If you are in the transportation business, you know that measuring performance is one of the most important ways of ensuring your business success. Knowing that you need to measure the performance of your transportation is one thing, knowing how to measure transportation performance and what to focus on is another thing entirely. No two organisations are the same and as such, no two measuring systems can be the same. You need to measure the metrics that tie in with the specific goals and vision of your organisation.
An effective transport performance management strategy contains KPIs that give you detailed insight into whether your business is heading in the direction you envisioned. Knowing what to measure and when empowers you to make decisions that will directly impact your operation on a fundamental level. Using effective transportation management software (TMS) will make performance management easier and more streamlined, and enable you to monitor crucial KPIs such as:
Excellence is the latest buzzword across all business platforms. Order accuracy measures the amount of orders that are processed, shipped and delivered without any incidents or issues along the way. Measuring the time it takes to ship and deliver a product, if the order was the correct one and whether goods were damaged or not are ways in which you can measure order accuracy. In the same way order accuracy is measured, so too can inventory accuracy be measured and used as a KPI in your supply chain management. Inaccuracies in the warehouse can make or break your chain, so having a record of all goods in your database that don’t match the actual inventory on the floor is essential. Inaccurate inventory can lead to unnecessary stock purchases or even worse – incorrect or late customer deliveries.
Costs Per X
There are always costs involved in running a successful business and transport is no exception. Whether it’s warehousing costs, transportation costs or claims as a percentage of transportation costs – being able to track and trace the money is key to being (and staying) in operation. Calculating the claims percentage can be done by dividing the costs of loss and damage claims by the total transportation costs. This way you can see – if the numbers are high – whether there are problems in packaging, storage or with the carrier. Road transportation cost per unit is another metric that can be used to measure road transportation performance by dividing the total cost of road transportation per period by the number of units shipped. This method can also be used to calculate by mode (road, ocean, truckload, less-than-truckload, etc.) and is especially useful where units of measure are standard (e.g., kilograms and tonnes).
On Time Pickup and Delivery
Calculated by dividing the number of pickups made by the total number of loads sent in a period, measuring the “on-time delivery” metric allows you to measure the performance of the carrier/driver. If you’re in the transportation industry, you know that delivering on time is your raison d’être, your ‘reason for being’, as it were. A transporter that delivers late is a transporter that’s doomed to failure, and on-time delivery depends on on-time pickup. On-time pickup can be calculated similarly by dividing the total number of pickups which were made on time by the amount of shipments carried by a specific carrier/driver. On time pickup and delivery work hand-in-hand to ensure customer satisfaction so make sure to measure them both as focusing on only one can leave you with half the picture (and half the power to make changes).
The old adage of “time is money” has probably never been truer than in todays’ instant eCommerce world (popularly referred to as the Amazon Effect) so it only makes sense to measure time as a key indicator of your transportation performance. Measuring how long a shipment takes to be delivered, how long a driver waits at a destination, whether the driver makes unexpected stops and how long these last is one of the most important metrics to measure. High dwell times indicate that there is a problem or issue that can be addressed, whether with your fleet or with your customer’s waiting area. Understaffing, overbooking, inaccurate scheduling – all of these can lead to longer than desired dwell times that can adversely affect not only your bottom line but also that of your other customers. Closely monitoring vehicle turnover time (for both outbound and inbound transportation) is a metric that helps you to monitor the efficiency of your process, whether at receiving or dispatching stage.
Perfect Shipment Measurement
“Perfect Order” might very well be the ideal of all supply chains and while it sounds complicated, a “perfect order” is simply an order that was delivered to the correct place, in perfect order and without damage, within the expected turnaround times, in the correct quantities, to the right customer and with the correct invoice. Anything less than this is not considered a “perfect order”. Although daunting, having a high perfect order rate is entirely possible if measured correctly and constantly. The effects of imperfect orders can include increased labor costs, costs incurred due to returns and cancellations, lost revenue due to non-returning customers and having to carry more inventory than is actually necessary. Transportation performance in this regard is easily measured by having high visibility on current conditions across various areas, followed by closely monitoring improvements to the areas that most need it.
There are, of course, many other transportation performance KPIs such as labour productivity, revenue yield, fuel efficiency, maintenance costs, loading and unloading times, damages, percentage trucking capacity used etc.
Nobody knows your business like you do, so you need to look at implementing transportation performance management software that is uniquely tailored to your business and its specific goals. This will allow you to accurately and easily monitor the key performance indicators that are relevant to you, ensuring your transportation performance is not just on par – but beyond it.