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4 Shipping Metrics for 3PL Businesses

Posted: May 29, 2019 by Ly Phan

4 Shipping Metrics for 3PL Businesses

The global third-party logistics (3PL) industry was valued at $869 billion in 2017, with projections of 7.1% growth up to 2025, where the figure is set to reach in excess of $1.5 trillion. These eye-watering numbers are a sign of a market in the midst of stunning growth, with the modes of transport ever-evolving. Yet one thing remains constant, the core shipping metrics.

3PL businesses in the Asia-Pacific region are enjoying spectacular growth, a trend set to continue for the next five years.

To capitalize on the enormous potential of 3PL, it’s essential to focus on the core metrics to measure performance. As the competition for contracts and business intensifies, having the ability to accurately deliver goods across the supply chain, on time, can make the difference between profit and loss.

In this post, we will identify the key metrics you should focus on and how you can use them to optimize your business.

 

1. Time to Delivery

This measures the time it takes from the moment the order is placed to the completion of delivery, which is particularly important with perishable goods. For each category, you should set an acceptable timeframe in which the order should be delivered. For example, dairy products should be set within hours while auto parts can be measured in days.

In essence, you should match or try to beat the industry standard and utilize the full range of delivery options that are available. 3PL and other shipping companies are becoming increasingly flexible, as the graph below shows:

3PL companies are offering increasing convenience for clients.

2. Cost Per Delivery

It’s one thing to boast about making a high volume of deliveries each day, but it’s quite another to ensure that you’re making a profit. If each delivery is making a loss, then your costs will simply pile up. Therefore it’s critical to measure cost per delivery. This can be done in one of two ways:

  1. Cost per pound: This is the most simple way of measuring delivery costs. Divide the weight by the cost it takes to get to a destination. The calculation will give you a good indication of a fair price for your customers.
  2. Cost per mile: Measuring over distance is a little more complex but it can prove useful in terms of efficiency. For instance, one route may be shorter than the other, but the longer route is flatter and avoids mountainous roads so it could be more cost-effective overall.

The aim is to work out the most cost-effective mode of shipping for products. Also, consider customer requirements. Some may be prepared to pay a premium for speedy delivery, while others are happy to wait a little longer. By calculating the costs, you can offer a fee structure accounting for each service and demonstrate flexibility without the fear of incurring losses.

 

3. Volume and Capacity

Like any form of transport, it’s essential to measure demand in order to make a route profitable to a 3PL business. This can be worked out by the volume of goods being carried by trucks, trains, and containers on their trips. In doing so, you should be able to work out how full these containers are, and the efficiency of each journey.

For instance, if the containers are only around 60% full for each trip, then it would make sense to reduce the number of trips or the size of the vehicles to save fuel costs. Conversely, if the containers are running at high capacity (98% or above), then there may be room for additional trips.

 

4. Warehouse Costs

As a 3PL business, it can be easy to oversee the costs of warehouse operations. Aside from the obvious overheads associated with space, there are also additional factors to consider, such as:

  1. Processes: Are all the processes such as inbound/outbound logistics, storage, and inventory checks running as smoothly as they could?
  2. Staffing: Are the warehouse operators sufficiently trained and briefed on their roles? Are they being as productive as possible?
  3. Inventory control: Consider the type, size, and shape of the packages. A well-organized warehouse operation will have designated areas for the full range of items it handles. For example, a 3PL specializing in groceries would have separate rooms for meat and vegetable products. Additionally, you need to ensure perishable goods spend minimal time in the warehouse.

Distribution centers are a key part of the supply chain. Many 3PL companies use warehouse KPI reports in order to monitor performance, which has led to significant cost savings. By managing operations smoothly and efficiently, you would be able to ship items accurately and in a timely manner.

 

How to Monitor Shipping Metrics

The use of software is one of the driving factors in the growth of the 3PL market.

The next challenge is to achieve real-time visibility so you can accurately monitor shipping performance metrics. As well as having an organized operation, technology is key to securing the ability to analyze the KPIs and to address any weaknesses.

An inventory management system can look after each element of the shipping process from the moment products arrive into the warehouse to the point of delivery. For 3PL businesses, such a system can prove to be invaluable.

One of the key functions inventory management software offers is facilitating greater collaboration between 3PL companies and customers. In doing so, it has the ability to drastically reduce inefficiencies through delays, inaccurate orders, and wastage. With all the key information visible to stakeholders, any issues can be identified and resolved swiftly.

The other benefit is its ability to automate processes. With 3PL management software, you would be able to forecast flows of demand and plan the shipping accordingly. For example, you can use data to predict the trends for the next holiday season and be able to put resources in place.

Taking a proactive approach using technology should lead any 3PL company to a more streamlined, efficient business delivering excellent customer service.

 

Conclusion

The emphasis of the shipping metrics mentioned is on efficiency. With ever narrower margins, running a smooth, cost-effective operation can be the difference between profit and loss. The most sustainable way to achieving this fine balance is through technology.

With 3PL management systems, you can automate and integrate the processes that are key to shipping goods accurately and quickly. The additional bonus of software is its ability to record data and deliver the results in a coherent way. In doing so, you will be able to identify strengths and weaknesses in your systems. By taking a proactive approach, you can make further improvements.

However, the shipping metrics outlined above should be the core focus of a 3PL business. Getting those elements right will lead to streamlined, lean business delivering excellent customer service.

 

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