For anything in business, you need to establish a set of goals and objectives. Otherwise you run the risk of becoming aimless, which is the last thing an ecommerce company like yours wants to be in today’s competitive landscape. But creating goals for different areas of your business isn’t enough. You also need to establish key performance indicators (or KPIs) for each goal as well.
Your KPIs are usually top-level metrics that give you big picture data on the progress of a goal or decision you’ve made. And for today’s ecommerce company, perhaps one of the biggest decisions you can make is partnering with a third-party logistics provider, or 3PL.
Outsourcing your logistics to a 3PL can provide several impactful benefits to your ecommerce company. But not all 3PLs are the same, so you want to ensure you’re partnering with a 3PL who can deliver (pun intended) when it comes to managing your supply chain. After all, if you’re really going to separate yourself from the competition and appeal to today’s changing consumer behavior, your logistics needs to be top-notch. That’s why it’s key to establish KPIs for your 3PL partnership once you start working together to have peace of mind that you’re getting the return on investment you deserve. But what 3PL KPIs should you be tracking?
Inventory management is a hallmark of a quality 3PL, as you’re likely storing your inventory in your 3PL’s warehouses. That means your 3PL should provide accurate inventory information for you at all times. Otherwise, you may encounter difficulty forecasting demand, planning for future needs, or experience costly product shortages.
Inventory replenishment is an important aspect of your supply chain. Because of this, you need to track your 3PL’s receiving time, also known as dock-to-stock time. Receiving time measures how fast your 3PL takes newly arrived items from the warehouse dock and properly adds them into your inventory storage. Shorter times help you avoid item stockouts, which ultimately ensures a stronger customer experience at the end of the purchase cycle.
Customers today only want faster shipping times. That means in order for your business to survive, you must be able to not only offer faster shipping times, but also meet them. Your 3PL should have the capacity to allow you to offer one or two-day nationwide shipping, for example. But your KPI should measure how reliable your 3PL is at achieving such delivery times. If you’re not meeting expectations, you run the risk of losing customers when you don’t meet their shipping expectations.
When your customer opens their package, they should get what they actually ordered. But accidents can happen. This 3PL KPI measures how accurate your 3PL is at picking and packing orders. Ideally, this KPI should be close to perfect accuracy. If not, your customers will get frustrated, and you’ll lose time and money having to process returns and resend shipments.
It’s no fun to get a notification that your order has been delivered, only to discover that it was dropped off at the wrong address. Talk about a letdown! Even if your 3PL promises faster shipping times, they need to be able to deliver them to the right places. This KPI should track the rate that your 3PL delivers packages to the correct destination. Ideally this 3PL KPI rate should be 99% or better. If not, consider a 3PL alternative.
Returns are an inevitable part of the ecommerce process. But while they aren’t ideal for the customer, you can make up ground in the customer’s eyes if your 3PL excels at managing returns. That’s why you want to measure the time it takes your 3PL to process a return. This also should factor in the number of orders returned due to transit damage, which should preferably be low if you have the right 3PL.
Cost per unit shipped is a 3PL KPI that gives you a high-level look at your 3PL’s overall logistics efficiency. Dividing the total cost to ship by the number of packages shipped, this KPI should stay about the same throughout the year. If it’s steadily rising over time, your fulfillment expenses could be eating into your profits.
If you’re tracking the right 3PL KPIs throughout the year, you can know with confidence if your 3PL is managing your supply chain well. With that said, you need a 3PL willing to provide this KPI information.
At Smart Warehousing, we’re all about transparency and providing real-time data for our clients. That’s why we’re trusted by so many ecommerce companies around the country. If you’re ready for a 3PL partnership that achieves your key KPIs, contact us today.