It is necessary to identify KPIs when evaluating third-party logistics companies’ services. You must be aware of these indicators to select an appropriate company. Read on to learn more about KPIs to evaluate third-party logistics.
KPIs To Evaluate Third Party Logistics Companies Services
The goal of third-party logistics (3PL) is to help businesses reduce costs. This is achieved by outsourcing transportation and logistics operations. This can include everything from shipping and receiving. It also entails warehousing, kitting, inventory management, etc.
To evaluate a 3PL provider’s performance, they should be monitored. You can do this by using key performance indicators (KPIs). KPIs are metrics that assess a company’s success in its objectives. They can also be used to measure the performance of suppliers or service providers.
A KPI is a number that shows whether you’re meeting your goals.
You Can Use KPIs to Check Your 3pl’s Services.
A KPI is a number that shows whether you’re meeting your goals. Keep it up if you’re on target or doing better than expected. If you’re falling short, it’s time to find out why and make some changes.
Evaluating your 3PL is the best way to align its performance with your goals. Spend time figuring out what results are important to you, then work with your 3PL to track them over time. You may want help from a logistics consultant or professional at first. But once you get the hang of it, managing KPIs should be easy for anyone in your organization.
When evaluating results, look at the process, not the outcome. For instance, if an accident causes damage to a shipment—that’s bad luck for everyone involved. This shouldn’t be cause for concern about how your 3PL is working.
An Evaluation Process Should Be Regular, Fair, and Honest
In the evaluation process of your third-party logistics providers, you must ensure that:
- The process is regular,
- It is fair, and
- The process must be honest.
Your evaluation process should be based on facts—not opinions. Don’t let your emotions get in the way of the evaluation. This will make the process subjective. You are responsible for evaluating your members’ performance and third-party logistics providers’ performance.
Evaluate Based on the Process, Not the Outcome
It is essential to evaluate your 3PL based on the process is critical, not the outcome. By focusing on the process, you can discover problems and inefficiencies. The process is also more controllable than the outcome. This is because it’s possible to change how an action is done but difficult to predict outcomes. The process will also perform because it will be repeatable across many projects.
What Rates Should You Be Paying?
While you can always find a 3PL provider with lower rates, such providers may not meet your needs. This can be costly in the future. It would be best to educate yourself on the market rate by asking your competitors. You can also look at rate surveys or ask your current 3PL provider for a rate card. You will only have the information necessary to negotiate with a 3PL provider.
Despite popular belief, you should never try to compete on price alone. There are other factors to consider when choosing a third-party logistics provider. For instance, outsourcing services to a 3PL frees up space in your warehouse for goods. It gives you access to better technology and transportation options. This is an investment that will pay off by saving money over time. Don’t look at the immediate cost savings associated with outsourcing right now.
Supply chain management processes are sometimes outsourced. If this is the case, you will want to determine whether it is worth paying more to retain your clientele or if you stand to lose business regardless of your pricing.
What Are Your Expectations?
You can’t measure what you don’t know. As you begin to consider, evaluations start by asking yourself what you hope to achieve. Do an assessment and know-how that contributes to your goals and objectives.
- What are your expectations? Make your point known during evaluation.
- Why are you evaluating? Is it to determine whether a program should continue, be modified, or changed? Is it because someone asked for one or because it’s required by policy? Understanding why an evaluation is being done will help define how the results will be used.
What Are They Also Doing Wrong?
This is a great time to look at value-added services. Because they are offered doesn’t mean your 3PL provides them to you. For instance, have you asked your provider if they are cross-docking shipments? If not, there may be opportunities for better product flow and faster delivery times.
Some 3PLs will offer kitting or light assembly of products. This might be an excellent service for some organizations. However, it might not meet your customers’ needs. You want to make sure you only pay for the services you need without extra fees.
You also want to look at their distribution centers (DCs) and storage facilities. Are their yard trucks in good working condition? Do they have enough equipment to handle the required volume of work? Do they have an organized system to keep track of trailers onsite?
Are There Areas Where You Could Improve Too?
You may find that you are not satisfied with the performance of your current 3PL. But before a quick decision, take a step back and ask yourself some questions. Are there areas in which your business could improve? Could you streamline your processes to minimize mistakes? Are there ways to communicate better with your 3PL provider? If you find areas where you can improve, revise those processes to work with your 3PL.
Evaluating how well the 3PL is performing is essential. You must assess how well equipped your company is for outsourcing logistics operations. Assess whether this is the right time to outsource logistics operations. It would be best to ensure the expectations are realistic. Finally, consider cost savings versus service quality and customer satisfaction.
KPIs are the frameworks of successful companies. They provide a way to measure the performance of you and your 3PL. Third-party logistics can help you track what’s going on within your business. Warehousing companies play a vital role in the supply chain of many companies. With the right logistics partner, you can enhance your company’s efficiency. When choosing a third-party logistics company, check a current provider. KPIs can help you determine the best option for your business.