Best practices in 3PL and fulfillment contract procurement : A methodological approach to optimising 3PL rates and services

Abstract

With the proliferation of online shopping, the e-commerce industry is growing exponentially. As a direct result, third party logistics (3PL) fulfillment support services are rapidly growing and considered a critical part of the customer experience. 3PL fulfillment support services are not only important to completing the last leg of the e-commerce and business-to-business (B2B) transactional process, but also have an impact on customer satisfaction, long-term customer loyalty and the overall brand experience. The 3PL fulfillment market has changed significantly over the last 50 years, and the scope of the support services has also changed throughout the decades. Overall direction of the industry changed forever on 5th July, 1994, when Amazon was founded and began operations. In the late 20th century, online commerce launched a modern-day gold rush and with newfound fortunes to be made, the fulfillment market was flooded with new companies from various industries that all wanted to stake their claims. Today, understanding the 3PL market options, pricing methodologies and service level agreements (SLAs) is critically important to selecting the best 3PL partner to support your current needs and help you scale your business for the future. The 3PL contract optimisation process starts with selecting the right partner, developing the appropriate contract terms and conditions, scope alignment and performance incentives to lay the foundation for a successful partnership. Ongoing contract optimisation requires a formalised process to evaluate performance, review market alternatives and deliver efficiencies. The ideal state of fulfillment services contract optimisation is achieved when the 3PL relationship delivers maximum shareholder value from best-in-class pricing, outstanding service and long-term goal alignment.