There are hundreds of metrics you can use to measure your supply chain performance and creating a carrier performance scorecard should be one of them. Measuring carrier performance with the right metrics can ensure that you are getting the best value for your spend, can help you identify opportunities for improvement and helps you determine which carriers are best suited for your business’s needs. Below, we count down a few examples of carrier performance KPIs to track carrier performance.
11. On-Time Payment
Cash flow is a good indicator of many different business factors. This can be measured by dividing the number of on-time payments by the number of total payments. Anything below 90 percent should not be acceptable.
10. Number of EDI or API Invoices
Moving from paper-based invoices to EDI or API can bring several advantages to your business such as increased savings, accuracy, and efficiency. EDI and API invoices are about 35 percent less expensive to process and reduce the amount of time spent and inaccuracies that occur when processing invoices manually.
9. Capacity Issues
If a carrier does not have the capacity to handle your shipments, several problems such as late pickups, late deliveries, and unattended customer needs can occur. To measure performance in this area, use specific KPIs such as cost per item, cost per order, percentage of perfect shipments, dock utilization, and time from pickup to departure.
8. Routing Guide Compliance
Routing guide compliance increases productivity by eliminating time-consuming or financially costly mistakes in the supply chain. Make sure your vendors have easy access to clear and concise routing instructions to reduce service delays and unnecessary expenses. Measure your expected savings against the actual savings to gauge the effectiveness of your routing guide.
7. Monitor Tenders Accepted Versus Tenders Declined
This will tell you if your carriers are meeting their contractual obligations. When a first-choice carrier declines a substantial number of tenders, the cost for the shipper may increase to the point where it might exceed the budget. Carriers will reject tenders for different reasons, so it is important to understand it and look for ways to improve this measurement.
6. Monitor Driver Performance
Knowing which carriers have the highest performing drivers helps when evaluating carriers. Are drivers being tested according to the drug and alcohol clearinghouse? Do they handle your freight properly with the right equipment? Are they on time or do they miss pickups? Not only are these safety issues, but selecting the right carrier with the best driver performance can help ensure that your freight gets where it needs to be on-time with a lower risk of damage.
5. Transportation Utilization
Remember that empty space is wasted space. You can increase the value of your transportation spend by switching from less-than-truckload (LTL) to full-truckload (FTL), raising the minimum quantity for orders, or combining multiple shipments into one.
4. Accessorials as a Percent of Freight
Divide any accessorial charges, like fuel, permits, or charges by the total freight expenditures for a period. If you notice an increase in any of these costs, you may want to re-evaluate your processes to eliminate inefficiencies.
3. Invoice Accuracy
It is important to measure the number of accurate invoices and categorize the inaccurate invoices by carrier and reason. Continual issues with inaccurate invoices can be an indicator of performance, and you can limit or avoid using this carrier.
2. Number of Damage Claims
There is always a risk of damaged freight during shipping; however, the number of freight claims is an important factor to consider as it can have a big impact on the bottom line. You can calculate the impact by dividing the total cost of loss and damage claims by the total freight costs. The higher the number, the higher the likelihood that packaging or processing problems will occur on the carrier’s end.
1. On-Time Performance
A carrier’s ability to meet On-Time Pickup, On-Time Departure, and On-Time Delivery will directly affect the success of your shipment and your customers. Measure the percentage of shipments that are picked up, departed, and delivered on time. A rate of 90% or higher is generally considered acceptable.
At FreightCenter, we are always evaluating our carriers and most recently awarded our Carrier of the Year Awards based on these criteria as well as the dedication and commitment to customer service standards.