Making a Poor Choice in a 3PL: Don’t Take the Risk

Third Party Logistics Providers, also known as 3PLs, are companies that arrange shipments as well as provide and manage transportation and related services for shippers, freight carriers, and other companies. 3PLs are becoming a critical component in the logistics industry, making important changes over time to adapt to changing customer needs and higher levels of sophistication. Because of this, it is important to make the correct choice when shopping for a 3PL. This article will explain some of the missteps that can arise from making a poor choice in a 3PL, as well as what the right 3PL does to counter things that could go wrong.

3PLs are rapidly embracing the internet, e-commerce, and other electronic means to provide logistics services. With this new wave of technology influencing 3PLs, there is a lot that can go wrong. If 3PLs fail to properly maintain and support access and connectivity to their online portals, they can create serious security vulnerabilities. Customers must be sure that a proper security apparatus is in place at their 3PL in order to prevent a potential breach of security in the documentation, contracts, and inventory tracking. For this reason, it is important to choose the right 3PL– one that has a strong, up to date security system in place, as well as one that can maintain and support all of your vital data. With respect to the internet, many 3PLs also manage interactive websites for customers to interface with data on freight carriers, shipment and inventory information, and shipping instructions. It is important for customers of 3PLs to make sure that their 3PL is on top of their website game—managing and supporting website activities, access, and connectivity. It’s also important to ensure that their security infrastructure extends throughout their online portals.

Many liability concerns with respect to 3PLs and the internet also exist. These risks include what the global professional services firm Marsh calls “representative liability concerns” that can cause “internet exposure.” Shipping, billing, and claims documentation are all being completed online, and it is incumbent upon customers to make sure their 3PL is not making errors or omissions in such documentation. Good 3PLs are ones that have a robust system for documentation in place that ensures the quick transmission of these important documents to entities in the distribution chain. Modern 3PLs are able to do this quicker than through the outdated non-internet means of transmission. Contracts conducted online need to be timely and accurately processed, with all parties in agreement. 3PLs failing to do so can cause many liability risks. Good 3PLs also need to post carrier, inventory, tracking, and other information on the internet in a timely and efficient manner. If they fail to do so, they will expose themselves to liability risks including damage claims and business losses.

There are a variety of other liability-based concerns that 3PL customers need to look for when shopping for the right 3PL. Transportation management, including making sure the correct packaging and labeling is used, is critical to the movement of goods across the country. Current deregulation makes it much easier for 3PLs to be less diligent, resulting in negligence and unnecessary mistakes that can cost both time and money; thus, it is important to review your 3PLs track record in these areas. The same applies to load management, administrative services management, claims management, supply chain management, record retention, facilities, warehouse, and contract services management.

Copyright, trademark, and confidentiality concerns also plague 3PLs, because they are in possession of confidential, protected information about shippers and carriers. It is important to prevent issues related to the mishandling of documentation that could result in the improper disclosure of protected information.

In addition, many other claims and costs, including, but not limited to, libel, slander, negligent hiring, oversight, delay, hazardous materials, insurance coverage, and attorney fees, can result from negligence on the part of 3PLs. It is important to watch for these claims when looking for a 3PL.

The best 3PLs have strong, modern internet infrastructures that are able to deal with potential security vulnerabilities, as well as robust management and careful attention to detail which prevents the mishandling of customer data and critical shipping components. They also pay attention to potential legal issues down the line.

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