Third party logistics providers (or 3PLs) have quite a few challenges when it comes to providing warehousing and inventory management services to their customers. Their business model can be especially complex. Businesses that own their own inventory and operate their own warehouse space have relative predictability in the type of products they manage, standards, and processes. 3PLs on the other hand have a little more of a juggling act to perform. Consider the fact that they manage multiple customers, a variety of different items, along with varying management requirements and you can begin to see the mountain of challenges that can present themselves.
For example, with a single warehouse a 3PL will need to plan for various storage capabilities given the products they manage. As well, they need to have the proper packaging materials on hand (at times customer specific) and put in place customer specific processes; like inspection and handling protocols.
Ultimately businesses hire 3PLs for a variety of reasons. These can be because they don’t necessarily want the hassle of managing inventory themselves, cost efficiency, lack of specialization, distribution and market reach, amongst other considerations. 3PLs thus generate revenue from the service related functions of managing the inventory of their customers. So how can 3PLs make sure that they maximizing revenue through proper billing?
A warehouse management system (WMS) can go a long way in helping to make sure your warehouse operations are tracking and billing your customers accurately. How so? There are a few key areas that are associated to a 3PL revenue stream. They are the storage times, storage type, and service related tasks (picking, packing, processing, etc.). These are related to the charge type and the specific rate for these charges. A WMS can help to track these charges in real-time as they are applied when specific processes and actions take place. For example, as inventory is received into the warehouse the WMS will automatically stamp the date and time it came into the warehouse. This can then be used to track the amount of time each specific item is stored by the warehouse and used for storage billing.
Furthermore, your charges specific to handling tasks can also be integrated into your processes. Say for example one type of product requires a specific type of packaging for shipping. By defining the packaging charge and associating it to the product type in advance you can automate the charge tracking as the fulfilment takes place. Every time the item is picked for a shipment the WMS will then automatically add the charge for the product since the special packaging requirements are already known. Rather than manually tracking and tabulating these charges, which opens the billing to errors, the charges are accurately accrued and billed accordingly.
As we can see from the above storage and packaging requirements examples this same strategy can be applied to all charges that the warehouse uses for billing its customers. By automating charge application and tracking as part of a warehouse’s processes accuracy is increased and time is saved. But how are these charges defined and what if some charges are customer specific?
A WMS, like Akatia’s WAM solution, with a price book feature and functionality can help. A price book is where all the charges associated to the warehouse can be defined. In WAM’s case these price books can be used universally or can be customer specific. These charges within the price books act as the point of reference and can then be related to either the inventory, storage type, or customer in the cases where they have specific requirements for the warehouse to fulfill.
Of course, having the charges well defined and integrated into your warehouse processes is all well and good. But how to we gather those charges and ultimately bill the customer? This is where the financial component of the WMS, just like the one the WAM solution has, comes into play. As mentioned, the WMS can accrue and track the charges. The warehouse can then set the appropriate billing cycle and once the predefined date, or period (weekly, monthly, quarterly, etc.) arrives the WMS will gather and batch all the billing lines of charges that accrued during the specific period for each customer. In WAM’s case the invoice can then be generated directly from the system using these billing lines, or else they can be sent to the financial and accounting software of the warehouse and then invoiced to the customer. This can be done manually of course but can also be automated as part of a business process flow. In this way billing accurately and on time becomes relatively seamless and can be adjusted according to the contractual agreements the warehouse has with each of their customers.
By implementing a WMS that has billing and financial functionality we've seen how a warehouse can effectively track and bill their customers accurately. WMS technology that supports warehouse billing will also give clear traceability of the charges accrued thus making it easier to resolve issues surrounding billing, as well as ensuring that all charges are captured and thus no loss of revenue occurs. Furthermore, by automating the billing processes a warehouse can eliminate much of the tedious tasks associated to billing and help both warehouse staff and accounting teams focus on more critical tasks.
3PLs need to maximize revenue while at the same time delighting their customers. By introducing technology based strategies like a WMS and process automation a warehouse can optimize and transform in such a way where both the business goals and customers will be satisfied.
If you’re looking to transform your warehouse and inventory management, click the link below to get in contact. We’d be happy to speak with you.