3PL contract review: what to check before you sign.

A 3PL contract is a price list, a service promise and an exit plan in one document, and most of the cost sits in the pages after the rate card. These are the clauses that decide what you will actually pay, and the questions to put to the 3PL before the signature.

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Quick answer

What should I check in a 3PL contract?

Check these before you sign a 3PL contract: the storage basis and when the week starts, handling charged per pallet, carton, line or order, minimums, the full accessorial list, who owns and pays for the pallets under your stock, how fuel and rates move, KPIs with a written definition and a consequence, your data in your format on request, liability, and the term, notice and exit costs. Price last year's actual activity on the proposed rate card before you sign.

The rate card

What is the rate card not telling me?

Clause	What to check	Why it matters
Storage basis	Per pallet per week, per pallet per day, per cubic metre, or a floor area; and when the week starts.	A pallet that arrives on Friday and leaves Monday can be charged two weeks on a weekly basis.
Handling	In and out charged per pallet, per carton, per line or per order; and whether a pallet broken down to cartons is both.	Carton picking at a pallet rate, or the reverse, is where the quote and the invoice part company.
Minimums	Minimum monthly charge, minimum pallets stored, minimum term.	A quiet month still costs the minimum; a growing account pays the same minimum it never needed.
Accessorials	Labelling, shrink wrap, pallet exchange, returns, stocktakes, after-hours, dangerous goods, cancelled bookings.	The list is long and each line is small; together they are often a fifth of the invoice.
Pallet accounts	Who owns the pallets under your stock, who pays pooled hire, who counts transfers and when.	Pooled pallet hire on stock that sat for a year is a bill nobody budgeted. Hire versus buying has the arithmetic.
Fuel and rate reviews	How the fuel levy is calculated and published, and whether rates move with CPI, with notice, or with the 3PL's costs.	A contract that moves with the 3PL's costs is a contract you cannot budget.

Service and exit

Which service and exit clauses decide the relationship?

KPIs with a definition and a consequence. DIFOT, pick accuracy and stock accuracy, each defined (by line or by order, against which date), measured from which record, reported when, and what happens when they are missed. A KPI without a consequence is a wish.
Your data, in your format, on request. Stock on hand, movements and KPIs exportable at any time, and at exit, in a file you can use. Without it you cannot leave and you cannot check the invoice.
Liability and insurance. What the 3PL is liable for per pallet or per event, what is excluded, and whose insurance covers stock in storage and in transit.
Term, notice and exit. How long, how much notice, what the exit costs, and who pays to move the stock out. The cheapest rate card with a three year term and a heavy exit is not cheap.
Change of volume. What happens to the rates if your volume doubles or halves, and whether you can take a second site elsewhere.
Invoice detail. Every charge by line with the count it was calculated on, so a monthly check takes an hour rather than a day.

Before you sign

What should I do the week before signing?

01Price last year's actual activity on the rate cardEvery pallet in, every carton out, every week of storage, every accessorial you can predict, run through the proposed rates. The result is the real price, and it is rarely the one on the summary page.
02Walk the site at 10am on a weekdayDock time, pick faces, the empty pallet stack, how the other clients' stock is stored. The contract describes the service; the floor shows it.
03Get the KPI definitions in writingThe same definition the 3PL will report against, agreed before the first month, because the first KPI argument is always a definition argument.
04Settle the palletsWhose pallets your stock sits on, who pays the pooled hire, and how empties and transfers are counted. Own the pallets where the sums say so.

A contract read with the rate card priced against your real activity is part of the cost to serve work and the procurement review; both are priced on the consultancy page.

Getting it read

Send the proposed contract and last year's activity.

Pallets in and out, cartons picked, weeks of storage, and the draft. It comes back priced on your real numbers with the clauses that need changing marked, before you sign rather than after.

Ask for a contract read Cost to serve analysis

Questions about 3PL contracts

How is 3PL storage usually charged?

Per pallet per week or per pallet per day, sometimes per cubic metre or per square metre of floor. Check when the week starts and whether part weeks are charged in full; a daily basis suits fast moving stock, a weekly basis suits stock that sits.

What are accessorial charges?

The charges after the rate card: labelling, shrink wrap, pallet exchange, returns, stocktakes, after-hours work, cancelled bookings. Each is small; together they are often a fifth of the invoice. Ask for the full list and price last year's activity against it.

Who pays for the pallets under my stock in a 3PL?

It depends on the contract and it is often not written down. Pooled hire on stock that sits for a year is the usual surprise. Settle whose pallets, who pays hire and how transfers are counted before the first pallet arrives.

What KPIs should a 3PL contract include?

DIFOT, pick accuracy and stock accuracy at least, each with a written definition, the record it is measured from, a reporting cadence and a consequence for a miss. Without the definition the first review is an argument.

What does a bad exit clause look like?

A long term, long notice, exit costs for moving your own stock, and no right to your data in a usable format. The cheapest rate card with that exit is the dearest contract.

Can 360 review a 3PL contract before we sign?

Yes. The draft and last year's activity are priced against the proposed rates and the clauses that need changing are marked. It sits inside the cost to serve and procurement review work on the consultancy page.

Prefer to talk? Call Jayden on 0494 820 639. The arithmetic on pooled pallets is on hire versus buying.

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