One of the most challenging aspects of managing a third-party logistics (3PL) business is the constant pressure to increase efficiency and reduce costs.

Fortunately, logistics companies now have access to a wealth of data and robust analytics you can utilize to pinpoint opportunities to make your operations more efficient and reduce your expenditures.

But more data itself is not the answer. You need a method to use that data to make trends easy to comprehend and provide practical forecasts you can use to scale and grow your 3PL business.

A key area for both opportunities and pitfalls is order fulfillment. When your inventory levels are low or your team makes preventable packing and shipping errors, it costs your business time and money.

How can your logistics business make the most of all this data without drowning in it? Below you’ll learn why data analysis is key to growing your business. Plus, you’ll find answers to two of the most common questions we receive about how to use your data and how to provide your customers with more transparency into their data.

Let’s dive in.

How Much Data Do You Really Need?

Many third-party logistics (3PL) businesses are struggling to keep up with the explosive growth of eCommerce over the last several years – and the seemingly never-ending stream of data that has come with it.

A constant influx of data coming into your 3PL from multiple sources includes:

• Marketplaces and shopping cart applications
• Shipping carrier integrations
• GPS location information
• Website browsing patterns
• Email click-through rates
• Advertising data
• Social media analytics
• Barcode data,
• And much more

It can feel impossible to make sense of it all – let alone use that critical data to streamline operations and drive growth for your 3PL.

Making your endeavors even more challenging, your clients increasingly expect visibility into their inventory levels, transaction history, and inventory location in your warehouse.

And why shouldn’t they? Using data to drive business decisions is necessary for growth and future success – not just for your business but also for your customers’ success.

In 2021, the most implemented new technology for 3PL businesses was warehouse management systems – WMS (84%), followed by mobile barcode scanning (53%), and order management systems (52%).

Manually generating spreadsheet reports for your clients about their current stock levels, storage costs, and inventory quantity is time-consuming and hamstrings you from scaling your own business.

Your logistics company can leverage the wealth of data available to 3PLs to give your business a competitive edge, help you spot opportunities, and give you the tools you need to grow your business – but only if you know what to do with it.

Your Clients Want to See Their Entire Transaction History. You’d Like to see Your Family Sometime This Week.

“My clients have no visibility into their transaction history or their item location. They’re killing me with emails asking about current stock and questioning their picking fees and storage costs. How do I give them more transparency?”

Great question.

You want to provide great customer service to your clients. Unfortunately, manually creating spreadsheets to report these numbers for your customers is a never-ending job that takes up a good chunk of your time.

The solution?

A WMS, such as Skuvault‘s warehouse management software, instantly provides you with:

• Transaction reports
• Audit reports
• Location reports and more

This gives you and your customers an accurate, real-time overview of their inventory quantities, bin quantity/volume, and a wide variety of other useful reports.

In addition, WMS reporting significantly reduces the workload on your end by simplifying monthly billing and streamlining your customer communication with clear, powerful, exportable reporting.

This means your customers are happier because they get the information they need right when needed. Better still, you can invest all that time you’ve been spending to manually generate reports and answer customer inquiries on growing your 3PL business.

Your Customers Want Their Inventory Data Right Now 

“My customers are demanding a way to view the inventory quantities they have with me. I’m forced to create and send spreadsheets every month and after any big swings in quantity. This isn’t scalable and doesn’t meet my clients’ demands for real-time visibility. How can I give them what they want?”

This is another fantastic question and a fairly common one.

Your customers are asking for a self-serve dashboard that allows them to easily and instantly see their inventory data and analytics. This real-time information is critical to:

• Build trust through transparency
• Give customers a real-time look at their inventory quantities
• Provide location and activity reporting
• Improve your customer service and satisfaction

Providing your customers with access to a client portal hub by utilizing a WMS as your central source of truth empowers them to obtain the information they need on inventory quantities, locations, and activity.

The good news for you? No more searching across multiple platforms to gather what you need. (Or worse, tracking all that information on a spreadsheet is made useless by a single incorrect data input or lost and must be re-created.)

In addition to real-time reporting via your customer dashboard, a robust warehouse management system provides your customers with accurate forecasting, helping them grow their business while you grow yours.

Types of Fulfillment Data Analytics Businesses Can Expect

You may wonder about the different types of data analytics your business can expect from a WMS.

Your 3PL should be able to provide its customers with a range of standard key performance indicators (KPIs) you use for clients across the board and provide customized analytics that help your customers gain a competitive edge in their specific marketplace.

Usage Summary

Usage summaries allow you and your customers to determine which products are most and least popular with consumers based on sales and the frequency, or velocity, at which they are being sold.

This valuable information provides you and your customers with insights to help you prepare for peak seasons, holiday buying, marketing promotions, and other high-volume sales periods.

This ensures your customers’ most popular products are in stock, and you’re always able to fulfill your customers’ orders when demand is high.

Fulfillment Accuracy

When it comes to order fulfillment, the dollars are in the details.

All 3PLs strive for 100% accuracy, even if that is an impossible goal. Many of the errors that reduce your fulfillment accuracy rate include:

• Packing incorrect quantities
• Stockouts
• Picking errors
• Mislabeled SKUs
• Other mispicks

Each incorrect order costs you money, damages your business reputation, and increases your risk of client dissatisfaction.

If customers regularly receive late shipments or incorrect items, they’ll make certain your clients know of their displeasure.

Continually monitoring your 3PL’s fulfillment accuracy rates allows you to quickly discern areas for improvement, streamlining, or re-training.

Transportation Cost Per Package

Transportation cost per package (also known as shipping cost per order) details exactly how much it costs for your clients to deliver a package to their customers. Understanding the details in this metric will help find slowdowns that can be corrected, which increases your profitability and can serve as a decision point for new and existing clients to utilize your 3PL’s services.

Customer Satisfaction Level

Customer satisfaction is one of the most critical areas of any business. Unsatisfied customers tell everyone they know about their unpleasant experience with your business. Satisfied customers will send your business referrals and continue to utilize your services for years to come.

Your clients’ and their customers’ satisfaction are often critical performance indicators.

Understanding how your clients and their customers are experiencing the services of your 3PL is key to addressing their pain points, providing excellent customer service, and growing their businesses.

Cycle Time

Cycle time is an important report that measures the period from when the products arrive at the fulfillment center to when the shipper picks them up to deliver a customer order.

End-to-end cycle time includes a range from when the product arrives in the fulfillment center to when they are delivered to the end customer’s doorstep.

Average Cost Per Order

Your average cost per order may seem like a simple metric. However, this report includes exactly how much you are spending order on fulfillment.

Expenses included in the average cost per order include:

• Labor
• Damaged product returns
• Equipment costs
• Operational costs such as utilities
• Other variable costs

For your 3PL to be profitable, ensuring the average cost per order is low is critical. Lowering the cost can be achieved by ensuring your fulfillment process is as efficient as possible, from the time it takes to pick and pack an order to the time it is picked up for delivery by the shipper.

Expenses

While expense reports may not be the most exciting reports you will generate for your business, they show you exactly where your money is going, which is necessary to understand as you grow your business.

In addition, expense reports can help you manage expenses and maintenance fees, shipping fees, packaging costs, and premiums offered to your business.

How 3PL Analytics Help eCommerce Businesses

Your 3PL’s analytics help your eCommerce clients increase efficiencies and grow their businesses – by adjusting their inventory in real-time, making smarter product decisions, identifying costs, and spotting carrier errors.

Adjust Inventory Levels

Several factors impact the speed at which the product is delivered to a customer’s doorstep from when it is ordered. These include:

• Availability of labor
• Marketing and advertising
• Seasons and holidays
• Gas prices and weather

Your WMS gathers inventory data and provides analysis and predictions, allowing businesses to make informed decisions and adjust their inventory.

Product Decisions

When businesses understand the underlying conditions and trends impacting their businesses, they make more effective decisions.

Data analytics can help your clients decide whether to increase or decrease production levels or product inventory based on sales trends. The magic of analytics is revealing which products are not selling and why.

Cost Savings

Without a “big picture” preview, it can be difficult to find specific areas to increase efficiency or save money. Data analytics from your WMS can provide your logistics company with the data you need to decrease your fulfillment costs and provide better customer service.

Identify Carrier Errors

Choosing an ineffective shipping carrier can be a critical error for your 3PL, frustrating both your clients and their customers. Data analytics can help you identify invoicing errors and shipping delays, allowing you to easily compare speed and reliability against your expectations and between carriers.

How Data Analytics Helps to Improve 3PL Service Providers’ Performance and Service

A data-driven approach helps your logistics company to remain flexible and act on valuable insights. Robust data analytics provides a competitive advantage through supply chain visibility, effective inventory management, and improved resource planning to manage the everyday fluctuations and hiccups in your supply chain.

Competitive Advantage

Utilizing available data and up-to-the-moment analytics can help give your logistics business a competitive advantage, allowing you a birdseye view into your business and industry.

End-to-end Supply Chain Visibility

Your WMS can help your 3PL to optimize the utilization of your resources at every juncture, delivering visibility of your supply chain end-to-end.

Improved Resource Planning

By utilizing your clients’ historical and seasonal data, your 3PL can predict your clients’ future inventory volumes and needs, allowing you to allocate your resources and storage capacity most effectively.

Adjusting Inventory Levels as Needed

Various factors, including labor availability, promotional campaigns, weather, and seasonality, can all impact the amount of time required for order delivery. Effective analytics can help your 3PL identify patterns and adjust inventory levels accordingly.

Cost Savings

One of the key benefits of data analytics is the ability to identify areas of revenue leakage as well as opportunities to reduce fulfillment costs.

Final Thoughts

Data management and robust analytics are a must-have to improve operational efficiencies and grow your bottom line.

Do you have a question about how your 3PL can use data to improve your customer service, improve efficiency, or grow your business? Drop us a line, and we’ll be happy to help.