Holiday 3PL fulfillment company performance can make or break your eCommerce business. The weeks between Thanksgiving and Christmas account for 20% of all retail sales, on average. If your products make good gifts, the holidays may be even more important to your annual revenue. Great 3PL fulfillment performance is the key to great holiday sales.
If your order fulfillment gets backed up or there’s a major snafu in your supply chain, that’s easy to spot. However, glitches in 3PL fulfillment company performance are often subtle. A series of small issues can pile up. By the end of the season, these small errors may have taken a big bite out of your bottom line. But these financial hits can fly under the radar. That’s why it pays to take the time to evaluate how your order fulfillment warehouse did during the holidays.
To understand how your 3PL fulfillment company performance affects your bottom line, you need measuring tools. KPIs are a great way to assess your fulfillment operations.
What Are 3PL Fulfillment KPIs?
KPI stands for key performance indicator. KPIs track your progress toward defined business goals. For example, you might have the goal of selling your eCommerce products in a new market. A KPI for this goal might be your level of social engagement with consumers in the new market. Social engagement can be a leading indicator of awareness of your brand among your new consumers. This awareness can precede sales, and it might be a good indicator that you can expect your sales to grow in that area.
The best way to measure your 3PL fulfillment company performance during the holidays is through relevant KPIs. These indicators should be measurable. It’s a good idea to set a goal, such as 95% of orders shipped on time. After the holidays, compare your 3PL fulfillment performance in this KPI to your goal.
Here are some KPIs for measuring your 3PL service company’s holiday performance.
KPIs to Measure 3PL Fulfillment Company Performance
Here are some general fulfillment KPIs that every eCommerce business can use.
Customer service response time
Success isn’t measured by eliminating problems but by how quickly you can solve them. A fulfillment problem doesn’t have to become a big issue, as long as you can resolve it quickly.
Track the time it takes your 3PL company to respond when you have a question or issue. How long does it take to fully resolve the problem? For example, at Red Stag Fulfillment, we make sure we respond to every query from a client in three hours or less. Our current average response time is less than 40 minutes.
Time from dock to stock
Many eCommerce sellers focus on the pick, pack, and ship part of their fulfillment operations. However, the time it takes to move your products from the loading dock to warehouse shelves is crucial. This is even more important during the holiday rush. When orders may be flying out of the warehouse as fast as product goes on the shelf, you don’t want stock lost on the loading dock.
When your products linger on a pallet without being logged into inventory, it produces no return. You can lose sales and customers because an item is marked as out of stock. You do your best to get your products to the fulfillment center on time. Your fulfillment partner must step up and put them on the shelves quickly. At Red Stag Fulfillment, we offer a 48-hour dock-to-stock guarantee. To evaluate your 3PL fulfillment company performance, find out how quickly they can receive your inventory. Then compare that to what actually happened during the holidays.
A crucial KPI of fulfillment center performance around the holidays is on-time shipping. How many of your orders were shipped on time? Did late shipments cause customer service problems? Your order fulfillment provider should have a holiday plan in place. This will facilitate uninterrupted service during the extra volume of the holidays.
If your order fulfillment center offers same-day shipping, you can use this service to boost sales. Getting orders out fast is part of your sales pitch. Measure actual service against the promise. Make sure that your same-day shipping didn’t turn into next-day shipping over the holidays.
Pick, pack, and ship accuracy
Pick, pack and ship errors can cost you money. While most 3PLs will boast of a near-perfect accuracy record, the reality is not always so rosy. Use your own customer service inquiries and returns data to fact check this important KPI. You want the percentage of mis-packs and mis-ships to be as close to zero as possible. Human error does happen, however. An error rate under 3% is above the industry standard.
Red Stag Fulfillment has taken steps to protect our clients from human error. We pay $50 for every order that is packed or shipped incorrectly. That puts the pressure on us to make sure we do it right the first time, every time. As a result, Red Stag has one of the lowest error rates in the fulfillment industry.
When you look at this 3PL fulfillment company performance KPI, separate the types of returns. Returns caused by products didn’t meet your customers’ expectations show something you need to change. However, returns because of late shipments, broken and damaged goods, and mis-packs are third-party fulfillment mistakes. Track this KPI to get a clear picture of your 3PL fulfillment company performance and its hidden costs.
Shrinkage is the industry term for client inventory lost or broken by the fulfillment warehouse. Most fulfillment companies have a shrinkage allowance written into their contracts. This means that they aren’t responsible for a certain percentage of your lost inventory. This allowance can be as high as 10%.
It’s important to track the amount of shrinkage at your third-party fulfillment service. This lost inventory is an often unnoticed drain on your profits.
3PL Fulfillment cost
What was the average cost to ship an order? This 3PL fulfillment company performance KPI measures the fulfillment charges plus any shipping charges that you pay. It can help you set prices to cover your real fulfillment costs. It can also tell you if you’re paying more for fulfillment than you can afford.
When considering fulfillment cost, it’s important to look at this KPI in the context of several other KPIs. If your fulfillment services company has very low inventory shrinkage and error rates, that’s a cost savings. You need to balance that out against fulfillment cost to understand your fulfillment company performance. Sometimes the cheapest provider can actually cost you more money.
How To Choose the Best 3PL Service Company for the Holidays
Now know what 3PL fulfillment company performance metrics to track. But how do you choose a 3PL services company that will excel at these KPIs during your busiest selling season? When you’re looking for outsourced 3PL, you can use KPIs to decide on the best fulfillment service company for your business.
Verified error rates
Many third-party fulfillment companies will advertise accurate pick, pack and ship services. Look for a company with accuracy data that you can check.
If a fulfillment warehouse has a high shrinkage allowance, find out why. It could be that the company has a problem with damage and theft. Look for a fulfillment company with a low or no shrinkage allowance. Red Stag Fulfillment’s shrinkage allowance is zero — we pay for everything we break or lose (it’s not much).
Order fulfillment turnaround
Understanding your customers’ expectations is key to your choices for order processing. If they expect fast shipping, choose a 3PL fulfillment company that offers same-day order fulfillment. At the same time, ask how often orders are shipped late. A company that offers same-day shipping but routinely misses shipping deadlines isn’t providing the service you pay for. Make sure you get the fulfillment services you pay for.
The remaining 3PL fulfillment company performance metrics are not KPIs. Instead, they address practical and physical characteristics. These can help you find the best 3PL company for your fulfillment needs.
The location of your fulfillment warehouse determines how many zones packages travel through to reach US locations. If your sales are purely regional, a fulfillment center in the middle of your sales region will work best. If your customers are distributed across the US, a more central warehouse will save you money and shipping time. Consider an order fulfillment company that has more than one location to provide better coverage.
Red Stag Fulfillment has two fulfillment warehouse locations, one in Knoxville, TN, and one in Salt Lake City, UT. These two locations can reach 97% of US residents in two days or less.
The holidays are crunch time for everyone involved in eCommerce. You plan for months to make sure your supply chain is ready to meet the holiday demand. Your fulfillment operations shouldn’t become a bottleneck. Make sure the 3PL services company you choose can scale up for the holidays. Will there be enough staff to meet the demand? Will there be extra shelf space for you to expand your inventory?
Not all fulfillment companies are alike. Some specialize is shipping small and light products; others ship large and fragile items. Many order fulfillment services handle a range of products. Make sure that the provider you choose has experience shipping the types of products you sell. For example, Red Stag Fulfillment specializes in shipping heavy items (10 pounds or more). We are also experts at handling large and fragile products.
3PL fulfillment company performance reviews
Don’t take the word of your potential 3PL partner. Find out about 3PL fulfillment company performance from other customers. Ask for customer satisfaction survey data and references from other customers.
3PL Fulfillment Center Performance During the Holidays is Crucial
The holidays are the time of year when your eCommerce business has the most opportunity to make sales. You need to make sure you’re ready to take full advantage of the holidays. To do this, it’s important to choose the right fulfillment company to best serve your eCommerce customers. Collect data to monitor 3PL fulfillment company performance throughout the holidays. Use these KPIs to make changes to your fulfillment operations or to guide you to a better third-party fulfillment partner.