Stop Wasting Money: How to Slash 3PL Invoice Errors in 5 Steps

Stop Wasting Money: How to Slash 3PL Invoice Errors in 5 Steps

Sound familiar? Are you tired of sifting through 3PL (Third-Party Logistics) invoices, only to find unexpected charges and head-scratching discrepancies? You're not alone. Many e-commerce businesses bleed money due to 3PL invoice errors. One frustrated Redditor put it perfectly: "Every month I find the SAME $300 ‘mistake’ on our 3PL invoice. They’re still surprised when I catch it." Source: Reddit

This guide is for you, the eCommerce manager. I'll walk you through a step-by-step process to identify, prevent, and fix common 3PL invoice errors. Ultimately, you'll save your business both money and time.

What You'll Achieve

• Identify common 3PL invoice errors.
• Spot discrepancies in your invoices.
• Implement best practices to prevent errors.
• Dispute and resolve incorrect charges.
• Use tools and strategies for efficient invoice management.

What You'll Need

Before you start, gather these items:

• Your 3PL invoices (digital or physical).
• Order management system (OMS) data.
• Inventory management system (IMS) data.
• A spreadsheet program (Google Sheets or Microsoft Excel).
• Your 3PL contract.

Step 1: Know Your 3PL Contract Inside and Out

Understanding your contract is the first line of defense against invoice errors. It outlines the services, pricing, and terms. Focus on these key areas:

• Storage Fees: Understand how they're calculated (per pallet, cubic foot, or month). Does the invoice match your inventory's actual space usage?
• Picking and Packing Fees: Review the fees for picking and packing orders. Are they in line with your order volume and agreed-upon rates?
• Shipping Fees: Scrutinize shipping rates, including any surcharges (fuel, residential delivery). Do the methods and destinations align with your orders?
• Returns Processing Fees: If your 3PL handles returns, review the fees. Are they accurate based on the number of returns and services?

Tip: Keep a readily accessible copy of your contract for easy reference during invoice review. Also, review it regularly for any updates.

Step 2: Match Invoices with Order Data – Carefully

Cross-referencing the invoice with your order data is crucial for spotting errors. Here's how:

1. Extract Data: Export order data from your OMS and IMS. Include order numbers, item quantities, shipping addresses, and other key details.
2. Match Orders: Match each line item on the 3PL invoice with corresponding orders in your OMS/IMS. This clarifies which orders are being billed and for what.
3. Verify Quantities: Compare item quantities on the invoice with your order data. Look for discrepancies in units stored, picked, packed, or shipped.
4. Check Shipping Details: Ensure the shipping addresses, methods, and package weights on the invoice match your order data. Make sure the correct rates are applied.

Example: Incorrect weight calculations are a common error. If your 3PL uses dimensional weight, confirm the dimensions used are accurate.

Step 3: Scrutinize Storage and Inventory Data – Don't Miss a Thing

Storage fees are often where errors hide. A detailed review of your inventory data is essential:

1. Inventory Levels: Compare the invoice's inventory levels with your actual inventory. This can reveal discrepancies in the number of units stored.
2. Storage Duration: Verify how long each item was stored. The invoice should accurately reflect the storage time.
3. SKU Accuracy: Double-check that all SKUs (Stock Keeping Units) on the invoice match your inventory records. Wrong SKUs lead to incorrect charges.

Warning: Be extra vigilant about inventory turnover. Slow-moving inventory leads to higher storage costs. Is your 3PL managing your inventory effectively?

Step 4: Analyze Shipping and Handling Charges – Get it Right

Shipping and handling fees are complex and prone to errors. A thorough analysis is a must:

• Shipping Rates: Verify that the rates on the invoice match your contract.
• Accessorial Fees: Scrutinize any accessorial fees (residential delivery, liftgate service). Are they justified and correctly applied?
• Package Weight: Confirm the package weights on the invoice. Weight discrepancies can lead to overcharges.
• Dimensional Weight: If your 3PL uses dimensional weight, ensure the dimensions used are accurate. Incorrect dimensions inflate shipping costs.

Tip: Regularly audit your shipping practices. Are you using the most cost-effective methods? Are you optimizing your packaging?

Step 5: Document and Dispute Errors – Act Fast

Once you find errors, document them and dispute them promptly. Here's how:

1. Document the Discrepancy: Clearly document each error, including the invoice number, line item, the error amount, and supporting documentation (order data, contract terms).
2. Gather Supporting Documentation: Collect all supporting documentation: order confirmations, shipping labels, packing slips, and your 3PL contract.
3. Communicate with Your 3PL: Contact your 3PL's billing department to dispute the errors. Follow the dispute process in your contract.
4. Track Disputes: Keep a record of all disputes: date, error details, amount, and resolution.

Pro Tip: Set up a system for tracking and managing disputes. This helps you resolve errors quickly and get any refunds due.

Troubleshooting

• Inconsistent Data: If your OMS, IMS, and 3PL invoices don't match, find the source of the discrepancy and fix it. This might mean updating your inventory records or clarifying order details.
• Contract Ambiguity: If your contract is unclear, ask your 3PL for clarification. Document everything in writing.
• Recurring Errors: If you see the same errors repeatedly, investigate the root cause. This might require process improvements, training, or a new 3PL.

Next Steps

• Automate Invoice Review: Explore tools to automate the process. This saves time and reduces errors.
• Negotiate Better Rates: Review your contract annually and try to get better rates. Competition can help.
• Consider a 3PL Audit: Conduct a comprehensive audit of your 3PL's performance to identify areas for improvement.

Comparison Table: Common 3PL Invoice Errors

Actionable Takeaways

• Regularly Review Your Contract: Understand your 3PL agreement. This is your first line of defense against errors.
• Implement a Cross-Referencing System: Compare invoices with order and inventory data. This helps you catch discrepancies early.
• Document Everything: Keep detailed records of all disputes and resolutions. This creates a clear audit trail.
• Automate Where Possible: Explore tools and software to streamline invoice review. Automation saves time and reduces errors.
• Negotiate & Audit: Regularly review your 3PL's performance, negotiate terms and rates, and consider a third-party audit to ensure accuracy and efficiency.

By following these steps, eCommerce managers can effectively reduce 3PL invoice errors, save money, and improve their overall fulfillment operations. Remember, as one Reddit user pointed out, even a small mistake can cost your business: "Every month I find the SAME $300 ‘mistake’ on our 3PL invoice." Source: Reddit

Effective invoice management is vital for maintaining profitability and operational efficiency in eCommerce. Take control of your 3PL invoices today, and start saving.