Third-party logistics (3PL) involves outsourcing your logistics and supply chain management to expert providers. It’s a crucial step if you’re looking to optimize your supply chain and maximize efficiency.
At the heart of these partnerships is 3PL billing and invoicing. It ensures:
- Financial accuracy.
- Operational transparency.
- Trust between you and your providers.
Keep reading to learn all about the billing process, from its costs to best practices.
Let’s dive in!
How does the 3PL billing process work?
The 3PL billing process consists of three major steps.
1. Contract agreement: First, you and your 3PL provider sign a contract. This agreement outlines what services they’ll provide, how much everything will cost, and accepted payment methods.
2. Gather data: Next, your 3PL provider collects data relevant to their services. This includes transportation details, materials reports, and more.
3. Issue invoice: Finally, the provider takes that service data and generates an invoice for you. These invoices outline key job details, like the costs and services rendered. Typically, 3PL invoices are issued in monthly billing cycles.
An effective 3PL billing process ensures transparency, so you know exactly what you’re paying for. Better yet, it fosters trust between you and your 3PL provider.
Types of charges in 3PL systems
Some associated 3PL costs, like management fees, are fixed and don’t change. Others vary depending on how much work your provider does or how many goods they handle.
As demonstrated by our hands-on approach, understanding these costs is essential for effective logistics management. Here are the types of charges in 3PL systems.
Receiving and handling
When shipments arrive at a 3PL provider’s facility, receiving and handling charges apply. These cover the costs of:
- Unloading goods from delivery vehicles.
- Inspecting shipments for damage.
- Preparing goods for storage or further processing.
Storage and warehousing
Warehousing and storage fees are based on the amount of space your inventory occupies in the 3PL provider’s facility. These fees are calculated by the:
- Pallet size.
- Square or cubic footage.
- Inventory quantity.
Charges also depend on the type of goods stored. For example, there are special rates for items that require controlled temperatures or extra security.
Outbound fees
When arranging shipments for the end customer or retailer, outbound fees come into play. These fees cover:
- Picking items from inventory.
- Packing goods securely for transit.
- Preparing shipments for dispatch.
Outbound fees depend on the complexity and labor intensity of your order fulfillment process.
Transportation and shipping
Transportation and shipping charges cover the cost of moving goods from the 3PL’s warehouse to their final destination. This includes freight, fuel, and additional services involved in the delivery process.
These rates are influenced by the:
- Mode of transportation.
- Distance.
- Weight and size of the shipment.
- Expedited shipping needs.
Returns
These charges apply when handling returned products. Return charges cover the cost of:
- Receiving returns.
- Inspecting the items.
- Restocking usable products.
- Disposing of defective items.
Value-added services
Value-added service fees may also apply, which include:
- Custom packaging.
- Product assembly.
- Quality checks.
These services go beyond basic logistics and offer tailored solutions to meet your needs.
By understanding these various charges, you ensure better partnerships with your third-party logistics providers.
Top 3PL billing process challenges
When navigating billing, you may encounter these common challenges:
- Complex billing structures: Your 3PL provider offers a variety of services — each with its own pricing model. This makes it difficult to verify accurate billing charges and may result in costs you didn’t budget for.
- Billing errors: Human-caused 3PL discrepancies, like incorrect inventory counts and storage times, lead to inaccurate billing. These errors cause disputes and require lengthy reconciliation efforts.
- Lack of visibility: It’s hard to get detailed information about the specific activities and costs of your 3PL services. This makes it difficult to forecast expenses and identify areas for cost savings.
- Less control: Outsourcing work means less direct control over how your business manages and executes logistical tasks.
Preventing these challenges requires:
- Thorough budgets and market research.
- Clear, detailed billing practices.
- Accurate and automated tracking systems.
- Effective communication between you and your 3PL provider.
How billing software helps
Overcoming billing obstacles is possible with 3PL billing automation.
Billing software automates routine billing tasks and lets you allocate resources more efficiently. What’s more, it saves you time and minimizes the risk of errors.
3PL billing software also integrates with other systems, including your:
- Warehouse management system (WMS).
- Inventory management system (IMS).
- Transportation management system (TMS).
- Accounting software.
- Supplementary business tools.
After putting it to the test, this software:
- Scales with your financial operations.
- Provides real-time access to service data.
- Ensures optimal supply chain performance.
- Simplifies time-consuming, manual processes.
- Shortens the billing cycle and improves billing accuracy.
Costs associated with implementing 3PL billing software
Billing software has numerous benefits, but there are also costs you need to take into account. Our investigation demonstrated that these costs include:
- One-time or recurring subscription fees.
- Integration and setup charges.
- Customization costs.
- Training costs.
- Maintenance and support fees.
It’s important to consider these costs before you invest in billing software. The best way to gauge a platform’s value is to weigh its expenses against the benefits for your business.
What is 3PL software?
3PL software is a tool that helps you manage your logistics and supply chain operations through third-party services.
It optimizes a wide range of processes, such as:
- Inventory management.
- Warehousing.
- Shipping.
- Tracking of goods.
For example, let’s say you’re a furniture manufacturer. Instead of handling the logistics yourself, you use a 3PL software provider. By using 3PL software, you can easily:
- Monitor storage and inventory levels.
- Manage shipments to retailers.
- Generate accurate invoices.
Using designated software to handle your 3PL partnership simplifies your logistics and ensures cost-effective delivery.
Recap: 3PL invoice and billing process best practices
Understanding the 3PL billing and invoicing process is crucial for businesses using third-party logistics services. When you automate this process with 3PL software, you enhance your operational transparency and improve financial accuracy.
For the best experience with your 3PL provider, follow these best practices:
- Closely monitor your billing schedule and frequency.
- Verify service charges for billing accuracy.
- Use technology for better transparency and valuable insights.
By leveraging the right tools, you’re on track to optimizing your supply chain performance in no time.
3PL invoice FAQs
What is 3PL?
3PL, or third-party logistics, is when you outsource logistics and distribution to a third-party business. Businesses use 3PL service providers to handle their:
- Warehousing.
- Transportation.
- Packing.
- Inventory management.
Discover how to perfect your manufacturing automation in six steps!
Image credit: Tom Fisk via Pexels
