Throughout this series of blogs, the focus has been on how Best in Class shippers ensure their freight is delivered at the right place, at the right time and intact. The beauty of freight management is that so much about transportation is measurable. Over the years we have observed how Best in Class shippers pull away from mediocre performers and industry laggards in the area of measuring performance. They tend to have better data and more robust and relevant tools and reports. These are some of the Key Performance Indicators (KPIs) and Reports that they utilize.
Macro Financial Indicators
The first set of financial ratios helps identify trends in supply chain costs and their impact on the business over time. Key ratios include:
Supply chain costs as a % of Revenue
Freight transportation expenses as a % of Revenue
% Recovery of freight costs in Customer Purchases
Negative trends may signal a need to conduct an RFQ, to address poor business practices and/or changes in market conditions.
Freight Density Measurements
Best in Class shippers know the precise density of their freight. They know how much cubic space their pallets take up on a trailer. These measurements help them maximize the cube utilization on carrier trailers and containers. They also measure Shipped Weight and Billed Weight. They carefully monitor the level of cubing being done by their carriers so they can address and mitigate these extra costs.
Mode Utilization
It is very important for shippers to monitor their mode utilization over time. This includes gathering statistics on the percentage of freight moving via:
Small Parcel – by Service (e.g. same day, next day, next day by noon, etc.)
Hot shot or Expedited Service
LTL
Truckload – over the road
Truckload – Intermodal
Carload
Ocean
Air Freight
Changes in these percentages over time can signal production, inventory or carrier management problems. Shippers should also be vigilant about the percent of their freight moving via asset-based carriers versus load brokers. Freight brokers take a carrier’s cost and add a markup to it. In other words, shippers are paying a double markup. Increases in the percentage of freight moving with a broker may highlight market capacity issues, an inadequate number of core carriers in the routing guide or laziness on the part of the shipper in sourcing additional asset-based truckers.
Service/Carrier Performance
There are various elements of service that need to be measured. They include:
On-time pickups
On-time deliveries
Overages, shortages and damages
Negative trends may suggest truck capacity or driver recruiting issues and/or poor business practices.
Freight Rate Management
There is a need to monitor changes in freight rates over time. This set of measurements examines:
Carrier Linehaul Rates by Lane
Fuel surcharges
Other Accessorial Charges
Changes over time may highlight fluctuations in market conditions, carrier cost increases, carrier lane balance issues and other factors. Best in Class shippers know their numbers and track them continuously to ensure they optimize the value of their expenditures on freight transportation.
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