Identifying a Bad 3PL: Insights That You Need

We often hear from new clients who had bad experiences with previous 3PLs. Typically, the main challenges are unplanned costs, late shipments, lost inventory, and decline in trust from their customers. The worst 3PL companies may seem affordable at first, but over time, the hidden costs and inefficiencies add up, leaving you with more headaches than savings. 

This guide will walk you through what to look for in a bad 3PL and how to avoid selecting one.

Key Characteristics of a Bad 3PL Provider

Brands will find themselves trusting a 3PL company with their entire supply chain, only to find out later that there are additional costs and missed expectations for working together. The result is more costs than you expected, late deliveries, poor communication, and broken promises. 

The worst 3PL companies are notorious for cutting corners, whether it's failing to maintain accurate inventory levels, pricing transparency, or mishandling freight. These logistics issues can impact your bottom line in ways you may not immediately realize.

1. Inventory Mismatches

A bad 3PL may struggle to manage inventory counts effectively, leading to stockouts or overstocking because they can't forecast accurately. Both scenarios cost you money. Overstocking means you're tying up cash in unsold inventory, while stockouts can mean lost sales and frustrated customers. For reference, according to a study 43% of companies report financial losses due to poor inventory management by 3PLs.

2. Transportation Delays and Misshipments

Delays in shipping can be costly, especially for large companies relying on just-in-time delivery models. The worst 3pl companies often have poor labor management practices, leading to shipments that are late because they run out of time in the day. Additionally, if their fulfillment space is disorganized, you can count on mis shipments and delays.

3. Missed Deadlines and Lost Customers

Your customers expect their orders to arrive on time. When a bad logistics provider fails to meet delivery windows, your reputation suffers. Missed deadlines can quickly escalate into lost customers, and rebuilding trust takes time and money. 

Companies with bad logistics can face expensive chargebacks, especially if penalties are in place for late deliveries.

How to Identify a Bad 3PL

To avoid these financial pitfalls, it’s critical to vet your 3PL provider thoroughly. Use 3PL reviews and 3PL rates as starting points, but don't rely on them solely. Conduct site visits, ask for references, and scrutinize their track record, especially with Fortune 500 companies that use 3PL services. A proven history of success is a good indicator of reliability.

Top 8 Warning Signs For a Bad 3PL:

1. ‍Organization: Look at their warehouse. A disorganized warehouse can be an indicator how things are run internally.
2. Employee Turnover: High turnover rate vs. industry standards. You can ask or go to LinkedIn to find out.
3. Reviews: Look for reviews on Trust Pilot and their Google Business Profile. That's typically a good indicator of their success.
4. Communication: Ask what their response time is from their current customers.
5. Invoicing: Does their pricing match their invoicing each month. Ask their customers.
6. Hidden Costs: Some 3PLs are not located in an ideal geography. They may have the best service, but their location may cause higher transportation costs, thus your bottom line.
7. Inventory management: Inaccurate inventory levels. A source is current customers.
8. Technology: Any 3PL that's worth their salt will have a modern WMS solution that has been reviewed by outside parties. Live inventory dashboards are critical to a brand's success.

Warning Signs Recap: How to Avoid the Worst 3PL Companies

       1.    Disorganized warehouses       
       2.    High employee turnover       
       3.    Poor communication with clients       
       4.    Hidden costs in invoicing       
       5.    Outdated WMS technology

Ensure your 3PL provider checks all these boxes to protect your business from unnecessary risks.

Why Modern Technology Matters in 3PL

The best 3PL providers leverage advanced Warehouse Management Systems (WMS) that offer real-time inventory visibility and optimized labor management. A 3PL without a robust WMS is bound to suffer from inefficiencies that will ultimately affect your bottom line. Always ask about their tech capabilities before signing on.

For instance, at Buske Logistics, we use advanced Warehouse Management Systems (WMS) Made4Net to give you real-time inventory visibility and efficient labor management. This means fewer mistakes, faster order fulfillment, and better control over your supply chain.

With a 3PL lacking this technology, you risk delays and costly errors. Always make sure your provider’s tech matches your needs.

‍The Financial Benefits of Choosing the Right 3PL

On the flip side, partnering with the best 3PL companies can be a game-changer for your bottom line. A good 3PL provider will work as an extension of your business, helping you streamline operations, cut costs, and improve overall efficiency. 

Here’s how the right 3PL can positively impact your finances:

1. ‍Lower Operational Costs: A reliable 3PL will have access to better shipping rates and optimized warehouse management systems. By outsourcing your logistics, you reduce the need for in-house expertise and infrastructure, translating into significant cost savings.‍
2. Enhanced Customer Satisfaction: On-time deliveries and accurate inventory management lead to happier customers, fewer returns, and a better brand reputation. Happy customers are more likely to be repeat customers, driving increased revenue.
3. ‍Better Cash Flow Management: A good 3PL offers flexibility in terms of scaling your logistics needs based on demand. This helps you avoid overinvesting in warehouse space or inventory during slower periods, improving your cash flow.

The Cost of Choosing the Wrong 3PL

One client of ours previously partnered with a 3PL that promised low costs but delivered poor results. After switching to Buske Logistics, the business regained control of its supply chain, reduced delivery times by 20%, and eliminated costly errors.

This case highlights how critical it is to thoroughly vet your 3PL provider to avoid financial setbacks.

According to a report, supply chain disruptions, many of which stemmed from poor logistics management by 3PLs are costing consumers an extra $1,200 annually and businesses 6-10% of their revenues.

These disruptions have also driven about 60% of U.S. inflation increases over the past two years, impacting both finances and reputation. This further emphasizes the need for a reliable 3PL with transparent practices and modern technology.

‍Why Buske Logistics Is Your Best Choice

Buske Logistics understands the costly impact of unreliable 3PL providers, and we’re dedicated to providing the efficiency and reliability your business deserves. With over 100 years of experience, we’ve partnered with leading brands like Pepsi and Ford to offer customized, reliable, and efficient logistics solutions that meet their specific needs.

Unlike the worst logistics companies, we pride ourselves on transparency, communication, and delivering on our promises.

Frequently Asked Questions (FAQs)

1. What are the main financial risks of partnering with a bad 3PL? 

The financial risks include higher operational costs, lost customers due to delays, inefficiencies in warehouse management, and damage to your company’s reputation. The worst 3PL companies often fail to deliver on their promises, leading to significant financial losses.

2. How can I identify a reliable 3PL provider?

Look for a 3PL provider with strong 3PL reviews, proven success working with companies in your industry, transparent pricing, and a solid track record of meeting delivery deadlines. Ensure they offer tailored solutions that align with your business goals.

3. Why is Buske Logistics considered one of the best 3PL providers? 

Buske Logistics is known for its reliability, cost-effective solutions, and commitment to transparency. We’ve partnered with top brands to offer efficient, scalable logistics solutions that enhance their supply chain operations.

Protect Your Finances by Choosing the Right 3PL

A bad 3PL provider is more than just a logistical inconvenience—it’s a financial risk. From missed deadlines to inventory mismanagement, the worst 3PL companies can harm your bottom line in numerous ways. 

With a reliable and experienced 3PL provider like Buske Logistics by your side, your business can avoid costly logistics setbacks. Our expertise ensures that your logistics run smoothly, helping you avoid costly mistakes and improve operational efficiency. 

Don’t let a bad 3PL drag your business down—contact us today or call us at +1 (618) 931-6091 to safeguard your supply chain and protect your profits.