3PL Exit Best Practices

July 12, 2019

Moving out of an existing 3PL into a new 3PL can be complex, expensive and risky if it is not managed properly.  The Enlinx Client Onboarding team works closely with our new clients to make this process as seamless as possible.  Listed below are some important considerations for managing a successful exit.

 

1. Be professional—Exits can feel emotional but professionalism is best policy for exiting, quickly and efficiently while maintaining inventory accuracy and product integrity.

2. Understand your contract—There are important details in your contract about giving notice of exit and the conditions under which that exit can happen.The better you understand the rights of both parties, the better your ability to negotiate intelligently and effectively plan your move.

3. Give written notice—During the exit it is best for both parties to meet face-to-face or discuss details over the phone but because exits have a legal component follow everything up in writing. Give written notice of your departure as soon as possible, this is often a part of your contractual obligation.

4. Put a project plan together—Exits are complex, especially if you have a large foot print or high SKU count operation. Map out the specific timelines required for the transition. Take into consideration the setup of your new 3PL, the specific exit tasks of current 3PL, the changing of integrations, communication to customers, blackout periods, impact of limited product availability, along with promotions and campaigns that may be affected, communication to suppliers, and transportation of your inventory from 3PL to 3PL.

5. Create contingency plans—Consider vulnerabilities to your business during the exit and discuss contingency plans. Something will go wrong during this process, prepare for these moments as best you can.

6. Produce an ABC analysis—Identify your fast-moving SKUs and prioritize how to move your most important inventory first. Consider splitting high quantity items to shorten the time to receive and stage product in your new 3PL.

7. Don’t ship garbage—Moving is expensive! You will pay your current 3PL to pack your inventory and load your inventory. You will then have to ship that inventory and then pay your new 3PL to receive it. Consider the total unit cost to pack, ship, receive and store against the original cost of the product.  You may be justified in moving the product even if it is a slow mover but if you move it just to store it, so you can dispose of it in a year or two you’ve probably added considerable cost and inefficiency to your move.

8. Strategize how to best move inventory—Determine what transportation options will work best, determine who will schedule with freight forwarders during the move. It is ideal if carriers can drop trailers to be picked up once loaded but often, they will want you to live load the truck. Determine how many trucks can be moved each day and schedule for items to be received per your new 3PL’s routing guide requirements.

9. Pack it out right—Provide clear expectations about how your product should be packaged and labeled on exit. If you don’t set clear expectations your current 3PL will do what is most convenient for them. This could be disastrous for your new 3PL to receive in and will substantially slow the receiving process causing customer order delays and inventory inaccuracies.

10. Keep it separate—Don’t fall into the trap of mixing SKUs into boxes to save on space or freight.  Plan to have small boxes on hand for partial quantities and insist that everything be boxed and labeled separately.  If you don’t you will pay the labor to separate that inventory when it is received at the new 3PL and you run the risk of losing that inventory.

11. Plan to be on-site to oversee the exit—Take the time to create clear job instructions and be on site to ensure that things are being done to your specification.Often times 3PLs assign temp labor to handle exits because of the workload required. Often these exit crews are not well supervised. If you need additional help recruit accounting and finance staff within your organization to assist in overseeing the move.  Your inventory is one of your company’s largest assets. There should be some shared interest in making sure it is managed correctly. If you can’t be on site discuss with your 3PL who will be overseeing the exit and what resources will be allocated.

12. Manage cost—Set clear expectations around your move schedule and what you are willing to pay for. You will likely need to pay some overtime but know what you are paying for and be clear about what you are not willing to pay for.

13. Shorten your start up time—Consider sending a single box of every product to your new 3PL to that they can complete all the tasks associated with receiving a product for the first time, like entering the product weights and dimensions.When the bulk of your product finally arrives it will be received in a more efficient timely manner.

14. Rebox—Old inventory that is in tattered boxes can get lost or become damaged in transit if it is not reboxed. Picture a large box with one corner blown out, filled only ¼ of the way full with inventory that has been sitting on a pallet for the last 3 years. Your existing 3PL will likely load this box “as-is” unless you specify otherwise. Boxes get beat up bouncing down roads with other boxes set on top of them. Even new boxes take a beating when being transported.  Set clear standards about what should be reboxed and before it leaves.

15. Relabel— It is not uncommon to see a box in a warehouse with 5 different faded product labels on the side, some with handwritten numbers where the original quantity on the label has been scratched out. It’s not good practice by any means but it happens in some 3PLs.  What’s worse is passing that on to your new 3PL to figure out.  Give clear guidance to your existing 3PL about how boxes should be cleaned up or labeled for your new 3PL to receive in.

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