3PL Profit & Loss Computations & Executive Analysis - Overview of a Detailed Design Paper  Order Now - PDF Overview 3PL Profit & Loss Calculations By having the detailed profit & loss data on every client, the 3PL is able to renegotiate rates with those unprofitable or marginal clients. Unfortunately - analysts at each 3PL manipulate data in a lengthy monthly manual process to provide management this client-by-client profitability analysis. The analysis is outdated immediately and management has a limited “once a month” view. The following information shows a solid design in calculating the clients P&L that provides real-time analysis available at any moment. Out of 200 WMS software packages, there are approximately 40 that produce only the billing charges (ABC Pricing). For every warehouse task, accessorial charge, and storage charge, the client is billed a charge for that service. ABC costing is needed to be calculated and stored. By adding an estimated cost field to each billable task, storage, and accessorial charge billed to a client, one is able to have both ABC costing and ABC pricing. Once the estimated cost field is added and calculated – the profitability of each task, storage, and accessorial charge can be computed by subtracting the price charged minus the estimated cost to determine a profit or loss amount. For example, the following table shows the detailed level with information: Date Client Part # UOM Task Elapsed Time Charge Est Cost Profit / Loss May 20 Classic PickleDill51 Plt RF Receive 01:55 10.85 4.55 6.40 May 20 Classic PickleDill51 Plt Storage 1 Month 15.00 9.25 5.75 May 20 Classic PickleKos4 Plt Shrink Wrap 02:36 1.25 3.85 -2.60 Table 1 - Detailed Level of Charges, Costs, and Resulting Profit or Loss* In Table 1, the first line item is the task to receive and putaway a pallet (plt) of Dill Classic pickles part number PickleDill51. Based on RF start and end times it took 1 minute 55 seconds. Based on contracted rates with this client, the billable charge is $10.85. Based upon actual time spent on this task, for this user’s hour rate, the estimated cost was $4.55. Net profit is $6.40. But the last line – shows the shrink wrapping has a loss of $2.60 on this pallet. How was the “Estimated Cost” computed? Cost calculation of the RF task is simple. Every worker performing RF tasks signs on with a unique userid that identifies that employee and the exact equipment that the user is utilizing. In the user or employee table, we have the employee’s hourly pay rate with a percentage for benefits. Est. cost = (Employee Hourly Rate with Benefits) times Actual RF Task Time Cost calculations for a complex RF task, accessorial, & storage computations are explained in the full report. Initial Executive View for Selected YTD, Quarter, Month or MTD* Client Revenue Cost Profit Inbound Pallets Inbound Volume ...... Classic 3101502 2888155 213347 16345 ... ... Bitgo 2403363 1765464 637889 8245 ... ... Zebra 2198777 1564232 634545 7900 ... ... Metro 1508500 1278500 230000 7423 ... ... Bamco 1175666 1105666 70000 8215 ... ... ... ... ... ... ... ... ... What many 3PL executives need is a client inquiry, where they can graphically view which clients are profitable, marginal, or a losing proposition. The first level is shown above. Our yellow highlighted client called Classic is marginal and the executive drills down multiple times to determine exactly the root cause. This drill-down inquiry has four levels with reporting at each level – to give ammunition (detailed data) for renegotiation of rates with the client. All four levels of the client inquiry are explained & illustrated in the full report. Conclusion The profitability of each client can be established. It is critical that these warehouse operations clearly monitor & measure their profitability by client, product group, and task type. It takes regular discipline and a software tool as described in this design paper. Order the FULL DETAILED REPORT called “3PL Profit & Loss Calculations”. This in-depth paper covers 3PL billing, 3PL costing calculations, database table layout, profit & loss analysis, and executive profitability drill-down analysis by customer, group, & product. It also shows the short ROI that the 3PL can expect from automating this labor intensive process. To purchase a review copy of this design paper – See http://www.idii.com/orderdigital.htm If you wish to implement this design into a software solution – contact IDII for additional licensing requirements regarding IDII’s intellectual property. Order Now - PDF Overview About the Author Philip Obal is President of IDII, an Independent Software Research Consulting Group, with over 25 years experience in software design for the supply chain. He frequently does research & management consulting for TMS & WMS software. He is the author of research reports, technical books, and RFP's that are available from Amazon and IDII.com.

 

*All data provided is sample data for sample companies.