulty managing a multichannel inventory
• Spending significant time and money on fulfillment tasks, rather than on other business operations
• An inability to scale your business

For most eCommerce brands, it quickly becomes obvious when you’ve outgrown your current fulfillment setup; what isn’t always obvious is how to choose a fulfillment partner that cares as much about your business as you do.

Choosing a 3PL Partner: Before You Start

With last-mile delivery now encompassing everything from order confirmation to returns and reviews, your 3PL partnership is arguably the most important one in your business. But before you jump into selecting an outsourced fulfillment provider, you first need to know your requirements.

This small but important task involves:

1. Auditing your current operations—what’s working and what’s not working?
2. Defining your non-negotiables—what’s essential to your business (for example, geographical reach, speed, tech, etc.)?
3. Establishing your budget—how much can you afford to spend on a 3PL before it starts affecting your profit margin?
4. Knowing your growth trajectory—what will your 3PL be handling in the future?

With this information, you’re better placed to match a potential 3PL to your business’s needs.

How to Choose a 3PL—What to Look For

Now that you know your requirements, it’s time to understand what to look for in a 3PL. The key requirements for an eCommerce 3PL partnership include:

1. Geographical coverage

A good 3PL for your business should be able to store inventory closer to your end customers, reducing shipping distance and, therefore, costs. Look for a 3PL with:

• Warehouse locations close to your key customer bases
• A fulfillment network that can grow with your brand (i.e., new customer bases)
• International shipping abilities, if relevant

Remember, you’re looking for a potential partner who meets your requirements; a 3PL with international shipping expertise is relevant only if you plan to expand internationally.

2. Flexibility and scalability

One of the goals of moving to a 3PL is the ability to scale your business. Therefore, it’s essential that your 3PL can scale as well. This includes having:

• The staff, space, and capacity to handle peak periods (for you and them); and
• Contract flexibility that allows you to scale without penalty.

Here’s where knowing your order volume and projected growth is essential.

3. Technology and integrations

Over 60% of 3PLs struggle with technology investment, making the tech stack and integrations of your 3PL a top priority.

In particular, you want to look for:

• A sophisticated WMS or TMS that gives you real-time visibility
• Integrations with your existing tech (think shopping cart, order management system, etc.)
• Reporting dashboards reflecting all KPIs

4. Specialized services

Standard 3PL services include warehouse and inventory management, order processing and packing, carrier negotiation and shipping optimization, and returns management/reverse logistics.

If you ship products that require specialized equipment, knowledge, or information, you need a 3PL with experience in those areas. For example, if you have international customers or ship goods that require temperature-controlled storage.

You may also require a partner that offers value-added services, such as kitting, custom packaging, and branded experiences. Whatever you need, don’t assume it’s part of the standard service; always ask, and then always ask for case studies and customer reviews to confirm the ability to provide.

5. Carrier relationships

Robust carrier networks improve delivery speed, reliability, and geographical reach, which, in turn, affect your shipping costs, transit time, and customer experience.

Look for a partner with strong multi-carrier relationships, allowing you to access preferred rates, faster service, and a broader geographic reach, while mitigating the risks of delays and costs during peak periods or service disruptions.

Further reading: How to Build A Winning Multi-Carrier Shipping Strategy

6. Pricing structure & transparency

Fulfillment is expensive, and those costs are rarely clear. In fact, 21% of shippers cite cost as the primary reason for a 3PL partnership failing. Always look for a 3PL with a transparent pricing model that clearly sets out the costs for:

• Storage
• Picking/packing
• Shipping
• Any extra (aka hidden) costs

And, don’t be afraid to ask about volume discounts and long-term incentives. Even if you’re not of a size to benefit now, that doesn’t mean you won’t be in the future.

7. Performance and customer experience

Finally, you want to know that everything your 3PL advertises, promises, and shouts about is true in reality. This means asking for and analyzing key information such as:

• Years in business and track record
• Client retention rates
• Any certifications
• Customer reviews
• Performance metrics

Vetting and Evaluating Potential 3PL Partners

We’ve covered what to look for in a 3PL, but once you’ve identified potential partners, here’s how to vet and evaluate them.

Stage 1: Research

Create a shortlist of three to four facilities or networks that meet your requirements. Look them up online, talk to industry peers, and start with a short list to avoid getting overwhelmed.

Stage 2: Conversations

Get in touch with each 3PL and run an RFP. The questions you ask will be specific to your business, but common questions include:

• How do you measure fulfillment accuracy and order speed?
• What’s your average on-time delivery rate?
• Can you support international fulfillment and reverse logistics?
• What technology do you use for inventory and shipping visibility?
• How can you support peak periods or scaled-up operations?

During these conversations, there are several red flags to watch out for, including:

• Poor communication throughout the process
• Outdated technology, manual operations, or a limited number of integrations
• Unclear or inflexible SLAs
• Hidden surcharges
• Frequent service issues or poor customer reviews
• A one-size-fits-all approach
• A reluctance to offer site visits or share customer reviews

Stage 3: Site visits and trials

It’s always a good idea to schedule a site visit and organize meetings with key operational and customer service managers while you’re there. Key things to look out for are:

• General cleanliness, organization, and security
• Technology, automation, and any manual processes
• Staff expertise, team culture, and communication

After your visit, inquire about a small batch trial where you can place test orders, review fulfillment speed and accuracy, check technical integrations, run reports, and measure key KPIs.

Stage 4: Contract negotiation

Did you know that effective 3PL contract negotiation can lead to an average cost saving of 10-20%? Spend time on contract negotiations to ensure you create a partnership that benefits your business. In particular, you want a negotiation period that includes:

• A detailed proposal so you can compare costs, service levels, and terms
• A transparent pricing structure that factors all costs, including storage, handling, shipping, and surcharges.
• A service level agreement (SLAs) that details measurable performance standards, including order accuracy, delivery speed, returns, and error rates, alongside penalties for missed targets. (Reminder: some 3PLs offer shipping and can take ownership of delivery speed promises, while others might work with transportation partners, or require you to bring your own carrier contracts. Pay attention to how your 3PLs offer shipping.)
• A contract that allows for scalable provisions (volume spikes, regional expansion, and new technologies), favorable payment terms, an exit clause, and a detailed plan for a smooth transition.

Future success

Successful 3PL partnerships require ongoing work to ensure they meet the needs and expectations of everyone involved. We recommend using a real-time scorecard to monitor performance, holding regular review meetings to discuss KPIs and forecasts, and proactively solving problems.

And if things do go wrong, don’t be afraid to address it head-on. Read more in our guide to When Fulfillment Breaks Down: What Growing Brands Get Wrong About 3PL Fit.

Conclusion

Choosing the right 3PL for your growing eCommerce business is an important decision that can scale your business, reduce your costs, and deliver unmatchable customer satisfaction. Take your time to understand what your business needs from a 3PL and then go deep when vetting and evaluating potential partners.

And, if you want a helping hand, get in touch with a trusted partner like iDrive to explore how we can help you find an amazing 3PL.