Key Strategies for Maximizing the ROI of 3PL Solutions
Let's explore the role of third-party logistics (3PL) solutions in supply chain management. 3PL providers take care of the behind-the-scenes work that keeps your business running like a well-oiled machine. From warehousing and inventory management to shipping and fulfillment, a good 3PL partner can take the burden of logistics off your plate, allowing you to focus on the core aspects of your business.
But not all 3PL providers are created equal. Just like you, they're in the business too. As a business owner, it’s your responsibility to maximize the benefits of any business decision, which in this case, is the 3PL solution.
Assessing Your Business Needs for an Effective 3PL Integration
Before you start looking for a 3PL partner, closely examine your existing logistics processes and identify inefficiencies and areas for improvement.
This self-assessment will help you understand what you need from a 3PL provider and ensure they can address your pain points. It’s a good idea to assess your:
- Unique business requirements, such as the volume of orders you process, the types of products you sell, and the destinations you ship to.
- Technological needs in light of features that can help your business grow. Some features include real-time inventory tracking, automated order processing, or integrated shipping solutions. According to a 2020 study, 93% of shippers believe IT capabilities are a necessary element of 3PL expertise.
- Business demand and supply game to determine the depth of services you need from a 3PL solution.
- Need for customizations and personalization. Many businesses keep their branding as a core item in overall supply chain processes, and being upfront about it will help you set the right expectations.
- Customer service needs. When it comes to after-sales service quality, not many businesses pay attention to it. If you do, assess the depth and quality of it.
How to Measure the ROI of 3PL Solutions
Companies that establish clear goals are better placed for success than those that don't. With measurable objectives, you can track progress to ensure you're on target instead of shooting in the dark and leaving your business vulnerable to costly mistakes and underperforming results. Here are a few tips:
- Find your North Star: Define your main objective for using 3PL solutions to establish clear benchmarks. For example, you might want to reduce shipping costs, improve delivery times, or increase order accuracy.
- Determine Costing: Establish a baseline for comparing your expenses before and after implementing 3PL solutions. Carefully determine the cost of using 3PL solutions, including any fees or charges.
- Set KPIs: Track key performance metrics, such as order fulfillment times, inventory accuracy, and shipping costs. Use these metrics to evaluate the effectiveness of your 3PL solution over time.
- Leverage Data Analysis: Analyze your data to identify trends and patterns. For example, you may notice that your shipping costs have decreased significantly since implementing 3PL solutions.
- Use Benchmarking: Use case studies and examples to illustrate the impact of 3PL solutions on businesses like yours. Over 60% of shippers agree that third-party logistics has reduced their overall logistics costs.
You're off to a great start if you’ve assessed your business needs based on the tips above. However, integrating with third-party logistic providers' existing systems and processes can still be an uphill battle. The challenges include integrating with your ERP, WMS, and other software systems. Integration issues can lead to data errors and miscommunication. Here are some of them:
- System Compatibility: 3PL providers often use their software and systems to manage logistics operations. Integrating these systems with existing systems and software can be challenging and may require custom integration solutions.
- Data Sharing: Integrating data between the 3PL provider and your business can be complex, and there may be issues with data integrity, accuracy, and security. Ensuring that data is properly shared and integrated is crucial.
- Process Alignment: The 3PL provider's processes and workflows may differ from your existing processes. Aligning these processes and workflows can take time and effort and may require adjusting existing methods.
- IT Resources: Integrating 3PL solutions may require IT resources and expertise, which can be especially challenging for smaller companies.
- Training: Staff training is necessary to ensure everyone understands the new processes and systems. However, training can be time-consuming and may affect business operations.
Optimizing Your ROI
We won't bore you with cliche advice that starts and ends with 'Set clear goals.’ Instead, here are some straightforward recommendations to optimize your ROI:
- Don’t sleep on lean logistics: Implementing lean logistics principles, such as reducing waste, improving efficiency, and increasing flexibility, can help you achieve significant cost savings and improve logistics performance. According to a report by McKinsey, a pharmaceutical warehouse reduced process time by 20% by eliminating picking from the highest shelves.
- Predictive analytics rarely lie: Predictive analytics can help you make more informed decisions and optimize your operations. For example, Everstream Analytics uses global news feeds and other propriety data to run predictive analyses for its supply chain customers across 30 risk categories. The company claims to reduce disruption-caused revenue losses by 30%, achieving 100 million USD in savings from transport-mode optimization.
- Pay attention to supply chain visibility: Improving supply chain visibility can help you identify inefficiencies and make data-driven decisions to optimize your supply chain. According to McKinsey & Company, supply chain disruptions cost the average organization 45% of one year’s profits over a decade.
- Embrace automation wholeheartedly: Automating logistics processes, such as order processing and fulfillment, can help you improve efficiency, reduce errors, and achieve significant cost savings. One study found that companies that embraced automation in their logistics operations experienced a 10% to 20% reduction in logistics costs.
- Implement sustainability initiatives: Implementing sustainability initiatives, such as reducing carbon emissions and improving energy efficiency, can help reduce costs and enhance brand image. For example, UPS has pledged to achieve a 50% reduction in CO2e per package delivered by 2035.
Bonus Tip: Work with the Right 3PL Provider
Optimizing your ROI with 3PL solutions requires a strategic and thoughtful approach. By selecting a reliable, experienced, and sustainable 3PL partner, you can ensure that your logistics operations are streamlined, cost-effective, and positively impact our world.
With Ziing by your side, you can confidently navigate the complexity of logistics. We seamlessly blend dedicated delivery options and distribution services to fit your business's unique needs.
Explore our solutions today.