5 Must-Ask Questions When Selecting a Third Party Logistics Firm

DeAnna Swinton
Published on October 15, 2020

Shippers today are navigating an ever-changing, increasingly complex transportation landscape. Over the last 40 years, since the deregulation of the freight marketplace, there have been several capacity crises. The majority of these crises have taken place since 2014. Change is happening at a much more rapid pace today than ever before, and the faster shippers recognize these trends and adapt, the better they will fare in the next capacity crisis.

Brokers, or third party logistics firms (3PLs), can be a great partner in both good times and bad, helping to add steady capacity and consistency on your loads. However, not all 3PLs are created equal, so it’s essential you select your transportation partners wisely, as you would any large, trusted carrier partner.

The following questions can be used as a starting point to help you separate the wheat from the chaff.

1. What does your carrier base look like?

Many brokers — especially the largest ones — leverage owner-operators for the lion’s share of their shipments. That means that their customers are rarely getting the same company twice, let alone the same driver. When selecting a 3PL partner, you want to find one you can treat as a “core carrier” that will provide the consistency you desire.

What does this look like in practice? Your 3PL should leverage small, medium, and large fleets. When one of the aforementioned broker's drivers falls off a load, they have to start over. Whereas a broker that uses medium and larger carriers is able to cover potential delays with another driver from the company. It's an enormous difference in the quality of service and performance.

2. How can I expect to receive updates on my loads?

Visibility is King (or Queen!) nowadays. If you’re like most shippers, you want key information about your shipment at your fingertips at a moment’s notice. A good 3PL will ensure you can receive this information in whatever way is most convenient to you, 24/7/365, including via phone; email; a self-service portal; or API, GPS, EDI, and XML feeds. You may also want to inquire about their reporting capabilities. Ideally, you’ll find a broker that will take it one step further to provide shipping data on your lanes — helping you improve your business processes and operations, and identifying valuable cost-saving opportunities.

3. What is your load acceptance ratio?

Commitment is key in brokerage. Thousands of brokers’ businesses are based upon the ideal that if they cover 80% of the loads on their boards, they made money on 80%. If you’re a shipper and your load(s) are in that 20% that the broker didn’t, couldn’t, or wouldn’t cover, where does that leave you? Like any business, brokers are in business to make money. (And your broker should make money ... If they do a great job, you want them in business year after year to support you, after all.) But you have to find a broker that values relationships, practices solid business principles, and commits to your volume. That’s a small minority of the overall marketplace, and it makes a huge difference.

4. What measures do you have in place to ensure the safe, successful delivery of my goods?

Any broker worth its weight in salt will be able to clearly outline for you their careful carrier selection process and the ways in which they continuously evaluate and monitor their carrier’s operating authority. You want to find a broker that will verify each and every carrier’s USDOT and FMCSA profiles, their compliance performance, and their insurance. The 3PL should also require that their carriers execute a written broker-motor-carrier agreement, and maintain copies of those documents to verify their compliance. (Consider it an added bonus if the broker also has customer-specific standards of care, or SOCs, and work instructions for each of their clients!)

 5. In the event of a claim, how do you manage the process?

At the end of the day, the carrier moving your freight is the party that is held liable in your contract. This doesn’t change when you introduce a broker to the mix. That being said, you want to make sure the broker you’re considering working with won’t just dust their hands off in a “not my problem” type of fashion. Ideally, the 3PL will have a general council on staff or retainer to help process your claim, and have insurance policies in place that back up the carrier’s position. If that is the case, you may actually have more protection working with a broker than dealing with a carrier directly. We’d recommend asking to speak with the 3PL’s risk management team to discuss this in further detail.

A few other considerations that should certainly be top-of-mind for you as you select a 3PL are factors like their company history (both financials and longevity are considerations), their on-time percentage for both pick-up and delivery, and customer satisfaction metrics. You want to make sure your transportation partner is in it for the long haul.

Need help with your truckload or managed-LTL needs? Send us a message at info@tuckerco.com. We’d love the opportunity to win your business.

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