Your 3PL contract is ending. Here’s what to audit before you give notice

When your 3PL contract comes up for renewal, don't treat it as a simple choice between renewing or switching. Make the most of the opportunity to audit cost, performance, technology, service, scalability and exit requirements before deciding what your fulfilment operation needs next.

Key takeaways

• Don't make the decision on price alone. Audit your total cost to serve, including surcharges, storage, returns, manual work and hidden operational costs.

• Benchmark performance against your actual requirements. Your 3PL may be meeting its contractual SLAs while still falling short of what your business needs.

• Check the contract before you give notice. Notice periods, minimum terms, stock movements, data access and exit charges can all affect your switching timeline.

• Look beyond today's operation. A 3PL that works for your current volume may not be the right fit for your next stage of growth.

• Give yourself time to compare properly. Changing 3PLs is complicated, so it’s better to know what you’re getting into before you hand in your notice.

Your contract renewal is an opportunity, not a deadline

A 3PL contract reaching the end of its term can feel quite administrative.

Check the notice period. Review the rates. Decide whether you're happy, or sign another agreement.

But fulfilment is too important to reduce to a tick-box renewal exercise.

Your 3PL sits underneath your inventory, order processing, delivery experience, returns and your customer experience. If the operation has gradually become harder to manage, more expensive than expected, or less capable of supporting growth, a contract renewal deadline is a useful point to stop and take stock.

Equally, you may discover that your current 3PL is performing well and remains the right partner.

The important thing is to audit the operation before you decide. And ideally, start before the contract reaches its final few weeks.

What you should be reviewing before your renewal deadline

Audit what you're actually paying

The rate you originally agreed with your 3PL probably isn't the rate you're paying today.

Over the course of a contract, fulfilment costs can change as your business changes.

You may have added SKUs, introduced new packaging, expanded internationally, increased returns, changed your order profile or started using additional services.

Meanwhile, carrier charges, storage requirements, labour costs and annual price increases may have changed.

So, start with the invoice, not the original rate card, and look at your total cost to serve by reviewing at least the last 12 months of costs across:

• Storage

• Receiving

• Pick and pack

• Packaging

• Shipping

• Returns

• Relabelling or rework

• Kitting and other value-added services

• Account management

• Technology or integration fees

• Minimum monthly charges

• Peak or seasonal surcharges

• Carrier surcharges

• Ad hoc operational charges

Then compare those costs with your actual order profile.

For example, if your pick, pack and dispatch fee is competitive but you regularly incur additional charges for split orders, manual interventions or storage, the headline unit price may not tell you much about the real cost of fulfilment.

It's important to know what it actually costs you to fulfil and deliver one order, and how that has changed over the last few years. That gives you a much more useful starting point than comparing individual line items.

“It's easy to compare two 3PLs by putting their storage, pick, pack and dispatch rates side by side. The harder, and more useful, exercise is understanding what those rates mean in the context of the whole operation.

We look at the customer's order profile, service requirements, returns, peak volumes and future growth before deciding what a competitive fulfilment model actually looks like. The cheapest line on a rate card isn't necessarily the lowest-cost operation.”

– Dan Thompson, Commercial Manager, IFGlobal

Audit performance against what your business actually needs

Your contract probably contains SLAs, but contractual compliance doesn't necessarily mean operational excellence.

A provider can hit its agreed dispatch SLA while your customer service team is still dealing with delivery complaints. It can meet inventory accuracy targets while stock discrepancies are creating problems for your ecommerce team.

That's why it's worth looking beyond the contractual scorecard to review your 3PL against these areas:

Don't just look at the annual average. Look for patterns.

• Did performance deteriorate during peak?

• Are certain SKUs responsible for repeated errors?

• Does one sales channel generate more exceptions?

• Are problems concentrated around particular carriers or delivery regions?

Patterns can tell you much more about the operation than a single annual SLA figure.

Audit the gaps between your contract and your reality

Your business probably looks different from when you signed the contract.

Maybe your order volumes have doubled, or you've gone from 50 SKUs to 300. Perhaps you're now selling into Europe and the US, or you've introduced subscriptions, bundles and influencer-led launches that create sudden demand spikes. Maybe your fulfilment requirements have just become more complicated and your fulfilment partner can no longer keep up.

Ask:

• Are we paying for capabilities we no longer need?

• Are there services we now need that aren't covered?

• Have our order profiles changed?

• Has our SKU count changed?

• Has our international footprint changed?

• Have our returns volumes changed?

• Have our packaging requirements changed?

• Are there new channels or integrations to support?

• Has our peak profile changed?

This is particularly important if you're considering renewing for another multi-year term.

Don't sign a new contract for old requirements.

Audit how much work your own team is doing

This is one of the easiest costs to overlook.

Your 3PL may technically be providing the service you've contracted for, but how much internal resource does it take to manage that service?

Think about the people in your business who spend time:

• Chasing stock discrepancies

• Investigating missing orders

• Reconciling inventory

• Requesting reports

• Correcting shipping issues

• Resolving integration problems

• Dealing with delivery exceptions

• Answering fulfilment-related customer queries

• Manually uploading or checking information

• Escalating recurring operational issues

None of those activities necessarily appear on the 3PL invoice, but they still have a cost.

A useful question to ask yourself is if we moved to a different operating model tomorrow, which fulfilment-related tasks would disappear from our team's workload?

You may find that the cheapest fulfilment provider on paper isn't the cheapest once internal management time is included.

Audit your technology before you compare technology

“WMS” and “integrations” can sound impressive on a sales presentation, but what matters is what the technology actually allows your team to do.

Review the systems you use today:

• Ecommerce integrations

• ERP or finance integrations

• Order management

• Inventory visibility

• Reporting

• Carrier management

• Returns

• Customer service integrations

• Exception management

• API capabilities

• Automation

• Data access

Then ask where the friction is.

• Are you downloading spreadsheets to get information you should be able to see instantly?

• Are stock updates delayed?

• Do your teams have to email your 3PL to investigate exceptions?

• Can you see what's happening across different markets?

• Can your 3PL make changes without creating a manual process?

Technology should reduce operational complexity. It also needs to support the customer-facing side of the operation.

IMRG research found that 80% of shoppers want access to online order tracking, while 87% said confirmation that a return had been received would improve the returns experience.

That makes visibility valuable beyond your own operations team: the data your 3PL captures can directly affect the information your customers receive.

Audit your peak performance

If your contract renewal happens after peak, you have a particularly useful set of evidence. Don't waste it!

Compare your 3PL's performance during the busiest period with its normal operating performance by looking at:

• Order volumes

• Throughput

• Dispatch SLA

• Accuracy

• Inventory

• Backlog

• Carrier performance

• Returns

• Customer service contacts

• Exceptions

Then ask what happened when things became difficult.

• Did your 3PL communicate proactively?

• Did it add labour or operating capacity?

• Did it manage carrier constraints effectively?

• Did you have sufficient visibility?

• Did problems get resolved quickly?

• What will your 3PL change as a result?

Peak is often the clearest indication of whether a fulfilment operation is genuinely scalable or simply works well when everything goes according to plan.

Audit your scalability, not just your current capacity

Your next contract term may last two or three years, so don't only ask whether your 3PL can handle your current volume. It needs to be able to handle the business you're trying to build.

Imagine your business three years from now. What happens if:

• Order volume doubles?

• Your SKU range expands significantly?

• You launch in another country?

• You add a marketplace?

• Your returns rate increases?

• You introduce subscription orders?

• Your product mix changes?

• You have a major influencer or retail launch?

• Your peak becomes substantially larger?

Then ask your current provider what would need to change operationally if that happened? More labour may be part of it, but true scalability can also require additional packing capacity, storage, carrier options, systems capability, inventory positioning and operational management.

“A contract can tell you what a 3PL has committed to deliver, but it doesn't tell you how the operation behaves when things change. When we're assessing an operation, we're interested in what happens when volumes move away from forecast, a carrier becomes constrained or a particular SKU suddenly takes off. The real test is how quickly the operation identifies the issue, communicates it and adapts.”

– Paul Lavin, Operations and Transformation Director, IFGlobal

A warehouse having spare floor space today doesn't necessarily mean it has the infrastructure to support tomorrow's operation.

Audit the customer experience

Fulfilment is often treated as an operational cost centre.

Your customer doesn't see it that way.

For them, fulfilment is part of the experience your brand provides.

That matters commercially, too. DHL research found that 80% of British consumers would abandon a purchase if their preferred delivery option wasn't available, while 75% said they would leave if the returns process didn't meet expectations.

Your fulfilment operation therefore isn't simply supporting the transaction after checkout. It can influence whether the transaction happens in the first place.

Your customers see:

• If the order arrives when promised

• Whether tracking works

• If the packaging arrives intact

• Whether the correct products are inside

• How easy it is to return something

• How quickly their issue gets resolved

That means your 3PL should be assessed against more than warehouse KPIs.

If your fulfilment operation is creating friction at any of these points, that should form part of your renewal or switching decision.

Audit your contract before you give notice

This is the part worth doing before you tell your 3PL you're leaving.

Your contract should be treated as an operational document, not just a commercial one.

See below for our checklist of things to know before giving notice.

Notice period

• How much notice do you need to give?

• Is it measured from the contract anniversary, renewal date or another point?

Minimum term

• Has the contract automatically renewed?

• Are there minimum volume or spend commitments?

Exit charges

• Are there fees associated with terminating the agreement?

• Are there outstanding implementation, technology or equipment costs?

Stock movement

• Who pays for the physical movement of inventory?

• How will stock be counted, reconciled and transferred?

Data

• What data are you entitled to receive?

• In what format?

• How quickly will it be provided?

Integrations

• What happens to your integrations when the contract ends?

• Who owns the work required to disconnect or migrate them?

Packaging and materials

• What happens to branded packaging or other materials held by the 3PL?

Returns

• How will returns continue to be processed during the transition?

Customer orders

• What happens to open orders, pre-orders and orders placed during the transition period?

You don't want to discover the answer to any of these questions after you've handed in your notice.

Should you renew or switch 3PLs?

Once you've completed your full 3PL renewal audit, you should be able to answer three questions:

1. Is our current 3PL performing well enough?

2. Can it support where our business is going?

3. Would another operating model materially improve the business?

If the answer to all three is yes, renewing may be the right decision.

If the answer to any of them is no, it's worth investigating your options before committing to another term.

What matters is whether the provider still fits your requirements.

Don't switch because another provider has a lower pick fee. And don't renew simply because switching sounds difficult.

Make the decision based on the operation you need for the next stage of your business.

If you are considering a move, start before you give notice

Changing 3PLs is a significant project. Inventory needs to move. Systems need to integrate. Processes need to be tested. Teams need to understand the new operation.

Customer experience needs to remain intact throughout the transition.

That means the time between “we think we should move” and “we've given notice” is important.

You can use it to:

• Benchmark alternative providers

• Understand implementation timelines

• Map integrations

• Assess stock migration requirements

• Compare total costs

• Identify operational risks

• Build a transition plan

• Understand what needs to happen before the existing contract ends

It’s important to do your due diligence before triggering the clock.

If you discover during the process that staying with your current 3PL is the better option, you've lost nothing except a little time.

If you discover that another provider is a better fit, you'll be in a much stronger position to make the move deliberately rather than under pressure.

What you should ask a prospective 3PL

Once you've audited your current operation, use the findings to make your next conversations more useful.

Don't just send the same RFP spreadsheet to five providers.

Give them enough information to understand the operation you're trying to build.

Then ask questions such as:

• How would you improve on our current operation?
  This forces the conversation beyond price.

• What would you need from us to implement this successfully?
  A good answer should reveal how seriously the provider approaches onboarding.

• Where do you see the biggest risks in our proposed operating model?
  You want a partner prepared to challenge your assumptions, not just tell you everything is possible.

• How would this operation perform at twice our current volume?
  This tests scalability.

• What would you want us to measure six months after go-live?
  This tells you whether the provider thinks beyond implementation.

• Can you show us an example?
  Claims about technology, scalability, peak planning or customer experience are much more useful when they're backed by evidence.

Don't wait for the renewal date to start the conversation

Your 3PL contract ending is a useful deadline, not starting point.

The earlier you understand how your current operation is performing, what your business will need next and what alternatives are available, the more options you have.

That doesn't necessarily mean changing provider.

Sometimes the audit will confirm that your current 3PL is doing a good job. Sometimes it will highlight a handful of improvements you can negotiate into a renewal. Or it will make it clear that the operation you've outgrown needs to change with you.

Fulfilment that moves with your business

At IFGlobal, we believe choosing a 3PL shouldn't be about finding the lowest individual fulfilment rate. It's about finding an operating model that gives your business the capacity, visibility and flexibility to keep growing.

We've been helping ecommerce brands scale since 2002, with fulfilment centres located across the UK, EU and US and experience shipping products across 100+ countries.

Our operation combines people, processes, and infrastructure, supported by BladePRO, our proprietary fulfilment operating system.

If you're approaching the end of your current contract, the question worth answering first should be "What does our business need from fulfilment over the next few years?"

We're happy to talk through your current operation, understand where you want the business to go and help you benchmark what a future fulfilment model could look like.