Price will always be a factor when choosing a 3PL.

However, it shouldn’t be the only one, or even the deciding factor. In most cases, providers who give pricing upfront don’t care about having a long-term partnership, and they probably don’t fully understand which services you need. They typically focus on quantity of new deals versus the quality of each partnership.

Most of these “churn & burn”-style 3PLs won’t work to maintain a good relationship once you’re in the door. Even their low upfront price doesn’t mean low prices for engagement, and you’ll probably get nickel-and-dimed later for the ‘extras’ you need to keep logistics operations running.

Remember, the right 3PL can make you look like a hero to your customers. A bad 3PL can put you out of business.

In fact, that happened this week to about 30 brands that were affected when the 3PL about a mile away from our headquarters closed their doors and went out of business.

The backstory is that this 3PL had Venture Capital funding, and as a result, was able to artificially drive down prices in order to win more contracts.

In the 3PL and warehousing world, there is something called ARR or Annual Recurring Revenue.

Essentially, this means the money that comes into the company from contracts on a yearly basis.

In the business of selling businesses, the value of the business is simply put, that ARR number times a multiplier.

In the case of the 3PL down the street, the 3PL’s COO deflated their pricing in order to load up contracts to make their ARR number look exceptional, so they could sell the company for the most money possible.

The issue was that the deal failed.

Because the investors didn’t want to keep putting in more money to subsidize these contracts.

The result, the brands that were warehoused there – with months of bad service – are now not able to access their product because the 3PL went bankrupt

Their doors are locked and the bank has the key.