Your 3PL Could Be Costing You: Why ‘Set It and Forget It’ Logistics is Draining Your Profits
A mid-sized steel treatment company thought they were handling their logistics the right way. About ten years ago, they carefully selected a third-party logistics provider (3PL) after testing various providers for performance and cost-effectiveness. To make things even smoother, they allowed the 3PL to place personnel on-site to handle and plan outgoing shipments on their behalf. They believed that by outsourcing, they were leaving their logistics in the hands of experts who would ensure top-notch service year after year. But when they finally re-tendered their transport services themselves, they found something surprising: a potential 20% cost savings.
The Hard Lesson Learned: Don’t Assume Outsourcing Means Optimization
Just because you’ve hired a 3PL or 4PL to manage your logistics doesn’t mean they’re continuously optimizing for your benefit. Most logistics providers start strong when they first secure your contract, often making initial optimizations to win your business. However, over time, that focus can shift.
"Just because you outsourced logistics doesn’t mean your 3PL is committed to saving you money—never assume they’re optimizing for you."
Why Your Operation Becomes a “Cash Cow” for the 3PL
It’s not that 3PLs are acting in bad faith; they’re businesses, after all, and naturally aim to maximize their profit. Once they’ve secured a long-term client, they don’t have much incentive to frequently re-evaluate or re-negotiate your logistics for efficiency or cost savings. Why? Because improving your operations could mean putting in more work, adjusting established routines, or even sourcing cheaper alternatives that cut into their own margins. They are incentivized to keep the system running smoothly but with minimal effort on their end.
"To your 3PL, your contract is a revenue stream, not a mission to maximize your efficiency. Their goal is profit, not your savings."
The Reality Check: Your Assumptions vs. Reality
Over time, complacency can set in. You may believe your logistics are being expertly managed because you’re working with “professionals,” but without regular, transparent performance evaluations, you’re operating on assumptions. As the steel treatment company discovered, these assumptions can mask a significant amount of untapped potential. Yearly negotiations or renewals may tweak the service rates, but rarely do they revisit or re-optimize the actual logistics processes for your maximum benefit.
Assuming your 3PL is optimizing logistics is like assuming your mechanic will change your oil for free—without proof, you’re just hoping."
What You Can Do to Keep Your Logistics Sharp
If you want to make sure your logistics costs are truly optimized, here are a few steps to consider:
Regularly Re-tender Services: Don’t rely solely on annual contract negotiations. Periodically re-tender your logistics services to invite fresh bids. This forces your 3PL to stay competitive and may reveal significant cost-saving opportunities.
Bring in Outside Expertise: Just as you initially tested multiple 3PLs, consider bringing in logistics consultants or an internal team member who can audit your logistics operations with a fresh perspective.
Demand Transparency and KPIs: Ask your 3PL to report on key performance indicators (KPIs) that directly relate to cost efficiency, delivery accuracy, and optimization efforts. If they know they’re being evaluated regularly, they’ll be more likely to keep your interests in mind.
Establish Regular Reviews and Continuous Improvement Clauses: Build regular performance reviews and improvement clauses into your contract, incentivizing the 3PL to continue optimizing on your behalf.
"Optimization isn’t a one-time event—it’s an ongoing commitment. Make sure your logistics partners know that, too."
Conclusion: Don’t Assume, Audit
Outsourcing logistics is often the right choice for SMBs and mid-sized companies. But it’s a mistake to think that once you’ve handed over control, your logistics are as efficient as they could be. Treating logistics like a “set it and forget it” operation leaves money on the table and often lets your provider profit more at your expense. Regularly assessing your 3PL’s performance and re-evaluating the market can reveal substantial savings, ensuring that your logistics operation truly serves your business’s best interests.
"‘Set it and forget it’ may work in the kitchen, but in logistics, it’s a recipe for lost savings and missed opportunities."
If you're ready to find out if your logistics could be optimized, we’re here to help. Reach out for a free initial consultation, or join our logistics efficiency workshop, where we can discuss your specific challenges and identify hidden savings opportunities.
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