Qualifying 3rd Party Logistics (3PLs)

While there are a number of factors involved in getting your product delivered correctly, probably no two are more important that the criteria used in selecting your freight forwarder (Third Party Logistics provider, or 3PL)  and the understanding of the environment in which your 3PL is working.  Choosing the right service provider will make all the difference in either getting what you want or getting caught up in seemingly never ending delays.

At the time of writing CSIC and The China Sourcer don’t offer an endorsed service provider for logistics because so often the ideal partner depends on the location of the buyer and the readership of this website and magazine is global. We have yet to find a 3PL that has true global coverage.  A lot of 3PL will say they have global coverage in their marketing, but we have found that when you dig deep into their experience you will find they focus on certain shipping routes or destination ports. And the giant freight forwarders that do have offices around the world are usually not interested in smaller accounts. So if you are moving less than 20 containers per year, they may not be a good fit anyway.

Since we don’t have a ready-made list of 3PL providers to give you, let us share with you something far more valuable–how to find the right 3PL for your particular needs.

Just like picking suppliers in China, the problem isn’t finding a 3PL, as there are so many to choose from, the problem is how to find the right one for you. Assuming you keep it easy and purchase “FOB China Port” from your supplier, then the role of your 3PL will be to orchestrate the movement of your goods from the China port to your destination point.  In most cases this means organizing ocean freight or express air for the international leg of the journey then customs clearance in your national plus local trucking for domestic delivery.  As such, you should be looking for 3PLs that have experience importing product from China into the specific domestic port you have in mind back home.  Here are some steps to help you make your selection a bit easier:

  1. Pick up the phone book or do an internet search with key words such as “3PL” or “Freight Forwarder” + “name of port”.  This will most likely generate a significant list.
  2. The next step is to contact the ones that seem to have what you’re looking for and learn if they will be a good fit for you.  We like 3PL’s that have at least 5 years of experience importing products from China into your destination port and have some experience in your product classification too.
  3. Your prospective service providers should be able to give you a list of client references they are currently doing business with.
  4. Once you narrow it down to a hand full of options based on initial talks and references, ask for an estimate on freight.  What separates the great companies from the good ones will be the format and timing of their quote.  If they take more than a few days to get back to you, it probably means that they don’t have well developed shipping channels and are trying to set something up just for your order. If at all possible, try to avoid having your order serve as some 3PL’s first attempt at doing business with China. Pay special attention to the form of their quote. It should be an actual form based on a template, not just a few sentences or pricing sent via email.  If they don’t have a set format for estimates or quotes that is a sign that their level of professionalism/experience is probably not what you should accept.  The quote should be easy to understand and if you are unclear about a particular line item on the quote the 3PL should be able to explain it to your satisfaction. Don’t be afraid to ask questions! Better to ask in advance before getting hit with surprise charges later.
  5. Shipping rates change on a day to day basis, and unless you are ready to ship immediately after receipt of the quote, most likely the quote will be an estimate.  So we like 3PLs that will hold their quote valid for an allotted time or at least offer to re-quote closer to the actual ship date so that the buyer knows the exact costs in advance.
  6. On countless occasions we have had shippers send us invoices after delivery which were much higher than the agreed estimate.  So as you are confirming price, ask this powerful question, “Does this price include everything to get the product from X to Y, even taxes, duties?”, or “Is there anything that is not included in this price?” and “Will you put in writing that the amount to be invoiced will not exceed the agreed estimate?”
  7. It also helps to negotiate your terms with the shipper so that the goods are paid upon delivery, as opposed to paying them upfront.  Though you may negotiate this, you don’t actually have a lot of leverage since the shipper has physical control of your goods and could choose not to immediately release them if there are any confrontations about pricing at the last minute.  So it is very important to find a professional company upfront and negotiate the terms and pricing well in advance.

Finally, China is a unique place to do business, and as such there are some additional country specific issues that you should also be made aware of.  Chinese ports are busy- REALLY busy.  China isn’t called the world’s workshop for no reason.  There are tens of thousands of containers moving through ports in China every day.  Scheduling enough time to get your product through customs and onto a ship can be tricky business.  Plan ahead as far as you can so that your 3PL can do the same.  Work with suppliers in China to constantly update the final manufacturing completion date and update your 3PL accordingly.

In addition to the sheer volume going though the ports there are other factors that will affect your shipping schedule.  Delays, including lines of containers waiting to get into port, not enough containers to pick up your goods, labor shortages, typhoons and national holidays will all impact when your container leaves China.  While not all of these can be planned for (typhoons) most of them can be, at least, prepared for.  Know when the major holidays (Chinese New Year, Int’l Labor Day, Chinese National Day) are and know that the two weeks before and after each of these holiday will be busier than usual.  If you must have your goods in port by Wednesday noon, plan to have your goods packed and your container gone by Monday or Tuesday noon at the latest.  Plan enough time for the truck to wait in case there are delays due to infrastructure

There can be real physical limits to what can be done if your truck arrives late or if your 3PL doesn’t have the experience importing into your port of choice.  Make sure that you’ve done as much as you possibly can to both eliminate problems and compensate for inevitable delays.  Do your due diligence in choosing a good supplier and plan as far ahead as possible.  Once you’ve done this, it should be smooth sailing.

Leave a Comment