Tracking key performance indicators (KPI’s) will help you know which carriers are keeping you on course to profitability. Using a scorecard that measures carrier performance promotes better dialog and provides a quantifiable way to measure the success of the relationship between all parties involved.
Shippers scoring carriers on timeliness gain an objective way to evaluate service. In an environment without a scorecard, customers can claim carriers aren't on time, while the shipper has no visibility into why customers are complaining.
Depending on your company’s goal, the metrics a shipper should track will vary. Two of the most popular KPI’s are on-time pickup and on-time delivery, which comes to no surprise.
If you are looking to implement on-time metrics, just remember – you must define what “on-times” means to you. Requirements differ based upon your industry, your own distribution center setup, and that of the consignees. For example, one shipper might define on-time as within 24 hours, while you define on-time within three hours.
Besides being on-time, communication is another important metric. Most carriers are very good at providing electronic data interchange (EDI) message, but not all are good at timeliness. It's critical that shippers know as early as possible that the carrier will be late, so quick notifications are essential when an exception is about to occur.
Accuracy, Safety, Capacity
Metrics on accuracy can include how effectively is your carries participating in official freight bids and are they submitting accurate information. Accuracy in billing is also important especially whether the carrier applies assessorial charges accurately. If a carrier keeps mis-billing, the shipper gets charged for every time a bill comes through. It takes more time and more effort to resolve exception invoices.
Rating carriers on safety can be scored from the Compliance Safety, Accountability (CSA) system operated by the Federal Motor Carrier Safety Administration (FMCSA). Some companies will even score carriers based on their claims and the time it took to resolve them as oppose to quantity.
One important metric in scoring carriers is capacity especially the consistency in which your carrier accepts committed freight. If a carrier gives a commitment to pick up 20 loads per week, than hold them accountable for it.
Despite the metrics a shippers chooses to track, the data, EDI platforms, auditing & billing systems and other transactional systems need to be processed, then presented in a format that is easy to understand. Shippers should clearly spell out their performance requirements in a carrier guide and use carrier metrics as the basis for regular performance reviews, so nothing is ever a surprise. The goal is to stimulate conversations that reinforce your transportation partnerships.