A 3PL or Third-Party Logistics service 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 when outsourcing order fulfillment and ensure that everything orders are flowing smoothly in and out of your facility?
A good 3PL partner should be committed to transparency with clients through detailed reporting and analysis of different 3PL services. In recent years, 3PL reporting has become more sophisticated, with companies like Whiplash developing software tools that capture, categorize, and showcase key data points and other metrics that their clients value.
We’re going to take a deep dive into 3PL reporting to help you identify what reports may be available to you and understand how to set the right benchmarks when it comes to reports, analysis, and data-driven decision-making.
3PL reporting can be divided into two main types. The type that a 3PL business uses will depend on the level of technological infrastructure and integrations they have with other business systems:
Most third-party logistics providers will offer traditional reporting capabilities, but the scope and depth of these reports will vary. ‘Static’ reports refer to spreadsheet-style reports that are typically processed overnight to provide you with a static look at updated inventory counts, order processing, inbound/outbound shipments, and inventory replenishment.
There are many iterations of these 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 that are readily available.
The obvious weakness of static reporting is that the reports contain data that is at least a day old – an eternity in the 24/7 world of ecommerce. The data is also highly dependent upon your 3PL provider’s warehouse management system (WMS) and any kind of glitch or delay with that system may severely limit your ability to get timely, accurate information.
In this day and age, entering into a 3PL partnership that only offers static reports is a massive disadvantage. It’s extremely difficult to coordinate effective supply chain management when you can’t make informed decisions using real-time data. This also increases the likelihood of stock-out and orders going unfulfilled due to a lack of inventory visibility. Reporting may not be able to keep pace and enable you to flag low inventory levels at your 3PL warehouse, which has a negative impact on the customer experience.
Any 3PL invested in technology and modernization will likely have real-time reporting tools at their disposal. Dashboards are focused on capturing, organizing, and presenting real-time data using easily understood interfaces, such as graphs, filters, and other infographics.
In recent years, real-time reporting has become widely available within the third-party logistics industry as the price of implementing this technology becomes more affordable.
This approach to 3PL reporting is advantageous because dashboards present information in an easily digestible way. The ability to make quick decisions in an ecommerce-driven world can easily be the difference between a good sales day and a great sales day.
Clients of 3PLs who use this type of technology have a meaningful competitive advantage because they have the ability to see and understand what is happening within their business operations and make informed business decisions.
“The Whiplash platform has been the ultimate trump card for Moda Operandi. The ability to integrate so seamlessly with our online store has given us a level of flexibility and control that we’ve never had before.” Nikhil Soares, Ecommerce Supply Chain and Operations Executive for Moda Operandi
As noted, there’s a lot of activity throughout the day as a 3PL manages a range of fulfillment services, from the flow of incoming inventory to fulfilling orders for end customers. This means there’s a lot of information available to both 3PLs and clients, which helps everyone to stay current and make educated decisions.
For the 3PL, this may mean shifting labor to different areas of the business, resulting in higher efficiency and lower costs for their clients. For clients, this may mean noticing that a particular item is selling better than expected and needs to be restocked more quickly than expected. You can also pause sales of that item on your ecommerce platform to avoid selling inventory you don’t have. This prevents angry customers and backorder costs.
Pro tip: The Whiplash platform enables brands to set custom reorder points for different SKUs according to their popularity in last year’s data, which avoids having insufficient inventory to fulfill orders.
Areas of reporting and KPIs can be broken down into three main categories:
Regardless of where your product is produced, your supplier or shipper will be transporting finished goods directly to your 3PL. When products arrive at your 3PL ready for sale, they will receive this product into your inventory and reconcile it against the order you submitted to your supplier. 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’s also possible that your supplier either over or under-supplied items. This is why it’s so important that your 3PL provides you with up-to-date and accurate receiving reports. If there is a discrepancy, this is a good indicator that something has gone wrong. 3PL reporting allows you to quickly identify this and resolve it.
Part of providing a great shopping experience for your customers is knowing how much inventory (per SKU) you have available for sale so that you don’t offer products that aren’t available. This can be particularly problematic if you’re selling to both consumers and retailers.
Insufficient inventory can be further compounded if you sell through Amazon, drop shipping sites, or offer a BOPIS service. The more selling channels your business has, the more complex it is to keep accurate inventory counts.
You can minimize this challenge by having a proper ERP system in place. These systems are largely designed to help centralize inventory and avoid the issues described above. Another important piece of this puzzle is having good inventory reporting from your 3PL. As a 3PL processes and manages orders for you, they should provide updated inventory counts to avoid costly mistakes and unhappy customers.
Whiplash integrates two ways with all major ecommerce platforms including Shopify, ensuring that inventory counts are synced whenever a customer places an order or makes a return.
One of the biggest things you pay for with a 3PL is space. The warehousing used to store your secondary inventory, picking products, and storing returned items can be expensive – particularly if it’s occupied by inventory that isn’t selling.
Any 3PL should be concerned with storing products that aren’t turning; it’s wasted space that could be much better utilized by popular, fast-moving SKUs. Providing reports that help clients understand what SKUs they may have that aren’t moving (dead stock) or are considered slow movers (excess inventory) is key to helping clients rid themselves of these items.
Some 3PLs may have language in their contracts regarding this, such as Amazon FBA which has penalties for storing 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 fulfillment costs.
Whether a business is just getting started or has been around for many years, everyone (including the 3PL) wants to know what the average order volume is.
From the business perspective, order volumes can help measure results when running promotions, analyzing seasonal trends, comparing forecasts to actual sales, or simply keeping an eye on inventory movement. This is also critical for 3PLs as they use forecasts to order volume, manage labor, and track the capacity of their facilities to implement storage optimization strategies.
The Whiplash dashboard allows businesses to view, filter, and pause all outstanding orders from one dashboard, making it easy to keep track of your order volumes.
It can be argued that nothing else matters if order contents aren’t accurate. Order management is a crucial service that businesses trust their 3PL with carrying out properly. Extensive reporting in this area helps both parties to identify if any mistakes are being made.
If errors are identified, you should expect your 3PL to immediately get to work resolving and implementing a long-term solution to ensure it doesn’t happen again. This isn’t to say that mistakes mistake won’t ever occur, but you should be able to quickly identify and resolve any errors that do occur.
The costs of transportation services 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 for your business is vital for profitability. This process begins with good reporting and being able to see:
With this information in hand, you can better understand how your freight is handled and achieve optimized transportation management.
There’s nothing 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, such as kitting or subassembly, and apply the appropriate rates before invoicing them in a consolidated 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, where businesses can download, import, and analyze using their own systems. This data often provides comfort knowing that you’re only paying for 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. When trusting such a critical function of your business to a third party, you should expect real-time, accurate, meaningful reporting that’s easily understood and actionable.
Partnering with a technologically-advanced 3PL like Whiplash who offers real-time reporting of inventory and order processing makes it easy for your business to stay in the loop with fulfillment activities. This means smarter business decisions, and in turn happier customers.