There’s a range of different ways you can look at a 3PL audit. We’re going to look at the different elements that may make up part of a 3PL audit so you can get an idea of exactly what one entails, and whether it’s a good idea for you to be considering one for your company.
Operational Performance Assessment
A 3PL audit is a great process to undertake that looks at the multiple operational and strategic aspects of the logistics company you’re using. An audit usually starts with an operational assessment where auditors look at key metrics, such as order accuracy, pick rates and on time shipments against service level agreements. This operational review goes into inventory management practices, everything from cycle counting to shrinkage and stock rotation.
Technology Infrastructure
The technology infrastructure section is another key part of the audit process. This is where auditors assess the 3PL’s Warehouse Management System (WMS), its integration with the enterprise systems, and the robustness of the data security used within your company.
The WMS you use within your warehouse or distribution centre is extremely important, especially as the warehouse evolves into something more advanced – you should give particular attention to the accuracy and completeness of the reporting mechanisms. as these give visibility into daily operations.
Quality Management Systems
Quality management includes documentation of Standard Operating Procedures, looking at your quality control checkpoints and staff training programs you’re using.
This part of the audit should verify that all processes are compliant with industry regulations and have necessary certifications, and it should also look at how well these quality systems are embedded in daily operations and how effective they are in preventing errors and maintaining service standards.
Financial Health and Stability
Financial health and stability assessment can give you a deeper insight into the long term viability of the 3PL partnership. This involves reviewing financial statements, insurance coverage and liability protection and transparency of pricing structures. It also involves understanding historical cost trends, and future pricing projections that will help identify potential risks and opportunities in the relationship.
Risk Management and Compliance
An often overlooked part of your audit should include risk management and compliance. This is the final part of the audit scope, and it looks at business continuity plans, physical and data security and environmental compliance. This includes workplace safety and labor practices to ensure regulatory compliance and operational resilience.
Your 3PL Audit Process
So, now we know the components of a 3PL audit. But what kind of process does it follow? Well, the audit process generally follows a structured approach, which typically starts with pre-audit planning, where your objectives are defined and documentation requirements are set. This is then followed by on-site assessment, where facility inspections, process observations and stakeholder interviews are conducted.
Next, the data analysis phase compares performance metrics to industry benchmarks and then identifies operational inefficiencies. And finally, the reporting phase documents findings and provides recommendations for improvement with implementation timelines and follow up audit schedules.
A good audit should give you a full view of the 3PL’s capabilities and performance, and then identify areas to improve and mitigate your risk. Regular audits will keep service quality and improve the logistics relationship – feel free to contact us if you want to consult.
