By: Russell Zuppo, VP, Strategic Account Management, Transplace
Data-driven decision making is essential to stay ahead in this volatile environment for shippers. Capacity constraints and cost inflation are driving supply chain and transportation leaders to seek out actionable data to create a competitive advantage in their operations and finances. The right metrics can help shippers paint a realistic picture of their network, adjust strategies and even prepare for unpredictable events.
Here are 12 key performance indicators (KPIs) that supply chain leaders are leveraging this year.
- Out of Alignment Shipping:
This KPI is the percent or related cost associated with shipments that are sourced from alternative shipping locations.
Why it’s important:
Shipper’s costs are planned and budgeted based on standard shipping patterns and sourcing alignments. Filling customer orders from alternative locations to accommodate inadequate supply or unplanned demand creates additional unplanned transportation costs, often at a premium. Evaluating these shipping cost increases against service requirements allows shippers to actively manage out of alignment shipping and reduce costs. - Real Intermodal (IM) Opportunity/Compliance:
This KPI is calculated by dividing the number of intermodal shipments by the number of shipments that could have run intermodal on 3ZIP-to-3ZIP lanes. A lane is considered to have a real intermodal opportunity if 10% or more of any participating customer’s shipments are on an intermodal mode type using that 3ZIP-to-3ZIP lane.
Why it’s important:
Intermodal costs are often significantly cheaper than truckload. In this tight market shippers need every available form of capacity they can get. These opportunities can be maximized by a managed transportation service (MTS) provider’s network with the ability to identify the possible lanes that should move IM based on network footprint and lane profiles. - Trailer Utilization:
This KPI calculates the percentage of actual weight, volume and pallet count against baseline maximums.
Why it’s important:
Maximizing trailer fill ensures fewer needed trucks in the long run, which keeps transportation costs down. MTS providers with network service capabilities can improve trailer utilization by optimizing shipments, minimizing deadhead and wasted miles, and improving transit time while reducing handling and claims. - Shipment Lead Time:
Shipment lead time is the period in between the time a shipment order is received or generated and the time it needs to be picked up.
Why it’s important:
It’s critical to understand how much time a shipper is taking to operationally fulfill an order compared to the expectations set by its customer. In today’s market there are seven to eight loads for every truck available, compared to 1.75 loads per truck in normal times. Dropping orders today for pickup today or tomorrow is tough in this environment. It can be done, but at a high cost. Shippers should consider the long-term implications of how they are doing business – from sourcing and order quantities to use of expedited freight. It all impacts revenue, costs and service. - Primary Tender Acceptance:
Often challenging for shippers to measure, this KPI is defined as the percentage of shipments accepted on initial tender by the route guide’s primary carrier.
Why it’s important:
When a primary carrier rejects an initial tender, it’s important to understand why. Shippers should start with data at the lane/SCAC (Standard Carrier Alpha Code) level to understand the root cause. “Is the reason the carrier, the market or me?” This is the time for collaboration and efforts to become a shipper of first choice. Sometimes it’s necessary to change incumbents for other viable partners or focus on a formal onboarding process to ensure the new carrier’s success and acceptance. - Route Guide Compliance:
This KPI is defined as the percentage of shipments that had a route guide in place and were serviced by a carrier pre-assigned to that route guide.
Why it’s important:
A route guide plays an important role in setting the strategy for carrier selection across a variety of shipments within an organization. Enhanced transportation management system (TMS) technology can enable truly dynamic routing guides for maximum cost savings and service improvement. Knowing the degree to which shipments are using this guide is key to meeting these goals. For example, we’ve helped shippers use this data to categorize low-volume lanes and save costs by assigning them to their own route guide. - Spot Market Volume:
This KPI is the percentage of shipments that were rated by the spot market. A spot market rate is any rate which differs from the systematically applied carrier contract rate for the given carrier/lane combination.
Why it’s important:
Shippers are seeing unprecedented splits between contract and spot freight. This is a portion of their business that isn’t managed with carriers they don’t know, rates they can’t control and service that’s unpredictable. Knowing the volume of freight that’s going to spot market is critical because it can add up quickly with major cost and service impacts. - Spot Market Premium:
Spot premium is the percentage a shipper pays on spot market freight over the contract rate.
Why it’s important:
Spot premiums are an important leading indicator for the direction of contract rates. If the spot market is significantly higher than the contract market, contract rates eventually follow suit and are slow to normalize.
During times of high spot premiums and extreme uncertainty like today, we advise shippers to keep a closer watch on carrier compliance, accountability and remediation. Shippers must set expectations and continuously monitor core carriers. This includes prioritizing detailed service failures and primary tender acceptance tracking. In addition, shippers must consider new bid strategies including more frequent bids, pre-negotiation with current carriers, seasonal bidding, dedicated fleets and adding new carriers in the network. - Percent of Manual Touches:
This KPI is the percentage of shipments that require manual intervention in the planning process to assign a carrier or replan the shipment.
Why it’s important:
Manually planning or adjusting loads is part of the daily exception process of transportation management. Increasing the amount of manual work creates added workload for transportation planners, opportunities for human error, potential delays and added cost. Shipper order or production changes and consignee scheduling issues drive much of the manual work. - On-Time Service Tracking:
This KPI is measured by tracking a historical index against the original or intended delivery a shipper had on the order.
Why it’s important:
Measuring a carrier’s on-time percentage based on customizable on-time expectations can give shippers visibility to overall and individual carrier on-time performance. Knowing which carriers or lanes are likely to cause issues will let you prioritize both your carrier improvement and shipment tracking. - Driver Dwell Time:
Driver dwell time is a measure of the time between when a driver arrives at a distribution center and when the driver leaves. Driver late arrivals are typically excluded from the KPI.
Why it’s important:
Long dwell times at distribution centers is one of the most frequent complaints of drivers. In times of driver scarcity, driver retention is a top priority for most carriers. Consequently, carriers are more likely to accept tenders for shipping locations that don’t typically have long dwell time. Minimizing dwell time will not only keep their workforce happier, but they can also be more productive. Another great benefit to measuring dwell time is to help curb accessorial spend. Evaluation of dwell time, excluding late arrivals, can be used to audit detention charges. - Accessorial Spend as Percent of Total Spend:
This KPI is calculated by dividing the sum of all accessorial charges by the sum of the total amount. Total accessorial charges are determined by subtracting linehaul, fuel surcharge and tax charge from the total amount.
Why it’s important:
This benchmark shows shippers what percentage of their transportation spend is driven by accessorial compared to other shippers. Resources like Transplace’s Accessorial Benchmark Report analyzes how shippers’ accessorial practices compare to their peers and emerging industry standards. In our latest report, we compared data from more than 470 shippers with more than $36 billion in annual transportation spend from a variety of industries.
Logistics technology with robust data insights allows shippers to quickly gain access to benchmarking and reporting tools, including critical information on spend and service performance. This actionable intelligence can drive the proactive and strategic decision-making shippers need in today’s erratic freight market.
To learn more about identifying the right KPIs to ensure success, connect with a Transplace expert.
