With the increased competition in the industry, third-party logistics providers should be setting 3PL sales KPIs (key performing indicators) to track and improve their sales department performance. However, many 3PLs struggle to determine which metrics are essential to measure and how to interpret them.
This article will provide you with twelve essential 3PL sales KPIs that you should measure to ensure effective sales performance. But first, let's learn what 3PL sales KPIs are and their importance.
3PL sales KPIs are metrics used to measure the performance of the sales organizations and each team member tangibly. It helps to understand if sales processes and team members are effective and/or if they are on/off track to meet their sales goals. It helps them to determine what to maintain and where to improve. These KPIs help 3PLs make intelligent business decisions about their sales efforts.
KPIs in 3PL sales are essential since these can provide measurable and objective standards to track sales progress. Failure to track these KPIs puts 3PLs in a blind spot. They can't guide their sales team in the right direction, predict their future sales, and determine if their actions convert into results.
Therefore, regularly monitoring 3PL sales KPIs is one of the most practical ways to ensure businesses make the right decisions. Now, let's look at the 12 essential 3PL sales KPIs, starting with the basics.
Revenue helps you determine how much money you have generated in a particular period. It enables you to measure business’ revenue growth and revenue generated by a salesperson.
This KPI measures the total gross profit you earned after deducting direct cost associated with generating revenues (cost of goods sold).
Net profit is the profit you earn after subtracting all costs of goods sold and expenses from revenue. This includes COGS and operating expenses, such as supplies, marketing, travel expenses, etc. Net profit is often known as the bottom line.
The deals win ratio is the ratio of won deals compared to the total number of deals created during a specific period. It is the success rate in converting sales opportunities into won opportunities (the percentage of deals you win).
The average deal size reflects the average dollar amount of all the deals in the sales pipeline (open and closed). It is calculated by averaging the revenue of deals in the pipeline.
The average closing time is the average time it takes to close deals. This is obtained by measuring the time between when a deal is created until closed (won or lost). It is an average of all the deals’ closing times.
The sales activity index is the aggregation of your sales team's core sales activities. There are three main types of sales activities:
This allows you to associate sales effort with sales output. In other words, is your sales organization working harder or smarter?
If you’re looking to track the above-mentioned basics sales KPIs, we have a CRM specifically engineered for 3PLs that can help you measure and visualize these KPIs.
Lanes won is how many lanes customers have accepted out of the total number of lanes requested. A lane refers to shipments being transported from one point to another, for example, from Miami to Chicago. Lanes won are usually broken down by mode of transportation, such as full truckload (FTL), less than truckload (LTL), intermodal (IM), full container load (FCL), less than container load (LCL), and air.
This 3PL sales KPI can help you understand the profit margin you gain from each transportation mode. Getting a profit margin breakdown is critical to understanding which lane type or transportation mode delivers the most profit. This is so you can pay more attention to the most profitable transportation mode and increase your company’s profit margin.
The lanes win ratio is a 3PL sales KPI that helps you assess how many lanes you are winning compared to the lost ones at a lane level. Tracking this 3PL sales KPI will help you understand what the lanes that you tend to win or lose the most are.
Shipment frequency is a 3PL sales KPI that allows you to track the shipment count of a customer in 30-day increments (30, 60, 90 days). Knowing these numbers would allow you to understand the shipment trend of your clients and see if they are consistently tendering shipments with you or taking their business somewhere else.
Customer rankings are essential 3PL sales KPIs that allow you to rank your customers through different criteria. Ranking your customers helps determine who to prioritize to ensure their business stays with you. You can rank customers in the following ways:
Ranking customers by revenue is a simple 3PL sales KPI that allows you to rank all your customers according to revenue generated. This KPI is critical to understanding the most crucial customer from a revenue generation perspective.
Customer profit rank is one of the most important 3PL sales KPIs you want to monitor because it has a direct impact on the bottom line of the business. It allows you to rank your customers according to the profit generated. This ranking differs from revenue rank because the highest revenue-generating customer may or may not be the highest profit generator.
Gross margin rank is another essential 3PL sales KPI that enables you to identify the customers that generate the highest gross profit for your company. This is another important KPI because it allows you to understand the profitability of a customer after direct costs (COGS) have been deducted and before expenses.
By tracking the shipment count rank 3PL sales KPI, you can identify the customer that ships the most with you, regardless of revenue generated or profits.
The best customer ranking is a mix of all these ranking types. Customers that rank high among these four KPIs should be given the most importance.
3PL sales KPIs are essential to maintain and improve your business’ health and sales team performance. Tracking these KPIs can help you make informed and short- and long-term financial decisions and/or investments to continue growing your business.
If you'd like to track the above-mentioned KPIs effectively, we have a CRM truly built for 3PLs that can measure and visualize these KPIs.
Thank you for reading our article. For more educational content, you can explore all our blogs here. You can follow us on LinkedIn, Twitter, or Facebook to get supply chain industry trends and efficiency tips. If you have other inquiries or suggestions, do not hesitate to contact us through this link.