Accountability and performance are important aspects of any business relationship, but when it comes to your 3PL partner, they’re especially important.
If your 3PL provider misses a beat or makes a mistake, it could have huge and lasting repercussions for your business.
But what are the best ways to hold your 3PL provider accountable and how do you measure their success?
This is a topic that we are asked about a lot. So, we thought we’d provide you with some tips on how to evaluate a 3PL provider to make sure you’re getting the best service.
Take a Second Look
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 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.
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.
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.
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.
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.
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.