What Are the Red Flags to Watch for in a Third Party Logistics Company in Los Angeles Contract?

Picking a third party logistics company in Los Angeles is no different than going into a long-term relationship, and your signed agreement is your marriage license. Most of the companies are honest, but in a third-party logistics agreement, hidden terms are lurking that are sure to suck your profit dry.

"You have to read the agreement like a detective before putting your John Hancock on it," he said. Understanding what constitutes a red flag means avoiding unpleasant surprises for your business when it's time for a breakup. This is what’s at issue for your e-commerce business when smooth sailing is the only thing that matters, especially when you are using west coast ecommerce fulfillment companies. Here, Montage Fulfillment explains the top three red flags that you simply cannot afford to miss when perusing 3PL agreements.

1. The Money Traps: Hidden Fees

The most common surprise that businesses are prone to is in respect of the charges that are not clearly reflected on the pricing list.

Red Flag 1: High Minimum Monthly Fees

"Minimum monthly fee" is common in many contracts, whether it is for storage or for service. If your business is small or even has a season when things are not so busy, you might find yourself being charged for a lot of services that have never been used.

The Solution: "If your sales are extremely variable in their extremes, then negotiate a contract in which the billing is precisely in accordance with your actual use, the number of orders shipped, or the amount of space used, not with a minimum that is arbitrary."

Red Flag 2: Complex Accessorial Charges

Be careful of "accessorial charges," which are often used to confuse prices. Accessorial charges are the cost for simple things that should merely be included in a quote, such as:

• Receiving Fees: An outrageous fee charged for delivering your item from a truck when it arrives at the warehouse.

• Returns Processing Fees: The cost of returning goods to customers.

• Payments: High fees charged by inventory count services. This occurs once a year.

• Always demand a clear list of all potential charges before agreeing to a third-party logistics service in the Los Angeles area.

2. The Escape Clause: Termination and Notice

An ideal partnership is easy to terminate if it doesn't go as planned. Never enter a contract that is aimed at ensnaring you.

Red Flag 3: Long, Adversarial Commitments

In some cases, the agreement might require that you commit for a period of a year. Even worse, it might be a two-year commitment. In cases where your business model has changed or where you are unsatisfied with the service, a two-year commitment means that exiting without having paid a huge penalty is close to impossible.

The Fix: Negotiate a short commitment period, such as 3 or 6 months, or make sure that the termination clause includes language that applies to your needs, stating that you are able to terminate with a reasonable 30/60-day notice, with little penalty, especially if the 3PL is not meeting service standards. 

3. The Limitation of Liability: 

Who Bears the Cost for Mistakes? Accidents occur - a box is damaged, and the 3PL delivers the incorrect product. The agreement has to specifically say what is supposed to happen in that event. 

Red Flag 4: Low Liability Caps 

The agreement should state how much the third party logistics firm in Los Angeles should pay when they are responsible for your inventory damage or when a shipment is misplaced. In some cases, the amount is set pathetically low, such as a measly ten cents per pound! The Fix: The solution is to make sure that your agreement states your product’s wholesale value, or that you are allowed to buy additional coverage in case of potential loss. This is a very important safeguard against west coast ecommerce fulfillment companies. 

Conclusion 

It all begins with taking care of oneself, specifically against a bad agreement. The most significant warning signals when agreeing on a third party logistics agreement in Los Angeles are when there are hidden charges on basic services, harsh termination terms with a lengthy validity, and a very low compensation potential that is not adequate for your inventory. https://sites.google.com/view/montagefulfillment12/home?read_current=1 https://sites.google.com/view/kiaraaagarwal22/home