The Simplified Guide to Benchmarking a Third Party Logistics Provider

Published : May 30, 2014

benchmarkingWhen it comes to accurately benchmarking a third party logistics (3PL) provider, you may have to reconsider how you look at outsourcing.

With a 3PL, you’re not so much looking for a service as you are looking for a company with which you can begin a new and profitable relationship. And to that end, you may find yourself taking a closer look at data in a way you may not have considered with your other third party providers.

Don't Discount Customer Satisfaction

Most third party logistics teams provide a similar complement of standard service and offer the same kinds of assurances as to how they will add value to your business. This typically comes in the form of promises that they are able to improve end customer satisfaction.

Though an intangible, it is still easy enough to formulate metrics through which to measure a 3PL's success in maintaining (or even improving) customer satisfaction.

  • Complaints are the most obvious sign that there's something wrong with your customer experience.
  • Perceived quality of your products and brand name will show a customer's satisfaction (or dissatisfaction) of their experience with your company.
  • Loyalty can be determined by establishing whether customers are recommending you to friends and family or abandoning you for other providers.
  • Intention to repurchase may be the single most important factor when it comes to evaluating the impact of a 3PL on customer satisfaction. If customers purchase from your company only once, it's fairly likely that there's something wrong with the product or their buying experience.

However, if you aren't shipping directly to customers, then you'll want to move on to more concrete data.

Dig Into Internal Reporting

One easy way to benchmark the success of your logistics provider is by asking a closer look at their internal data.

Most third party logistics providers will likely have already developed certain key performance indicators that they’re using as a measure of their own productivity and performance on a regular basis. Take a closer look at how the company is judging itself and translate those numbers into your own terms. Just keep in mind that you’ll want to take a look at not just the data you’re being provided, but the ways in which those numbers have been achieved.

It may be a considerable time commitment, but if you suspect your 3PL team is underperforming, you’ll want to put this reporting data through a detailed audit to determine whether the service you’ve signed on for matches up with the processes in action and whether or not your provider’s supply chain operations can truly support your operations.

It may be helpful to start your audit by defining the structure of the provider’s supply chain management network which can be as simple as reviewing figures for current transportation carriers that the provider is employing,. You’ll also want to take a close look at operating costs and other types of cost metrics to see how much money is being spent versus the amount of money you expect to be saving from outsourcing your logistics and fulfillment.

Compare Your Findings with Industry Standards

Once you’ve successfully performed your audit, you can compare the information you obtained with other similar providers across the board to determine whether you’re getting the best value. You can gauge the current relationship between your company and your logistics provider against both the top pricing benchmarks and the top logistics provider practices in the industry as a whole.

As a result of those comparisons, you’ll be able to accurately determine if you’re receiving average or above average service from your third party logistics provider. And, at the very least, you’ll be armed with the information you need to identify adjustments that can be made and methods that can be altered to reduce costs and increase the performance—or find a better provider.

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Topics: Supply Chain Logistics

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