Home > Property & Casualty > Tips for selecting a third party logistics provider (3PL)

Tips for selecting a third party logistics provider (3PL)

The diligence taken in the process of selecting and retaining a third party logistics (3PL) provider can have meaningful impact as to whether a company has a sound transit risk management program and a good claims experience. If your company is looking for guidance on this issue, here are some guidelines provided by Chubb’s Marine Department to use as a reference. This information is based on data, cost pricing benchmarks and contracts advice provided by an unnamed consulting firm to manufacturers:

  1. Specify the range of services you want and place them in your request for proposal (RFP).
  2. Quantify the level of performance you need; consider measuring such items as on time performance and dock-dock transit times.
  3. Conduct a walk-through of key hubs, terminals and distribution centers; follow the flow of goods ideally on a peak day during a peak season and make note of best and worst practices.
  4. Get historical rate trends and forecasts from industry experts so you can understand whether the bids you receive are aggressive or not.
  5. Embed flexible mechanisms for escalation and de-escalation of costs so risks are shared.
  6. Critically assess proposed subcontractors and interline carriers.
  7. Use software or a software service provider to allow carriers to bid on bundles of lanes and services so you can select the best carriers for every lane or set of lanes.
  8. Negotiate productivity improvements (such as RFID, new vehicle technology and wireless dispatching) over time and ensure you get your share of the benefit of any improvements.
  9. Customize the contract to your requirements and use the negotiating stage to press for special requests.
  10. If switching carriers, do so relatively soon after award of the bid since “lame ducks” may lose incentive to perform at high levels.

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William Gallagher Associates is a leading provider of insurance brokerage, risk management and employee benefits services to firms with complex risks and dynamic needs, within industries that include technology, life sciences, financial risks, health care, renewable energy & clean technology, and environmental services. WGA has offices in Boston, MA; New York, NY; Hartford, CT; Princeton, NJ; Columbia, MD; and Atlanta, GA.

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