Managing 3rd Party Logistics (3PL) Service Providers – Key Success Factor # 3 – Establish well defined performance measures

Establishing well defined performance measures will have two major benefits.

1. It will ensure that there is no ambiguity as to what the service level expectations are.
2. It will ensure that the service provider knows exactly how the performance measure is determined and how it is to be calculated.

As an example DIFOT (Delivered In Full On Time) performance, when calculated on order line fill rate basis can paint a very different picture than DIFOT performance calculated on the complete order fill rate basis.

Nine out of ten lines delivered in full and on time will result in a DIFOT performance of 90% when calculated on a line item basis.

When calculated on the complete order basis the DIFOT performance is 0%.