A 3PL is a critical partner that plays an integral role in your business receiving and storing inventory, fulfilling and shipping orders, and processing returns for your consumer and retail customers. With all these activities occurring every day, how do you keep track of what’s happening and ensure that processes are flowing smoothly? A good 3PL should be committed to transparency in all things.
One way they can increase transparency with clients is through reporting and analysis. In recent years, reporting has become more sophisticated with many companies developing software tools that capture, categorize, and showcase key data points and other metrics their clients value. A deeper dive into this topic will help you identify what may be available to you and understand how to set appropriate expectations when it comes to reports, analysis, and data-driven decision making.
Most 3PLs feature traditional reporting capabilities, but the scope and depth may vary. By traditional reports, we mean spreadsheet-style reports that are typically processed overnight to provide you with a static look at updated inventory counts, orders processed the previous day, inbound shipments and products received, and perhaps some information on inventory replenishment tasks and outbound shipments.
There are often many iterations of these types of reports, and they can likely be tailored to meet your specific needs. If a 3PL has been in business for many years, they may have dozens or even hundreds of these types of reports readily available.
A challenge with this type of reporting is that it is often based on data that is at least a day old, which can seem like an eternity in today’s world. The data used is often highly dependent upon the 3PL’s warehouse management system, and any kind of problem with that system may severely limit your ability to get timely, accurate information.
Real-Time Dashboards and KPIs
In more recent years, this type of “reporting” has become widely available. Any 3PL invested in technology and modernization will likely have these types of tools at their disposal. There are many solutions available, and all of them are focused on capturing, organizing, and presenting real-time data in easily understood “dashboards” (usually graphs or other infographics).
This type of approach is advantageous because information is presented in real time (or very close to it) and in an easily digestible way. Clients of 3PLs with this type of technology have a meaningful competitive advantage because of their ability to see and understand what is happening with their business operations and make good decisions as a result. It may sound funny, but the ability to make quick decisions in an e-commerce-driven world can be the difference between a good sales day and a great sales day.
Types of Information Available
As noted, there is a lot of activity throughout the day as a 3PL manages the flow of products and fulfills orders for their clients. This means there is a lot of information available to both the 3PL and their clients, which helps everyone stay current and make educated decisions.
For the 3PL, this may mean shifting labor to different areas of the business, resulting in better efficiency and lower costs for their clients. For clients, this may mean knowing that a particular item is selling better than expected and realizing that inventory will run out. With this information, you can pause sales of that item on your website and avoid selling inventory you don’t have. This prevents angry customers and backorder costs.
Areas of reporting can be broken down into three basic categories:
- Order processing
Some of the most common and key types of information a 3PL should have available to clients includes:
- Inbound receiving confirmation and quantities
- Inventory available for sale
- Inventory aging (slow or non-moving items)
- Order volume
- Order accuracy
- Freight cost
- Freight distribution by location, carrier, and service
- Invoices and all supporting order fulfillment and freight data
Again, there are probably dozens to hundreds of different types of reports and dashboards available within these broader categories. We’ll dig in a little more to the ones listed above to deepen your understanding.
Regardless of where your product is produced, your supplier is likely shipping finished goods directly to your 3PL. You’ve submitted an order to your supplier to make this happen, and they’ve told you when production is complete and the shipment has been sent. When this product arrives at your 3PL, they will receive this product and reconcile it against the order you submitted to your supplier and provided a copy of to the 3PL. This is a critical step in making sure your inventory counts are accurate.
A common misconception is that, if your inventory count is off, your 3PL is responsible. This may be true, but it is also possible that your supplier over- or under-shipped items, and that is why the count is off. The key point is to make sure your 3PL provides you current and accurate receiving reports that you can match up to your POs. If there is a discrepancy, this is a good indicator that something has gone wrong. The quicker you can identify and resolve this, the less problematic it will be as your product flows through your 3PL.
Inventory Available for Sale
As part of providing a great buying experience for your customers, it is critical to know how much inventory (per SKU) you have available for sale so you don’t offer products that aren’t available. This can be particularly problematic if you’re selling to both consumers and retailers. The problem may further compound if you sell through Amazon, drop ship sites, or offer site-to-store delivery as an option. The more channels you sell in, the more complex it is to keep an accurate inventory count.
You can minimize this challenge by having a good ERP system in place. These systems are largely designed to help centralize and manage inventory and to avoid the issues described above. Another important piece of this puzzle is having good reporting from your 3PL. As a 3PL processes orders for you, regardless of the sales channel, they have to provide you with updated inventory counts to avoid costly mistakes and unhappy customers.
One of the things you pay a 3PL for is space. The space used to store your secondary inventory, to pick product from, and to store returned items can be expensive, particularly if occupied by inventory that isn’t selling. Any 3PL should be concerned with storing products that aren’t turning; it is wasted space for them that could be much better utilized. Providing reports that help clients understand what SKUs they may have that aren’t moving, or are considered slow movers, is key to helping clients rid themselves of these items.
Some 3PLs may have language in their contracts regarding slow moving inventory. Be sure to understand any clauses like this and remember that the purpose of this is to help you manage your inventory and avoid unnecessary 3PL costs.
Receiving orders is exciting! After all, this is why a business exists. Whether a business is just getting started or has been around for many years, everyone (including the 3PL) wants to know what the order volume is.
From the business perspective, this can help measure results when running promotions, analyzing seasonal trends, comparing forecasts to actual sales, or simply keeping an eye on sales. This type of reporting is also critical for 3PLs as they too will evaluate forecasts to order volume, manage labor, and track the growth of their business.
It can be argued that nothing else matters if orders aren’t accurate. This is a crucial service a business entrusts their 3PL with. Reporting in this area helps both parties know if any mistakes are being made. If errors are identified, you should expect your 3PL to immediately get to work identifying, resolving, and implementing a long-term solution to the root problem to ensure it doesn’t happen again. This isn’t to say that a mistake won’t ever be made; they will, but you should be able to quickly identify and resolve any errors that do occur.
Freight costs continue to increase, and this trend is likely to continue. Understanding this cost, analyzing alternatives with your 3PL, and working together to tailor a freight solution that works well for your business are important. This process begins with good reporting and being able to see:
- How many orders in total have been shipped
- Which carriers and services they are being shipped on
- Where orders are in the delivery process
- The cost of each delivery by carrier and service
With this information in hand, you can better understand how your freight is handled and work together to optimize a freight solution.
Perhaps nothing is more frustrating than receiving a bill you can’t understand or reconcile against your own records. Modern 3PLs will have robust billing systems in place that capture each of the services provided to a business, apply the appropriate rates, and then invoice them in a consolidated and simplified format.
However, simplifying a format doesn’t mean you shouldn’t receive all of the detail supporting the invoice costs. Many systems in place today allow online access to this supporting data, which allows businesses to download, import, and analyze using their own systems. This data often provides comfort knowing that you’re only paying for the services received at the agreed-upon rates.
Transparency and insight are crucial to effectively managing any business. This is particularly true when it comes to working with a 3PL. You have decided to trust a critical function of your business to a third party, and in return, you should expect current, accurate, meaningful information in a manner that is easily understood and actionable.