Third-party logistics (3PL) providers offer companies the chance to outsource part or all of their warehouse operations to a team of experts. This frees up valuable time and resources that can be better spent on other areas of their business.
How can you be sure that your 3PL partner is delivering on their promises, though?
After you partner up with a 3PL provider, it’s important to keep an eye on certain key performance indicators (KPIs) to ensure they are meeting your expectations and dishing out the innovation you signed up for.
Here’s how to identify any areas where they may be struggling, so you can address them accordingly or move on to a more fitting provider:
How many smart solutions is your 3PL provider bringing to the table? After all, one of the primary reasons to partner up with a 3PL provider is to gain access to their vast expertise and arsenal of fresh ideas.
If they aren’t suggesting new ways to handle your volume and improve the efficiency of your warehouse, then it’s time to have a conversation or connect with a provider that can deliver the creativity your bottom line craves.
Do your invoices add up? You should be reviewing your invoices regularly for any inconsistencies, such as unexpected increases in hourly billing rates or warehouse space.
While warehouse operation costs can certainly fluctuate, you shouldn’t see any surprises that put a strain on your relationship. If you keep an eye on your invoices, you will be able to catch issues early and avoid overspending on your 3PL services.
What’s the accuracy rate of your outbound orders? It is smart to require reverse logistics reports and return reason codes so you have a straightforward way to assess this.
A common agreement among clients and 3PL fulfillment centers is an accuracy rate of 99.9%. If yours is falling short of this, it may be time for a talk or to swap to a new 3PL provider that promises higher performance.
Are your accounts managed effectively? After inventory and billing issues, ineffective account management is the main reason that relationships between 3PL providers and their clients degrade.
Your 3PL partner’s account management team funnels virtually all information surrounding problem identification and resolution. If you find that their service is slow or inconsistent, it’s time to have a chat with higher-ups about better communication.
How efficient is your 3PL warehouse, and is it improving? To properly analyze this KPI, make sure to process outbound receipts effectively and pay attention to the dock-to-stock time listed.
Dock-to-stock shows how quickly orders are processed and shipped out. A superior 3PL provider always strives to improve, so you should see this number steadily go down over time. If a part of the process is slacking, this will signal it so you can locate and address the problem.
Same Day Shipping
How many orders is your 3PL partner shipping out the same day they come in? Amazon and other major players in the world of eCommerce have set a high standard when it comes to same-day shipping.
Consumer expectations are higher than ever, so high same-day shipping rates may be required to maintain customer satisfaction in certain industries. If your 3PL provider is not able to keep up with the trend, then it’s time to see what could be more efficient.
Are you relaying customer complaints to your 3PL partner? Are you seeing resolution? If you do your part to pinpoint common pain points regarding pick pack and ship, tell them to your 3PL provider, and come up with potential resolutions together, you should see results.
Some issues may specifically pertain to your product, while other complaints about packaging and product condition could indicate ineffective 3PL services. Issues like this should be solved quickly if you want to satisfy customers through your 3PL partnership.
Is your 3PL partner monitoring inbound inventory and reporting all non-compliance? If they do not actively record certain items according to your requirements, it is possible that your vendor relationships are not as cost-effective as they seem.
Check up on your invoices for instances of your 3PL failing to report vendor non-compliance. Then, clarify your expectations and restate your requirements. If you still see evidence of non-reporting, it is probably best to move on to a more meticulous provider.
Is your inventory accuracy rate hovering around 99.5%? More often than not, a company has opted for 3PL services because its internal fulfillment operations cannot meet this standard.
Implementing inventory software and standard operating procedures to achieve this level of accuracy is not always cost-effective at an internal level. On the other hand, outsourcing the management of your inventory to a 3PL provider to achieve it should be.
Are your 3PL partner’s return processing times reasonable? A generally acceptable time frame is within 48 hours. Best-in-class 3PL services often strive for 24 hours or less.
The speed at which your 3PL partner has to handle returns should be written into your contract. In fact, if they fail to process returns within a reasonable amount of time, you will likely lose out on sales and any perishable products could spoil.
3PL services can do a world of good for your business— Gauge how well your 3PL partner is performing by keeping an eye out for these KPIs. If they aren’t able to deliver the innovation your company craves, you may want to switch to a more fitting provider.