Making the decision to work with a 3PL is often predicated by a need—transportation capacity and costs, seasonal warehousing, or global complexity, among others. But as outsourcing partnerships mature, customers need to routinely assess performance and set new goals.
Here are three factors companies should consider when assessing 3PL performance
Control
3PLs generally control transportation and distribution capacity, directly or as a broker. One of the most common reasons 3PL partnerships fail is poorly defined expectations. Outsourcers need to assertively communicate objectives and concerns, and constantly benchmark key performance indicators (KPIs) that are most important to them.
Reporting
3PLs will collect, archive, and analyze historical reports to identify improvement areas, alert customers to real-time or recurring problems, and explore opportunities where they may be able to gain further efficiencies and economies.
Customers need to dictate which status reports are most critical to their needs so they can view performance as it relates to their terms, not the service provider’s. Using the right metrics may help companies determine if they are striking the right balance between service and cost.
Execution
When it comes to execution, 3PLs should strive for continuous improvement—and customers should expect it. If a service provider is responsive to customer priorities and executes according to plan, there should be obvious gains in terms of customer service, efficiency, cost savings, and innovation.
There are many important KPIs you will wish to track when setting up your relationship with a 3PL, and we’ll take a closer look at those here. This is an important area to consider and revise based on your organization’s size, product line, level of service, and many other factors.
- Customer-Service Satisfaction Rate
- Prompt Communication
- Turnaround Time to the Customer
- Quality Control/Quality Assurance
- Hours/Days of Operation
- Distance/Time to Delivery
- Safety Record
- Cost-Reduction Goals
- Customer Reviews
- Fuel-Surcharge Management (FSC)
Selecting a Third-Party Logistics firm can be a daunting task. A fantastic 3PL can free up time, save money, and generally make your life so much easier. When evaluating a company that you are considering outsourcing your fulfillment to, it is important to take a close look at how that relationship is going to work. Make sure your 3PL partner checks all the boxes to make the relationship a success.
