8 Key Performance Indicators for 3PL Companies to Monitor for Peak Performance
As a third-party logistics (3PL) company, your customers rely on you as the lifeblood of their supply chain. That means you must maintain the highest service levels possible to move their products quickly, accurately, and efficiently.
We’ve compiled the top eight Key Performance Indicators (KPIs) you should use to help you track your performance goals and obligations.
1. Inbound Receiving Time (or “Dock-to-Stock”)
The Inbound Receiving Time KPI measures when inventory was received at the loading dock to when it was put away as inventory. If items remain on the loading dock for a week while your customer shows no items in stock, you have a serious problem. Typical Dock-to-Stock times are 48 hours, with the best companies achieving times under 24 hours.
2. Order Accuracy
Order accuracy maintains customer satisfaction and helps cut down on item returns. This KPI identifies how well the items that were picked were the items that were ordered. Errors should be corrected before the items are packaged and shipped. An order accuracy of 99.9% is typical in 3PL contracts.
3. Shipping Accuracy
Having the correct order in the package is one thing. Ensuring the package is delivered to its intended target is another. The shipping accuracy should remain above 99%.
4. Order Time-to-Fill
Once an order is received, it is then picked, packed, and made available to a carrier (for example, FedEx, UPS, the US Postal Service, etc.) for delivery. These carriers have standard cutoff times to allow them to complete their collections, sort the items, and process them for delivery. Any delay by the 3PL in making the package available to the carrier by the cutoff time can result in a delay of up to a full day before the carrier can deliver the item to the final destination. Order time-to-fill measures the time between when the order was received and when the item was made available to the shipping carrier.
5. Inventory Accuracy
Inventory accuracy measures the ratio between the number of actual items in inventory and the number indicated by the warehouse management system. Errors can occur during the inventory receiving and putting away activity, and during picking, packing, and shipping. When these two activities get out of sync, your inventory numbers are unreliable. This disparity can lead to stock-outs or overstocks and adversely impact revenue forecasts for you and your customers. Inventory accuracy should be 98% or better.
6. Average Lead Time
The lead time measures the time it takes from when the order is placed to when the customer receives it. At a time when most consumers expect same-day and next-day deliveries, delays in order fulfillment lead times can be costly.
7. On-time Delivery
This KPI measures how well you can meet your promised delivery times. Slow delivery times and missed delivery dates can lead to customer dissatisfaction and lost sales. The ratio of on-time deliveries and the total number of items shipped should be as close to one as possible. If this ratio falls below 95%, it indicates several potential problems in your fulfillment process.
8. Return Processing Time
This KPI measures when a returned item is delivered to a 3PL facility and when it is processed. Items that remain untouched for days or weeks can lose their value or reach their expiration date. Typical return processing times are 48 hours, with an ideal processing time of 24 hours or less.
Contact ArcherPoint to learn how we can help you optimize your third-party logistics and warehousing operations.