Why 3PL Fulfillment Services Are Key to Supply Chain Efficiency

The productivity of the supply chain relies on how a company can effectively deliver its products to the right location at the right time. Due to the growth of e-commerce, businesses are increasingly relying on third-party logistics (3PL) fulfillment services to ensure the efficient operation of their supply chain. 3PL fulfillment services offer various strategies, ranging from inventory storage and management to fulfilling and shipping customer orders. These services can aid in maintaining the smooth operation of your supply chain. But why is their importance significant? Here are five reasons why 3PL fulfillment services play a key role in ensuring supply chain efficiency.

Supply Chain Metrics to Track

To understand why a 3PL is key to supply chain efficiency, we must first examine the metrics used to track success. A few common metrics that determine the health and productivity of a supply chain, and they are as follows:

• Perfect Order Index – Perfect order measures show you the percentage of how many orders are fulfilled successfully and without any incidents, including inaccurate orders, late deliveries, or damaged items.
• Cash-to-Cash Cycle – The cash-to-cash cycle is the time period between when a business pays cash to its suppliers for inventory and receives money from its customers. The simple cash-to-cash calculation formula is:

• Inventory Turnover Ratio – The inventory turnover ratio measures the number of times a company replaced its inventory balance across a specific period.

• Order Accuracy – The percentage of orders accurately taken, sent to production teams, and delivered successfully to the end consumer.
• Supply Chain Cycle Time – Supply chain cycle time is the time it would take to complete a customer’s order if inventory levels were at zero when the order was placed. The shorter the cycle, the more efficient the supply chain is.

Supply chain efficiency is measured in speed, accuracy, and profitability. A 3PL fulfillment service participates in streamlining several aspects of the supply chain, directly affecting its productivity.

5 reasons why 3PL fulfillment services are key to supply chain efficiency.

Optimized Inventory Management

One of the primary advantages of utilizing a 3PL is its capability to enhance inventory control. By actively monitoring your stock levels, it enables you to plan future orders more effectively and maintain inventory balance. When you outsource inventory management to a 3PL, you gain access to flexible storage options. Furthermore, it leads to quicker and more cost-effective order fulfillment, advanced inventory management software implementation, and a decreased need for inventory and fulfillment personnel. This not only prevents overstocking and stockouts but also trims costs, exerting a significant positive influence on your business’s efficiency.

Increased Visibility

Having a clear vision of your inventory, from sourcing and producing to warehousing and final delivery, is necessary to improve your supply chain efficiency. Outsourcing your fulfillment will often give you real-time visibility from dock to door, covering a significant portion of the supply chain process. Increased visibility helps your company discover bottlenecks and inefficiencies that slow down cycle times and cost you money.

Automation and Real-time Data

Automating supply chain processes is one of the most effective ways to improve supply chain efficiency and productivity. Implementing automated inventory management systems helps to improve order efficiencies. This reduces stockouts as well as overstocking. Working with a 3PL fulfillment team gives you access to real-time inventory and distribution systems that would require significant investment to own in-house. Furthermore, this allows a whole suite of automation processes to be deployed, such as; invoice processing, order processing, and even returns management. The best 3PL providers will have implementation guidance to ensure that your sales software works hand in glove with theirs.

Route Optimization

Unsurprisingly, selecting the fastest and most affordable route for product delivery is vital to supply chain efficiency. Working with a solid 3PL partner ensures this is handled for you. Fulfillment companies’ success and profitability hinge on the same metrics; therefore, they will prioritize route optimization for every order.

Optimized Returns Management

Returns management or reverse logistics can often be overlooked in supply chain efficiencies, but that is a mistake. With an average of 20% of all online orders ending in a return or exchange, mismanaging returns can negatively impact the bottom line. In fact, one of the main value-added services offered by 3PL companies is returns management. They can help automate the process of receiving, evaluating, and restocking products when they are no longer wanted or required by a customer.