Third-Party Logistics Provider (3PL/4PL) Relationship Audit & Benchmarking
A&A’s consultants have reviewed hundreds of 3PL operations, spearheaded 3PL evaluation and selection outsourcing projects, led 3PL investor and acquisition due diligence projects, and participated in 3PL operations startups and strategic planning initiatives. A&A’s proprietary knowledge, 3PL market research information, and benchmarks gives it a “leg up” when benchmarking a 3PL versus its competitors. Put A&A’s experience and benchmarks to use in reviewing your current 3PL relationship(s). A&A’s overall 3PL relationship audit process is as follows:
3PL Relationship Audit & Benchmarking Project Process Overview
Objective: Review internal capabilities of client’s current supply chain operations, productivity, pricing, information systems, and back office functions. This information will be used to identify client’s 3PL operations current strengths and weaknesses versus other 3PLs and against industry benchmarks. It will also provide a basis for making 3PL/client relationship and operations improvement recommendations.
Project Methodology and Deliverables: Perform onsite reviews of current 3PL managed operations and review client provided relationship performance and pricing information (i.e. contracts, cost metrics, performance measurements). Prepare a detailed report from the following information and analysis:
- Define the current global supply chain management network (transportation and value-added warehousing and distribution) structure, organization, and global material flows. A&A will map all links and nodes in the supply chain network from suppliers to 3PLs and end customers.
- Review current transportation management processes, customer service and operational performance, and operating/cost metrics.
- Identify client’s order management and transportation service requirements and specifications.
- Review current warehousing processes, customer service and operational performance, and operating/cost metrics.
- Identify client’s current regional product mix, SKU profile, standard order profile, transportation, and storage and handling requirements in each geography.
- Review current pricing provided by 3PL to client.
- Document current value-added services being performed (i.e. pick/pack, kitting, RFID, reverse logistics, visibility and exception handling).
- Review specialized material handling equipment needs.
- Review 3PL’s information systems capabilities (warehouse management systems) for forward and reverse logistics.
- Define the current 3PL warehousing and distribution organizational structure for its client.
- Assess 3PL’s overall service offering capabilities.
- Assess obtained performance metrics versus industry benchmarks and A&A’s “hands-on” knowledge. Key performance measures for benchmarking often include: On Time Shipments, Backorders as a Percent of Total Orders, Dock-to-Stock Cycle Time, Percent On Time Ready to Ship, Order to Cash Cycle Time, Order to Delivery Cycle Time, and Percent of Supplier Orders Received with Correct Documents.
- Assess current 3PL pricing versus industry benchmarks.
- Benchmark overall information systems capabilities against other 3PL systems and off the shelf supply chain systems applications.
- Develop a summary strengths, weaknesses, and opportunities analysis for client’s current 3PL operations and contractual terms. Performance and pricing gaps will be identified.
- Supply chain management improvement recommendations will be provided from the information and analysis provided above.
- Gauge your current 3PL relationship against top 3PL practices and pricing benchmarks.
- Determine if you are receiving above average operational performance from your 3PL.
- Assess your current 3PL pricing in light of A&A’s proprietary 3PL pricing benchmarks.
- Identify ways to increase 3PL performance and reduce costs.
- Obtain objective information for internal reviews and presentations regarding your 3PL relationships.