If you run a warehouse, you know how important it is to measure and improve your performance. But how can you do that if you outsource some or all of your logistics functions to a third-party provider? In this article, we'll show you how you can use third-party logistics (3PL) to track warehouse performance metrics and benchmark them against industry standards.
3PLs are companies that offer logistics services such as transportation, warehousing, distribution, and fulfillment. They can help you reduce costs, increase efficiency, and access new markets. However, using 3PLs also means giving up some control and visibility over your operations. That's why you need to establish clear expectations, communication, and reporting with your 3PL partners.
Many companies prefer to go with 3PL as the complexity of managing the entire warehouse is reduced. Opting to operate on their own or 3PL will vary with business goals and values. The major part of the operations are handled by 3PL like: 1. Manpower 2. Infra 3. CAPEX and OPEX 4. Facility rent 5. Security 6. Feasible for immediate change 7. Multi-client warehousing 8. Reduction in overall business cost 9. VAS 10. Expertise Selection of the 3PL is highly important as it allows the organization to focus on its core competencies, flexibility, and scalability to provide the best customer satisfaction
Warehouse performance metrics are quantitative indicators that measure the productivity, quality, accuracy, safety, and customer satisfaction of your warehouse. Tracking these metrics can help you identify problems, optimize resources, and improve processes to enhance customer service. Examples of common warehouse performance metrics include inventory accuracy (the percentage of inventory records that match the physical count), order fill rate (the percentage of orders shipped complete and on time), order cycle time (the average time from receiving an order to delivering it to the customer), order picking accuracy (the percentage of orders picked correctly and without errors), warehouse capacity utilization (the ratio of used space to available space in the warehouse), and warehouse labor productivity (the amount of work done per labor hour or cost).
To use 3PLs to track warehouse performance metrics, you need to define your goals and objectives, negotiate your service level agreements (SLAs), implement data integration and analysis tools, and review and improve your performance. You should consider the key performance indicators (KPIs) that matter most to you and your customers, the specific services and standards that your 3PLs will provide, the systems and platforms that you and your 3PLs will use to exchange and analyze data, how often you will evaluate and compare your performance with your 3PLs and industry benchmarks, and how you will identify gaps and opportunities for improvement. Additionally, you must ensure data quality, security, and compatibility, generate and visualize reports and dashboards, handle issues and disputes, set penalties or incentives for performance, implement action plans, track best practices, and more.
In my experience, identifying metrics that may include order accuracy, on-time delivery, inventory turnover, and cost per order. A 3PL provider must understand your performance expectations and the specific metrics you want to track. SLA, define the clear performance levels and targets - overnight response, Technology to address realtime reports. Maintain open and transparent communication with your 3PL provider. Encourage them to share insights and feedback, and be receptive to their suggestions for improvement.
Utilizing 3PLs to track warehouse performance metrics can bring several advantages, such as access to expertise and technology, flexibility and scalability, and cost savings and efficiency. 3PLs have the expertise, experience, and tools to help you optimize your warehouse operations and meet customer expectations. They can also provide you with data-driven insights and recommendations. Additionally, 3PLs can adapt to your changing needs and demands, including seasonal fluctuations or new product launches. Moreover, they can leverage their network and resources to offer more options and solutions. Ultimately, 3PLs can help you reduce overhead costs, capital costs, labor costs, inventory expenses, and transportation expenses. Furthermore, they can help you improve your workflow, throughput, quality, and reduce waste and errors.
Using 3PLs to track warehouse performance metrics can come with some challenges, such as a lack of control and visibility. You may also face issues with data accuracy, timeliness, and consistency. Dependency and risk may arise if 3PLs don't meet expectations or SLAs, or if there are disruptions or delays that affect your operations and customer service. Alignment and collaboration can be difficult when 3PLs have different goals, cultures, and values than yours, or conflict with other 3PLs or stakeholders. Communication and coordination challenges, as well as a lack of trust and feedback, can also be present.