If your company has outsourced logistics activity, the performance of your 3PL provider will influence how customers see your brand and ultimately, can either enhance or tarnish your business reputation.
If you want to be certain that your 3PL will serve as a valuable brand ambassador, it’s essential to measure, monitor, and manage the partner’s performance, especially with regard to the quality and timeliness of customer deliveries.
How’s the Real DIFOT Performance of Your 3PL Partner?
DIFOT is pretty much an industry standard metric for tracking customer service performance. Provided you have the means to capture delivery data—a facility which your 3PL partner should provide as part of your contract—this measurement is as effective for measuring outsourced logistics performance as it is for an in-house operation.
However, a word of caution is called for in determining how you measure 3PL DIFOT performance. To be a truly meaningful measurement, the focus should remain sharply on the “on time” component of this metric.
The reason is this: It’s not uncommon for some 3PL providers to artificially prop up “on time” performance by shipping partial orders if availability issues would otherwise prevent them from delivering on time.
If you are to measure DIFOT properly, orders which are not delivered in full should also fail the “on time” KPI component. Simply put, it should be impossible for a partial delivery to be an “on time” delivery.
Measure Beyond “On Time”
Your 3PL partner should not only be held accountable for late delivery of customer orders, but should be monitored on the basis of how late those orders actually turn out to be.
For example, do you actually know how many orders were delivered within 24 hours of the scheduled time, and how many arrived more than two or three days late?
Of course late is late, so in terms of service level agreements there should be no consolation points for being “almost on time”. The point of measuring tardiness in terms of “average days late” (or something similar) is to understand just how severely your customers are impacted by any timeliness issues on the part of your 3PL partner.
Can a Wrong Product Be “On Time”?
Hopefully it stands to reason that a partial order shouldn’t be recorded as arriving on time, but it’s also questionable whether a delivery with errors can be categorised as passing the timeliness measure. If your 3PL partner picks and loads a wrong product for instance, or some ordered items are broken in transit to the customer, the full order will not have arrived on time.
In reality, it might be a little overzealous for a delivery to fail “on time” if the customer accepts the delivery minus the incorrect or damaged products. Instead you might prefer to measure the rate of “returns due to error or damage”, as a KPI to complement and add granularity to the DIFOT metric.
Measure Right, Manage Right
You’re surely familiar with the much used mantra, “you can’t improve what you don’t measure,” but when working with a 3PL partner, it’s particularly important to get the right metrics in place, and to measure them the right way, because you are a step removed from your customers in terms of order-fulfillment performance.
When it comes to tracking DIFOT therefore, it pays to be especially sure your measurements encourage the right behaviour from your 3PL partner. That can mean taking the “on time” element beyond the typical level of detail and making sure the results aren’t skewed by any artful use of smokescreens.
That’s not to suggest your 3PL provider is dishonest in any way, but with your brand’s reputation at stake, there’s no harm in keeping the door to temptation firmly closed—just in case.