The Scary Truth Behind 3PL Billing for Value Added Services
By Upp Software
All Too Often Value Added Services Mean Lost Revenue for Third-Party Logistics
If you ask almost any third-party logistics (3PL) executive what their biggest fear is, it will most likely involve “lost revenue.” Leaving money on the table is one of the most significant issues 3PL organizations face today.
In a cut-throat industry where every new customer is a hard-fought battle, many 3PL providers are unintentionally providing services free of charge.
The Problem With Value Added Services
Value Added Services (VAS) are any services that are unique to customer needs and provided by 3PLs from the warehouse floor. This may include a wide assortment of services like custom labeling, packaging, repackaging, and kitting.
To win new business and retain existing clients, organizations are increasingly taking on additional unique requirements, creating an ever more complex warehouse environment for staff to perform their tasks outside of day-to-day functions. This complexity slows down production and opens the door to fulfillment errors.
More importantly, special activities like VAS often go untracked and therefore unbilled.
Why VAS Billing is Challenging
Logistics consultants regularly stress “repeatability” as the goal in the creation of warehouse processes because it allows operations to be carried out uninterrupted. Picking, for instance, is both straightforward and highly repeatable once an associate is properly trained. The faster you can perform fulfillment, the less money it takes to get an order out the door.
Value Added Services, on the other hand, are a deviation from the normal flow of operations and therefore cost more money. VAS require a non-standard billing rate to be captured for all the services performed and attributed to a client.
The problem arises when these services are not charged at a higher rate or, worse, not billed at all. To assign such charges dynamically on the warehouse floor, 3PLs too often use manual step-by-step processes, which are prone to being done incorrectly, if not missed altogether, and also difficult to invoice after the services are performed.
Making VAS Billing Repeatable
The key to correctly associating Value Added Services to a specific client is to ensure the steps within the process are driven by a Warehouse Management System (WMS). Since efficiency is about repeatability, staff should be empowered to perform VAS uninterrupted.
With a WMS, warehouse staff on the floor can use hand-held mobile devices to determine what VAS tasks to perform, follow what the device is telling them to do, and confirm what they actually did. Real-time data is then automatically associated with the client, and the charges sent directly to a Billing module so the services provided can be invoiced.
Let’s take gift wrapping as an example. With system-driven VAS, a worker on the warehouse floor can simply scan a code for wrapping, telling the WMS an item was gift wrapped. That information is then associated with a specific order and, with a Billing module, the system can then automatically bill the customer for that service.
How a Cloud WMS Improves VAS Billing
Efficiency is an essential component to 3PL success. This means not just speed in order fulfillment, but also the time it takes to get a new client up and running. Large on-premise systems need months of preparation and customization to perform VAS Billing.
A cloud WMS, however, makes it very easy to quickly onboard new facilities and clients and begin tracking the unique billing requirements of each customer. This newfound flexibility allows organizations to set up a new location in any environment with Internet access and offers the agility to get it running, and billing, that much faster.
As margins in the 3PL industry shrink and more is promised to ever demanding customers, the time is now to stop doing more for less and recoup those dollars lost on VAS. While the money is certainly paramount, 3PL customers also benefit from the continuous visibility and traceability a cloud WMS provides. Accordingly, such technology provides a selling point for 3PL organizations to bring on more clients.
To learn how a cloud Warehouse Management System, like irms|360 Enterprise, can manage all of your Value Added Services Billing requirements and help increase your client base, schedule a demo or register for an upcoming product tour today.