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3PL Management: How to Accelerate Parcel Profitability

By May 22, 2024No Comments

Margin is crucial for successful 3PL management. It’s the lifeblood that ensures accurate billing, timely invoicing, and profitable scaling. Effective margin management, supported by scalable technology, accelerates profitability. 

Parcel shipping introduces multiple layers of complexity, from a wide array of service-level options and numerous accessorial charges, to dimensional weight factors and sub-optimal billing services. This makes the effective application of margin on parcel shipping charges an even more challenging task.

Whether your company is new to parcel shipping or aiming to enhance its operations, we will guide you through streamlining the intricate parcel analytics and margin application processes, equipping you with the knowledge and tools necessary to meet the growing demand for parcel shipping.

We’ll explore key strategies and best practices for accelerating parcel profitability through effective 3PL management. Say goodbye to manual and time-consuming billing processes and arm yourself with the data and technology your customers are asking for.

How to Accelerate Parcel Profitability

1. Embrace Technology

Embracing data-driven technology is a game-changer in accelerating parcel profitability. From advanced warehouse management systems (WMS) to predictive analytics and route optimization software, these tools can revolutionize your operations, cut down costs, and boost overall efficiency.

Modern 3PLs have several systems in place and aren’t looking to rip and replace existing technology that is integral to their operations. Augmenting these systems can provide real-time visibility into performance and cost data while enhancing the customer experience.

Logistics modeling and reporting can provide clarity, highlight profitability opportunities, and identify efficiencies

  • Sales Enablement Modeling — Expedite prospect negotiations by modeling the customer’s actual shipping data against your negotiated rate structure to quickly determine a mutual fit. Proactively identify areas of cost savings for the client and profit margin for you. Empower the sales team to confidently illustrate your value to the client.
  • Predictive Analytics — By analyzing historical data and patterns, predictive analytics software can forecast future trends, demand fluctuations, and potential profitability opportunities in your logistics.
  • Building Expansion Modeling — Mitigate risks and identify optimal warehouse locations by shipping origin and destination trends, ultimately aiding in strategic decision-making for expansion plans.
  • Contract Negotiation — Gain visibility into potential outcomes when onboarding a new carrier in your multi-carrier strategy. Having visibility into service type performance and cost trends when negotiating carrier contracts is critical when monetizing parcel and ensuring program profitability.

Embracing data-driven technology and leveraging advanced modeling tools and analytics not only optimizes 3PL management and profitability but also empowers you to enhance operational efficiency and customer satisfaction. With these tools at your disposal, you are in control of your success.

2. Billing Management vs. Margin Management

In geometry, a square is a rectangle, but not all rectangles are squares. Similarly, margin management is part of billing management, but not all billing management technology has margin management applications and capabilities. 

Billing management is invoicing clients for services that involve accurately calculating and documenting the charges associated with various logistics services, such as warehousing, transportation, inventory management, and value-added services.

Parcel shipping offers 3PLs a new revenue stream or opportunity to grow by enabling them to cater to the growing demand for e-commerce deliveries. This service diversification allows 3PLs to capture a larger market share and enhance their profitability through last-mile delivery solutions. Efficiently managing the margin on parcel shipping allows for improved operational efficiencies and competitive pricing strategies, further boosting revenue potential. 

Margin management is a critical aspect of billing management. It involves marking up parcel transportation costs, typically through a markup of your cost, a discount off published parcel carrier rates, or a combination of the two based on customer agreements and margin opportunity. Without parcel margin management technology, this process is time-consuming and prone to errors. However, when managed effectively, 3PLs can maintain a healthy order-to-cash cycle, prevent extended billing periods, increase cash flow, and maximize margin.

With a technology partner who excels in both billing and margin management, you can streamline the entire order-to-cash cycle, improve cash flow, and optimize margins. By integrating billing and margin management capabilities into a single technology platform, 3PL companies can achieve greater efficiency, accuracy, and transparency in their financial operations, giving you the confidence that your operations are running smoothly.

Steve Congro, Senior Director of Systems at Saddle Creek Logistics Services, noted, “Enveyo enables us to provide a service that we hadn’t offered before. It allows us to streamline our billing process with clients, it allows them to have more transparency and visibility into the things that make up their bills, and it allows them to really see their data over a period of time and understand their shipping in a way that they never could before.”

3PLs that augment their WMS with Enveyo for carrier invoice analysis and variable margin application streamline this complex and error-prone process while optimizing customer costs and maximizing profitability. Integrating billing and margin management functionalities into a single technology platform allows for seamless data exchange and eliminates the need for manual data entry.

3. Real-Time Data Visibility and Control

3PL management involves more than just handling data; it requires real-time visibility and control over that information. This capability allows 3PL companies to monitor revenue, expenses, and profit margins across various customer accounts and service offerings. Such transparency is crucial for making proactive decisions and timely adjustments to pricing strategies and cost structures, which ultimately leads to optimized margins.

“We have a lot of experienced people on our team, so the ability to self-manage things like adding new customers, managing rates, and changing business rules was important to us. Many traditional freight audit companies require that they manage this on their side, so the Enveyo model was very intriguing to us,” stated Jeff McDermott, EVP of Transportation at GEODIS Americas.

Data autonomy is crucial for 3PLs to maintain agility and flexibility in their operations. With a comprehensive technology solution like Enveyo, 3PL companies gain the freedom to manage critical aspects of their business, such as adding new customers, managing rates, and adjusting business rules, without relying on external vendors. This level of autonomy empowers 3PLs to adapt quickly to changing market conditions, customer requirements, and regulatory mandates, enabling them to stay ahead of the competition and deliver exceptional service to their clients.

With this visibility and data ownership, 3PLs can make proactive decisions and timely adjustments to pricing strategies and cost structures to optimize margins and maximize profitability.

4. Continuously Monitor Performance

Continuous monitoring and performance measurement are essential for identifying areas of improvement and driving operational excellence. By tracking key performance indicators (KPIs) such as on-time delivery rates, order accuracy, and inventory turnover, 3PL providers can pinpoint inefficiencies and implement corrective actions to enhance profitability.

Continuous performance monitoring enables 3PLs to benchmark their performance against industry standards and best practices, allowing them to identify opportunities for improvement and implement strategic initiatives to drive operational efficiency and profitability.

3PL Management: Power Your Parcel Operations

Accelerating parcel profitability requires a strategic approach to 3PL management that encompasses technology adoption, data visibility, and performance monitoring. By implementing these key strategies and best practices, 3PL providers can position themselves for long-term success in today’s competitive marketplace.

Remember, success in 3PL management is not achieved overnight – it requires dedication, innovation, and a relentless focus on delivering value to customers. By staying agile, adapting to market changes, and continuously striving for excellence, 3PL providers can unlock new levels of profitability and establish themselves as industry leaders.

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Nate Endicott

Author Nate Endicott

Since 2001, Nate has been helping shippers and 3PLs automate, reduce costs, get better results, and outperform goals by leveraging data-driven logistics solutions. He spends his free time golfing and relaxing with his wife and four kids in Scottsdale, Arizona.

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