How to Manage Your 3PL Performance Metrics

Finding a fulfillment center that can take on the challenges of your business is something requiring extensive vetting. However, once you find one, it’s easy to become complacent to the warehouse’s basic operations. You may think it’s going to run on automatic pilot forever without developing a close working relationship. Fulfillment errors, mistakes, and problems can quickly turn the tone on any relationship, so it’s critical to make sure you’re proactive about your partnership so you can solve problems before they become catastrophic. When you nurture a better relationship with them, things can run the way you expect to keep your brand intact.

Holding Your Fulfillment Warehouse Accountable

With that in mind, is your fulfillment running smoothly? Perhaps you haven’t checked in with your fulfillment center for a while after becoming complacent to their procedures. If you’re starting to notice a few things slipping in maintaining your delivery services, it’s time to visit the warehouse and ask some serious questions.

After you address these questions head-on, it’s important to maintain a good relationship to avoid having to seek another 3PL warehouse for logistics improvement.

Are Orders Shipping Out Accurately?

Statistics show that 39% of all retail companies face problems with accuracy in delivering products to their customers. This falls squarely on the fulfillment center you work with, and you may notice too many errors lately.

After several order errors, it can quickly start to erode trust with the customers you’ve worked hard to acquire. While you’ve already invested a huge percentage of your budget into labor expenses, this extra cost is essential to make sure the fulfillment center gets things right.

It’s time to do an audit of the warehouse you work with if you see too many inaccuracies in orders lately. More than several in a week’s time should become a red flag.

Is Cart Inventory Matching Your On-Hand Inventory?

Not being able to fulfill an order becomes even more of a frustration for your customers. The job of your fulfillment center is to make sure they relay what your inventory is so your cart inventory matches your on-hand inventory. Having to suddenly tell a customer your product is out-of-stock after they’ve placed an order is true retail anathema.

Keep daily communication going with your fulfillment center to get on the same page since they can’t operate at your level without your input.

Are Customers Receiving Orders On Time?

Maybe you’ve solved the inventory problems, but what about the method of getting your products to customers? Are customers starting to receive those items later than intended? If so, it’s time to look into what’s happening on the delivery end of your fulfillment center.

Location is everything in the 3PL warehouse you choose. Perhaps they’re in a geographic spot that isn’t conducive to the regions you need to target. Being closer to interstate highways and ports can help shave off time getting packages faster to your intended customer bases.

Do You Receive Products from Suppliers in a Timely Manner?

Getting your products sent to the warehouse from suppliers and manufacturers is another problem that might start to lag. Call your suppliers and find out what’s possibly occurring to slow down deliveries. Having constant low inventory immediately sends a message to consumers you’re not keeping your operations running optimally.

Are Returns Being Processed Quickly and Timely?

You always need a good return policy if you’re dealing in e-commerce. Your fulfillment center should deal in reverse logistics to make sure all returns go smoothly. The only way to make this happen is to assure the warehouse has the best technology to track information on inventory levels and to liquidate items.

Making sure fulfillment communicates this information to you helps you save money and time having unsaleable products stack up in the warehouse.

Take a Second Look at Your Contractual Agreement

The contract that you originally signed with your 3PL provider may no longer suit your needs. As your business changes and grows, so must the contract that you have with your 3PL partner. You may also find that the fulfillment center isn’t meeting all of the initial expectations of the agreement – so it’s important to review a few times per year to be certain.

Your contract defines the terms of your relationship with your 3PL provider and lays out each party’s responsibilities. As you learn more about the logistics solutions your business needs and as you gain more experience in the 3PL industry, you’ll be able to negotiate more favorable contract terms over time.

When you do review your contract’s terms, keep in mind that contracts aren’t in place for the good times, they’re in place to protect both party’s interests no matter what happens in the future.

All too often contracts get renewed without making significant enough changes to meet the needs of the businesses who are signing them.

Hold Regular Meetings to Go Over Expectations, Issues, and KPIs

One of the most important things you can do to manage your relationship with your 3PL provider is to meet with them regularly. During these meetings you should be reviewing their metrics, evaluating their performance and discussing improvement strategies where needed. We recommend holding these meetings every month or every quarter.

By having pre-scheduled meetings with your 3PL provider, you’re able to stay on top of their numbers and performance before there’s an emergency.

When you hold your 3PL provider accountable in the short term, they’ll take your business more seriously and will be less likely to make mistakes when handling your goods.

Now, if you don’t know what metrics to talk about in your meetings or how to evaluate the 3PL’s performance, then read on.

Frequently Manage Key Metrics That Matter

Data and analytics reports are a standard in the modern 3PL age we live in today. This is a fantastic benefit for your business because you’re able to see the numbers and judge your 3PL’s performance based on facts, not feelings.

Reading metrics is essential for any company to get a 360-degree view of what’s happening. Don’t ignore the analytics in your fulfillment center since it can tell you so much. Especially look at their 3PL KPI’s (Key Performance Indicators) where you’ll see some clarity on what the warehouse is doing and what their performance outlook is. Accountability and performance are important aspects of any business relationship, but when it comes to your 3PL partner, they’re especially important.

Here’s what you should look for when you’re evaluating your 3PL provider’s capabilities:

1. Order error and success rates

Your 3PL provider’s business is making sure that your goods are handled properly and that your orders are completed without error. Of course, no 3PL provider will have a 100% success rate every time. Errors do happen and should be expected as a cost of doing business.

However, your 3PL provider should be able to explain where their errors stemmed from and what they’re doing to prevent them from happening in the future.

2. On time shipping percentage

When your customers are given a delivery date, that date should be met. Even if your 3PL’s order success rate is high, if there are a large percentage of orders that aren’t arriving on time, that’s a problem that needs to be addressed.

Every order that gets delayed impacts your business’s reputation and your bottom line.

3. Inventory count accuracy

Your 3PL provider not only handles the transportation and storage of your goods, but in most cases they’re managing your inventories to ensure that you’re not over or under producing goods.

That’s a big responsibility and if they’re not managing your inventories well, it could cost you your business. Likewise, if they’re doing a great job with your inventory management, then you can be confident when it’s time to renew your contract.

Keep Communication at the Top of Mind

Beyond the metrics and the numbers, your 3PL provider should be providing quality customer service to you and your team throughout the relationship.

In addition to the regular meetings you’ll be holding with your provider, your requests for information, phone calls and emails should be responded to promptly and professionally.

Logistics is about organization and execution. If your 3PL provider isn’t able to respond quickly with the data and answers you need, then their priorities and organizational skills could be called into question.

Warning Signs You’re With the Wrong Third-Party Fulfillment Company

Working with a fulfillment company can become both a blessing and a curse, depending on how much you know about them. It’s why vetting is such an important process before you choose one, despite so many businesses skipping this process.

Even if you find one you think you can work with, the warehouse could have problems in the future. Sometimes it’s impossible to know whether a fulfillment warehouse is going to have issues until the time actually comes. They still usually show warning signs, which you can scope out in part during vetting. Then again, if you’ve already signed a warehouse contract in 2016, it pays to keep an eye on some red flags in the coming year. Conducting annual assessments with your warehouse usually helps find some of the most egregious issues.

Here’s some warning signs you’re with the wrong third-party fulfillment company so you can take heed and move on before becoming a bigger problem.

Lack of Communication

While this is a common issue, it’s something to still take seriously. Maybe you haven’t made an effort yourself to keep in contact with your warehouse for a while. Or, maybe you have, yet the fulfillment company hasn’t bothered to return your calls, emails, or texts.

If not, it’s an immediate sign they don’t take communicating with you seriously. When this happens, it’s a surefire sign your partnership isn’t going well. You can’t work with a warehouse and not have a good working relationship. They’re basically your other business half, and communicating every day is essential.

With this relationship, you need transparency, and any tendency to cover up things is an immediate sign to look elsewhere.

Improper Billing Procedures

Any lack of organization in the warehouse could lead to improper billing that creates constant confusion between you and customers. Much of this has to do with technology weaknesses and using paper-based systems. Digitizing documents is important now to prevent discrepancies.

All it takes is a mistake in charging too much on shipping, or not properly addressing your own bills, to create major downtime finding errors. Because you’re already busy keeping your business afloat, you don’t want to waste hours or days locating where a mistake occurred. Your warehouse might not cooperate either, making things worse.

Not Keeping Up With Your Growth Demands

Business growth could happen virtually overnight in your company. Can your fulfillment center keep up with those demands, or would they lag behind?

Doing thorough audits discerns whether the warehouse has ability to scale along with you. No willingness to invest in better technology is a major warning sign they won’t keep up.

They’re also maybe downsizing staff, which only places more pressures on other workers to keep up the slack. Not hiring talent to keep up with major demands is a sign mistakes may get made often down the road.

Too Many Cultural Gaps

Because your business may have unique products requiring specialized shipping and distribution, your warehouse might not possess enough capability to understand this. Maybe they did initially. Now they’ve slipped on keeping up with distribution changes, or on international shipping regulations.

In the coming year, you may have plans to expand to international markets. Your fulfillment center needs to keep up on the latest requirements in those foreign zones, including the latest bans on specific products.

Many countries don’t allow various items, and any mistake shipping them there could lead to major violations and fines. When your fulfillment center takes the brunt of blame, it could place them in financial jeopardy.

Contact us at insightQuote so we can help you find a fulfillment warehouse that continues to keep up with your business.

Conclusion

Logistics is a complicated and data driven industry. Your logistics provider has to manage a lot of moving parts in order to deliver on their promises of prompt execution and timely service.

Make sure that your 3PL provider welcomes discussions of accountability and is transparent about how they’re managing your account.

By using the metrics and tips above, you’ll be better equipped to evaluate your 3PL’s performance and make more informed decisions about the future of your business’s logistics needs.

If you have any questions about holding your 3PL accountable, feel free to contact us.

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