How trade wars are complicating the search for the right 3PL

Article that Matt Hertz, Founder and CEO of Third Person was featured in.

Originally published: https://www.modernretail.co/operations/how-trade-wars-are-complicating-the-search-for-the-right-3pl/

Welcome to Modern Retail’s “The New Supply Chain,” a week-long series of daily stories on how retail executives are revamping their supply chains to succeed in 2025. 

Matthew Hertz, a logistics consultant, compares the relationship between a brand and a 3PL to that of a marriage. And the last two months of trade wars have left brands uncertain as to whether they should find a new partner to walk down the aisle with. 

Many of the headlines over the past few weeks have focused on President Donald Trump’s on-again, off-again policy changes related to tariffs and the de minimis exemption, which allowed brands to ship products valued under $800 into the country, duty-free. But for many e-commerce brands, the chaos actually started to unfold days before Christmas Eve, when Mexican President Claudia Sheinbaum issued a decree making changes to how the country dealt with import duties. 

Effective immediately, Sheinbaum’s decree raised tariffs on certain apparel and textile products. It also restricted some products from qualifying for Mexico’s IMMEX program, which allowed companies to import goods into Mexico duty-free for manufacturing and processing as long as they were later exported out of the country. All of this hurt e-commerce apparel brands in particular.

Over the years, many of them had discovered that one way to save on logistics costs was to tap warehouses in Mexico and then — taking advantage of the U.S.’ de minimis exemption — ship orders to U.S. customers one at a time. Third-party logistics providers like ShipBob, XB Fulfillment, ShipMonk and more set up warehouses in Mexico to cater to demand.

So when Sheinbaum issued her decree on December 19, brands went into panic mode.

Chad Carleton, CEO of a Missouri-based 3PL recalled that in December, he was getting “immediate, urgent inbound [requests] coming from absolutely everywhere — some were people just, like, screaming on Twitter, ‘Please help me find the right 3PL,’ and others were trying to rush a formal RFP process.” 

Mexico did eventually carve out some exemptions to these changes, giving brands some breathing room. Meanwhile, the U.S. also attempted to cancel its de minimis exemption, and then walked that back, too. All of this has put brands in a bind as they tried to figure out how to set up their fulfillment operations to navigate a looming trade war. 

There are a few key issues here for brands. The U.S. has spent the past couple of months rushing out changes to its trade policy and then delaying or walking some of those changes back. This has left brand executives uncertain about which changes will actually come to fruition. It does appear that, in the long term, the current presidential administration wants to move as much manufacturing, fulfillment and more to the U.S. as possible. But for many brands, fulfilling orders out of Mexico remains the cheapest option in the short term.

So, for the past couple of months, brand executives have been grappling with how quickly they should move fulfillment operations out of Mexico. They have been firing off calls and emails as they’ve attempted to evaluate new fulfillment partners — but no one wants to make too rash of a decision. 

Hertz described the conundrum brands face like so: “Do I want to be the idiot — pardon my French — that moves [fulfillment out of Mexico] tomorrow, when my biggest competitor is choosing not to move? And then, who knows, in 12 months from now, policy may be the same that it is today, and I’m the idiot that’s moving to a more expensive market to fulfill from.” 

“There’s uncertainty in that we all believe something’s going to happen, but we’re not sure when that’s going to happen, and we’re also not sure the magnitude of [what’s] going to happen,” added Hertz, whose company Third Person helps brands find the right 3PL. 

In the near term, some brands are splitting the difference. Aman Advani, co-founder and CEO of workwear brand Ministry of Supply, said that his brand is currently fulfilling orders out of warehouses in Pennsylvania and Mexico. New inventory is going straight to the brand’s Pennsylvania warehouse. 

However, what this means in practice is that a customer can place an order for two different items and, depending on what inventory is located where, Ministry of Supply might have to ship half of that order from the Pennsylvania warehouse and the other half from the Mexico warehouse. 

“We can’t make a firm decision,” Advani said. “We might move everything from Mexico to the U.S., if de minimis is going to go away anyway. But we can’t do that because maybe de minimus doesn’t go away, and maybe even the double shipping is still cheaper than the tariffs.” 

In the meantime, 3PLs with a strong U.S. presence are fielding a lot of requests from brands.

Sean Henry, the CEO of Stord, a 3PL that operates around 10 of its own fulfillment centers in the U.S. and Canada, said his company hit its sales target for the first half of the year by the end of February, based on all the interest from brands looking to move fulfillment operations out of Mexico. One of those customers, which Stord touted on its blog, was the apparel brand True Classic. “We needed an alternative solution immediately, and Stord was there to support us,” True Classic CEO Ben Yahalom told Modern Retail in an email.

Henry said that what’s core to Stord’s model is not just its warehouses, but also its own technology that it has developed. That includes an order management system that helps gives brands deeper real-time inventory visibility, as well as a last-mile software optimization tool. 

Stord’s pitch to brands then is that its U.S.-based fulfillment network, combined with its in-house technology, will help them avoid further disruptions. “It helps us be incredibly nimble as a business,” Henry said.

But many brands have yet to pull the trigger on finding a new 3PL. That’s because they are still waiting for more clarity on what changes countries including Canada, the U.S. and Mexico may make to de minimis exemptions. Henry said that some brands also haven’t had the cash flow to make a move right away.

What’s more, finding a new 3PL takes time. Carleton said that, depending on the size of a brand and how many SKUs it has, it can take anywhere from two to six months to transfer inventory to a new 3PL. He added that, despite all the initial inbound, he has yet to sign a new customer that came to Good Company specifically to move its inventory out of Mexico. 

“Anybody who wanted to move fast, I just said no to,” Carleton said. He said that if brands sign a new 3PL too quickly, without taking the time to evaluate the right partner, they risk ending up moving twice. “There’s going to be the person they go to for immediate relief, and then they’re going to be able to find the right partner over time and move again,” he said.

“I’ve seen many scenarios where brands find a 3PL that’s not good for them and literally ruin their business,” Hertz said. Ideally, brands want to find a 3PL that can grow with them for years to come.

And for brands, trying to find the right fulfillment partner under the threat of a trade war is just another added challenge on top of a post-Covid era that has been marked by high inflation, rising ad costs and other business challenges.

“Brands have really had a hard time the last few years, and this is just even more fuel to that fire,” Henry of Stord said.