A topic that doesn't get enough airtime in the 3PL industry is firing 'bad-fit' customers. When building our 3PL business, we developed a terrible habit of trying to take on every customer profile - whether it was a bad fit or not. I've seen 3PLs often get a very bad rap when it comes to shoddy service, but I strongly believe most aren’t actually bad, most just don’t optimise to avoid poor brand/3PL fit.
With the industry as competitive as it is, most of us feel we can't afford to turn any customers away. We convince ourselves, "Oh, we'll make it work", but we should really be asking ourselves two questions.
1. Are we actually set up to deliver the best experience to this brand/customer?
2. Is it worth the headache?
We've all been there: brands we don’t serve well, brands who squeeze us for every penny while expecting the most bespoke services, those who take up space in the warehouse but barely move a box, or the plain rude ones who we put up with because they push high volume. But it doesn't have to be this way.
It took us a while, but at Hutch, we eventually learned it was all about onboarding the right brands and politely letting go of brands that just aren't working out. In the long run, it’s better for us and it’s better for them.
So at Hutch, we developed a few tools to help with this, that I think you'll find handy and if you're interested in getting copies to the frameworks below, just email me over at sait@getpimento.com:
- ICP Scorecard (Ideal Customer Profile):
So, the first step is to figure out if a lead's a good fit or not. For that, we created this simple model we call the 'ICP Scorecard'. It was a quick way for our sales team to size up a lead based on some hard and fast rules, the team plugged in what they’d learned after an initial discovery call with a potential lead and it spat out a score out of 50.
We had a range of criteria, and each was weighted differently based on how important it is. Volume, for example, is key, so we made sure it impacted the score a lot more than the parcel profile (large letter vs small parcel) for example.
Below is an ICP for the type of brands we loved. Low SKU, high volume and their orders to storage ratio is great and they do not have too much stock to store.
Below is the type of client we tried to avoid: High SKU, high returns and low volumes.
It’s not absolute and served as a guide, but it’s pretty accurate and worked well for us!
- Client Walkthrough:
Sometimes a customer comes in as an ideal customer, but over time they become a bad fit. Here’s how we mitigated against that.
We scheduled a quarterly session we called the ‘Client Walkthrough’. This is when we get the whole team—warehouse managers, account managers, and so on—to huddle up and review each client. We used a similar rating system as the ICP Scorecard, but at this stage we were also asking questions like: How's this client to work with? How easy is their stuff to pack? And, of course, the volume's still the main factor here.
We ended up slotting each client into one of four categories: "perfect fit," "good fit," "bad fit," and "awful fit."
The "bad fits" were put on review. We'd tell them to up their volumes, or we'd ship their stuff back (with enough time to find a new 3PL partner). For the "awful fits," we'd start figuring out how to part ways—politely, of course.
Our whole team would get a say in this process, and we added a little twist also…Everyone was entitled to one "fuck you". It’s essentially a veto, which lets anyone on the team give a client another shot if they thought there was potential there (as long as the client wasn't super unprofitable). This usually gets used when someone's had a hunch that a client was about to experience an uptick in volume or there was some other good reason to keep them around.
While we know our system wasn't perfect, it can be a solid starting point to ensure you're working with clients you genuinely enjoy dealing with and are doing a great job for.
It sends out a clear message to customers: "Hey, we chose you, just like you chose us."
If you want to use our template, complete with all the formulas, send me an email over at sait@getpimento.com
Happy to share it!
