How 3PLs Monitor Leading KPIs To Grow Their Business

 

KPIs are used by all companies, including 3PLs, to gauge the health of their operations (KPI). They consist of critical operating ratios, profit margins, client happiness, feedback, handling complaints, etc.

The dashboard that the organization’s leadership uses to assess business performance, spot discrepancies between expectations and reality, and take action to address issues while maintaining the expansion of commercial potential.

Today, outsourcing a company’s logistics and distribution to a 3PL (third-party logistics) company makes good commercial sense, especially with the rise of eCommerce companies. The scale increases business profitability and poses enormous logistical, warehouse, order fulfillment, and distribution issues. Therefore, it is advisable for business management to delegate these (critical) tasks to a 3PL’s competence.

The 3PL must keep an eye on its performance in order to live up to client expectations. The right approach to ensuring a successful and reliable operation is to select the appropriate KPIs and track them assiduously.

What are the most critical KPIs that a 3PL must monitor in order to successfully expand its business?

Define, quantify, examine, put into practice, and supervise: Understanding a 3PL’s operational goals and scope is the first step in creating KPIs for it. The following are some important queries:

· overall business goals

· What delivery deadlines must be met?

· What are your operational expenses and the permitted margins in your sector?

· How can you create a pricing strategy that works?

You’ll probably have incorrect KPIs set up if you don’t begin by addressing the questions at the very heart of your organization. The consequences of such would be devastating!

KPIs to watch for a 3PL

1. On-time delivery: Before making a purchase, about 90% of online shoppers take the sellers’ promised delivery schedules into account. Your success rate, or the percentage of shipments delivered on time, is a crucial indicator of the development and success of your 3PL company. You will undoubtedly lose clients and money if you can’t keep up with your competitors’ delivery schedules.
2. Perfect order: Getting an order to the consumer on time involves two separate steps. Once the package(s) leave the warehouse, the second phase starts. However, the first (i.e., order fill-time) is a captive process inside the warehouse and is connected to how long 3PL teams need to complete an order before it may leave the warehouse. 3PLs must maintain a minimum fill-time because that expedites the order’s dispatch.
3. Product circulation: Running out of stock when clients want to order certain things is one of the major issues businesses face. This issue is made worse at busy times (like holidays and celebrations), which is actually the period when you need to make sure you have enough stock to make the most money. It is essential to move inventory acquired from the dock to stock as quickly as possible so that it is available for customers to order. Your firm will be severely harmed if inventory is left on pallets that have been shrink-wrapped for days.
4. Inventory accuracy: Maintaining inventory accuracy is a key KPI for 3PLs, which is a continuation of the reason made above. Predicting consumer demand becomes inaccurate and error-prone if the proper mix of inventory isn’t maintained, both in terms of the number of SKUs and the number of individual units. This, therefore, causes a number of issues, including inaccurate revenue forecasting, poor supply-chain management, and greater operating costs (etc.). When a 3PL doesn’t use the most advanced, automated warehouse management system, it usually happens.
5. Order and Shipping Accuracy: Your order and shipping accuracy are essential determinants of shipping efficiency. Offering expedited shipping options like same-day and 24-hour delivery is excellent, but if your packages frequently end up at the wrong locations, it won’t be as efficient. Even though shipment accuracy is a vital indicator that needs to be watched, it won’t provide you a whole picture of how well you’re doing as a 3PL. Under 99% indicates that your performance is subpar. As a consumer, picture how you would feel if you opened a package and discovered the wrong products inside! Similarly, the contents of the packaging must be carefully packaged. You will undoubtedly lose clients if your success percentage dips below 99.8%.
6. Processing order returns: The supply chain and logistics industries inevitably involve order returns. And in the contemporary world of eCommerce, it is even more typical. You must process order returns within 48–72 hours at least 95% of the time. An endemic issue is if a 3PL’s reverse logistics process can’t achieve this rate.
7. Transit damage: Similar to the last issue, there will inevitably be commodities that are harmed in transit in the logistics sector. However, if the rate of incidence exceeds acceptable standards, there is a problem with the procedure a 3PL is using. For instance, there might not be enough padding used to pack the things, or the box sizes might be off (too big or too small). All of this raises the possibility of damage occurring in transportation.
8. Unit-cost: Similar to how some of the metrics listed above serve as direct indicators of specific aspects of a 3PL operation, cost-per-unit gives you a comprehensive picture of the effectiveness of a 3PL activity. This is calculated by dividing the overall shipping expense by the number of packages transported.

You must make sure that you are within the acceptable range of your competition, even if this number may vary depending on the sort of goods you ship and the distances they travel before arriving at the customer’s door, etc. If not, you should perform a root-cause analysis to determine where you are lacking. If your costs are continually greater than those of your competitors, customers will eventually start to defect.

Conclusion: It is clear that a 3PL may carefully evaluate its performance by picking the right KPIs. If done right, they become reliable markers of the health of an organization. To maintain the necessary levels of performance, implementing automated methods and software like last-mile delivery solutions is essential.

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