There are many reasons you might be searching for a new warehouse vendor. You might just be doing a regular review of an existing contract or you may be in a search because of missed KPI goals. Regardless of the reason for your search, there are 4 key considerations you need to take into account when conducting your search.
Make sure you look into ownership. The ownership of the warehouse vendor can have a big affect on the service that you will receive.
For example, privately owned warehouses are more stable than equity owned and publicly owned or traded warehouses. Do you want to have to worry about stability? If the owner is unstable, you can forget about meeting KPI’s because you could end up in disaster recovery mode half way through your contract term.
Another ownership factor that will have a direct affect on your service and quite possibly your bottom line is WHO owns the warehouse you’re considering. Now we agree that all business need to make a profit – but Wall Street profit goals are often very different than private-ownership profit goals. So if an investment company owns your potential vendor, you may be setting yourself up for problems because their focus on increasing bottom line at all costs could end up adversely affecting you.
Family owned businesses are generally not looking to “sale.” So you will find that since they are in it for the long haul their focus will be on servicing their customers and growing their business. Every business on Wall Street has an “exit” strategy and that is usually their focus. As a result, service can suffer.
Look for the ability to grow and scale. While you may not need a larger warehouse right now, you could be tasked with finding increased capacity relatively quickly. So if your current warehouse can quickly handle the additional capacity, you’ll be way ahead of the game.
Here are some questions you should consider about capacity and growth potential of your warehouse vendor.
- Can your warehouse meet your growing demand? If you just went through a round of evaluating warehouse vendors, you understandably don’t want to have to do it again just a few months later. Thinking just a little bit about your future needs now can save you huge headaches down the road.
- Does your warehouse have facilities in other locations to accommodate your growth in other regions? Geographic expansion needs are common in order to reduce delivery times. Is the vendor you’re considering able to help you with this need? The geographic growth need is another one that could cause you to have to re-evaluate your warehouse vendor. So address it up front.
- Does your warehouse vendor have a partner (like Palisades Logistics) who can help you grow into other locations? Some warehouses work with partners to help their customers meet their growth needs. This is a great way for the warehouse to provide additional service that you will find extremely valuable when you need it.
- Does your warehouse have the technology to meet your growth demands, new channels and distribution, new products? Technology and forward thinking are important in all industries and especially in Logistics and Warehousing. If your current vendor feels a little behind the times in one area, it’s likely that they are also behind in many other areas. Don’t get bogged down with a vendor who can’t keep up with the times.
What is the financial stability of your possible warehouse vendor? This is one of the most important considerations when evaluating a warehouse vendor. Misjudging this factor can have a catastrophic effect on your business and cause you many delays and service interruptions, some of which may be very long.
What would happen to your business if your 3PL warehouse provider went bankrupt? How would that affect you? If you’ve ever had this happen, you know that this will be a major disruption and you don’t want to have to go through it again.
Who owns the real estate in which your 3PL warehouse operates? Do they own it? Do they have a long-term lease? How long have they been in the building? At first glance these may seem like invasive questions, but you should ask each and every one. They all point to the financial stability of a potential warehouse vendor.
Does your 3PL pay their vendors on time? A company that pays vendors on time is efficient. A company that is efficient with their money will be efficient with their warehousing services. Make those reference calls and ask about the payment history of the vendor.
What’s their employee tenure like? How a company treats their employees can tell you a lot about how they treat customers. Good employees stay with good employers. Good employees will leave a bad employer.
Ask your potential vendor what their average employee tenure is and consider interviewing a few employees. Asking them what they like best about the company and asking them what they would change about the company can be great questions that shed a bright light on how their employees view the company.
Another factor to consider about the company and their employees is the number of new employees they have. The less new employees a company has, the less need there is for new training. Tenured employees know the systems and processes better and that can make your experience there much better.
Choosing a new 3PL warehouse vendor can be overwhelming. But these 4 insider tips can help you ensure that you’ve got all your bases covered during the search. The decision you make as a result of your search is one that you’ll have to live with for a long time, so make sure you’ve made the right decision.