The Most Important Warehousing KPIs to Manage Performance

All too often, outsourcing with a 3PL doesn’t work out as expected. We see it all of the time – businesses looking for a more suitable logistics firm because their relationship with their current provider isn’t working. One of the most commonly overlooked mistakes that businesses make (aside from failing to use appropriate standards when choosing a fulfillment company in the first place) is to not have a full understanding of how to hold a 3PL accountable.

In order to hold your 3PL accountable, you must have goals in place and you must measure performance on a regular basis. The easiest way to do that is to establish Key Performance Indicators (KPI’s). Every time you review performance with your 3PL warehouse, you can go over each KPI and monitor whether or not they are achieving the goals.

Before you put your KPI’s together, it will be helpful to take a step back and make sure you have the knowledge and processes set up to foster a working environment of trust and transparency. We’ve put together a short list of things that you can do to make sure you are well able to manage your 3PL.

1. Learn about the industry – Just because you’re using a 3PL doesn’t mean that you don’t have to know about warehousing and shipping. In fact, the less you know the more likely you are to experience a failure. Keep in mind that you have to know the job duties forwards and backwards to successfully manage any of your employees – so why would it be any different for a third party provider? And if you don’t know much about warehousing and fulfillment, search the web, talk to people in your network or check the resources on our site to learn more.
2. Keep an open line of communication – You’ve heard it said before: communication is the key to any relationship. This is especially true in third party logistics. You’ve got to have regular meetings with your 3PL – and not just when there’s an issue. Meet with them at a specific time each month to go over the high level and strategy in the very least.
3. Know what to look for – Make a list of the most important things that your 3PL must do successfully in order for the relationship to be functioning at the highest level. And then let them know that you’ll be meeting to discuss these metrics on a monthly, quarterly or yearly basis. The fact that you follow through on this will automatically hold your firm accountable.

Here’s a few tips on what to measure as a KPI:

• Response time to your requests
• Order error/success rate
• On time shipping percentage
• Inventory count accuracy
• Report accuracy and availability

By holding regular meetings to discuss these “high level” metrics and the overall strategy, you’ll see your 3PL relationship blossom.

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