Data drives today’s supply chain. Benchmarking and measuring what matters is the only way to know if what you are doing is working. In addition, knowing your KPIs, or key performance indicators provides a roadmap to improving your shipping experience and supply chain network. Addressing problems without evidence of their existence often leads to confusion, irritation, and conflict. That’s where KPIs come into play. 

KPIs can measure a seemingly endless number of variables, and navigating a full scorecard can be intimidating for the uninitiated. A few high-level indicators can point to a carrier partner’s — and shipper’s — overall performance.

1. On-time, in-full (OTIF)

OTIF is a combined look at the on-time pickup/delivery rate and the “in-full” rate. Essentially, this metric shows how often a carrier picks up and drops off the correct freight amount within the agreed-upon time window.

2. Claims rate

The claims percentage for freight costs is calculated by dividing the value of damage claims by total freight costs. This indicator measures how much money a shipper loses due to lost or damaged freight.

3. Accessorial spend

Accessorial charges as a percentage of freight spend is calculated by dividing accessorial cost by total freight cost. This metric makes it easy to visualize the impact of accessorial spending on overall cost, making it possible to identify excess fees.

4. Tender acceptance and rejection

Load acceptance and rejection rates track how often carriers pick up or decline to pick up available freight. Measuring the percentage of deliveries a carrier accepts or rejects allows shippers to determine how frequently their carrier partners perform requested services.

5. Average dwell time

Average dwell time tracks a carrier’s time at a scheduled stop without moving. This is one of several metrics that allows shippers to assess their own performance, as excessive dwell time leads to lost carrier profit and unhappy drivers.

For shippers just getting started with KPIs — or companies that do not want to be bogged down by details — these five indicators are a great place to start. However, for shippers hoping to take a deeper dive, FLS Transport Services offers a KPI scorecard complete with 16 service performance indicators, five rate management indicators, and six key financial indicators.

The importance of understanding these KPIs is twofold: Shippers can choose better partners, and shippers can be better partners.

Choosing better partners

The majority of KPIs aim to help shippers understand how their carrier partners are meeting — or not meeting — service and performance expectations.

Low-performing carrier partners put shippers’ bottom lines and reputations at risk, often leading to damaged shipments, delays, or general overpayment for less-than-excellent service. 

When a company can pinpoint a low performer, it can either take corrective action or shift its freight to stronger partners. Both approaches offer shippers a way to save money and gain operational efficiencies. 

Shippers often do not notice or cannot prove carrier performance issues without access to KPIs. This lack of transparency and understanding leaves companies hemorrhaging money and providing subpar service to their own customers. “Companies that have clearly defined KPIs get better performance from their partners because they know the level of service the Customer is expecting and how they’ll be measured,” states Craig Swain, Senior Vice President of Sales at FLS Transport Services.

Being better partners

Specific indicators, like dwell time, allow shippers to better understand their performance as partners. Carriers work for shippers, but that doesn’t mean they will accept loads from — and provide equivalent service to — everyone. “Having internal KPIs that measure your performance is crucial to helping you understand if you’re being a good partner for your suppliers,” Swain adds.

The transportation industry is a tight-knit group — and drivers talk. When a shipper gains a reputation for being unfriendly to drivers and carriers, it will experience failing access to capacity and climbing rates due to drivers’ lack of desire to work with it.

Carriers are most likely to reject loads when the market shifts toward tighter capacity and higher rates, causing additional headaches for shippers already struggling. Shippers must embrace best practices and build strong relationships with carriers regardless of market conditions.

Shippers can work toward becoming shippers of choice by analyzing their performance and making changes where necessary. This can take the form of reducing dwell time, respecting two-hour load times, staging products at the door, or even simply offering access to amenities like clean restrooms.

The post Top 5 KPIs to lower shipping costs, boost profitability appeared first on FreightWaves.

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