Key performance indicators (KPIs) are an effective way to measure the performance of your transportation operations, including the performance of your carriers. With transport costs having a direct impact on the bottom line of the business, KPIs are of the utmost importance for managing cost. Plus, shippers can leverage KPIs to strengthen the relationship with their carriers while harnessing greater control over transportation operations and freight spend.
To start, you will need to identify the metrics that are most important for your logistics operation; specifically, the ones that will help you meet your business goals. If your goals are to reduce costs, then you will need to choose KPIs that measure cost-related activities.
Measurements must be easy to understand and well defined. Measurements used in KPIs are not meant to finger point; instead they are designed to encourage appropriate behavior, so should reward productive activities. A consistent open conversation between carriers and shippers can eliminate any surprises.
There are an unlimited number of KPIs to measure your logistics operation and each company should have unique measurements to reach their corporate objectives. Some of these include:
- · On-time arrivals of pickups and deliveries
- · Average loading and unloading times
- · Percentage of shipments that equal the bill of materials
- · Percentage of shipments that arrive in good condition
- · Average transportation cost per miles/volume/weight
- · Average number of deliveries made per driver/truck/route
- · Percentage of shipments using LTL /TL/Parcel
- · Load acceptance rate
- · Carrier rate benchmarking by lane
- · Claims percentage for freight costs
- · Truck turnaround time
- · Planned time in transit vs. actual
- · Length of time between inbound load acceptance and scheduling a pickup appointment
Most importantly, carriers and shippers need to review the numbers, identify opportunities and take corrective actions for any issues that arise. KPIs identify a problem that must be traced back to its root cause to understand how to solve it. The problem could be with the carrier; it could be with the shipper, so the information must be reviewed carefully and analyzed extensively.
Working together, shippers and carriers can collaborate to improve their relationship by using the wide variety of measurements. By leveraging Kuebix TMS’s actionable reports, dashboards and carrier scorecards, shippers gain easy access to their KPIs and can begin this conversation with their partners.