How to Choose a Third-Party Logistics Provider

Choosing the right partner can make or break your company’s logistics, customer
service, and repeat purchases.

At Shopify Plus, we worked with the teams at Orderbot and Stitch Labs to formulate
the following questions every merchant should ask both themselves as well as a
prospective partner:

Basics (Them)

1. Do they have an enforceable non-disclosure agree (NDA)?

2. Do they have at least a two-year track record of financial stability they’re

willing to share documentation regarding?

3. What are their hours of operations (including weekends and holidays)?

Volume (You)

4. How many shipments from your factory do you receive on a quarterly basis?

5. How many orders do you ship each month (in the following categories: B2C,
B2B, domestic, and international)?

6. What is your maximum capacity?

Performance (Them)

7. Has their capacity grown over time? Does its growth match your own history
and projections?

8. How many warehouses do they operate?

9. Do their locations correlate to your high-volume areas?

10. Do they have strong customer references?

Charles Michael, Manager of Strategic Partnerships at Stitch Labs

“Many of our customers have trouble finding credible reviews. One way to circumvent
this problem is learning who a provider’s customers are and reading those
companies’ reviews that pertain to shipping and fulfillment.”

“Look out for the quoted price and understand that it often won't include value add-
ons like marketing inserts, gift wrapping, and special packaging. If you feel like you're
getting too good a deal, you probably haven't asked all the right questions.”

“Picking the right partner can be thorny. That’s why we wrote a blog post with more
advice on finding and leveraging them here.”

11. Have they worked with companies in your industry? What vertical do they
specialize in?

12. How do they compensate for delays?

13. Do they provide custom packing slips and gift messages or gift cards?

14. How do they execute next day orders?

15. How do they handle unexpected spikes in order volume?

Technology (Both)

16. Do they integrate directly with your Shopify store through an API or approved
app?

17. Do they have a standalone platform you can integrate with through an EDI or
via FTP file transfers?

18. What communications types are available for orders, shipping notices, returns,
inventory counts, incoming purchase orders, receiving, and adjustment
notifications?

19. How easy is their standalone platform to use?

Costs (Them)

Steve Izen, Co-Founder at Orderbot Software Inc.

“The big mistake everyone makes is to ask about price first. Price is one of the last
things you ask. A good provider is worth its weight in gold. Reduction of errors and
timely deliveries equal happy customers, and happy customers order more.”

“An extra 25 cents per order is cheap if your customers’ expectations are met, or
even better exceed.”

20. What are the costs in their quote?

Costs will normally be broken into the following categories:

Transportation costs: The standard shipment cost of sending your products from
your factory to your warehouse.

Receiving costs: What your partner will charge for offloading products from your
transportation provider and into their warehouse.

Warehousing fees: Usually a monthly fee based on the amount of space used.
Often charged per pallet.

Pick-and-pack fees: The price for a provider to pick a product from storage and
pack it. The more units you ship each month, the cheaper this fee should be.

Shipping costs: The actual shipping cost to deliver a product to your end
customer. 3PLs often have better shipping rates because they ship at scale.

Account set-up fees: The price you pay to create an account and integrate
software.

Minimums: Most will set a minimum monthly spend that you must have with them
in case your business has a slow month.