Logistics spend management remains a critical process for all shippers, but it remains subject to errors that often derive from the sheer diversity of modes, especially when parcel is involved, within the space. And according to a fall 2020 study on invoicing practices, says JOC.com, "approximately three quarters of survey respondents manage freight for companies with more than $1 billion in revenue, including nearly 40 percent from companies with more than $5 billion in revenue. Sixty-five percent of shippers surveyed said they manage freight across all seven modes analyzed in the study: full container load, less-than-container load, truckload, less-than-truckload, parcel, drayage, and rail." That's a tall order of data analytics, but it's important to realize that much of it amounts to parcel and e-commerce logistics. For that reason, it's imperative for shippers to start tracking the right data metrics in the form of these critical key performance indicators for the shipping industry.
Tracking the average and running monthly transportation spend is among the most critical key performance indicators for the shipping industry. It helps managers view and mitigate disruptions by drilling down into specific service levels, carriers or markets to avoid going over the budget. Seeing those trends also helps to promote more efficient management and effective carrier compliance too.
Another critical metric, on-time pickup amounts to viewing carrier reliability and the ability of a shipper to get shipments out the door. It's a measure of carrier timeliness, and knowing when carriers fall into an unacceptable on-time pickup range helps denote those problems early on and provide feedback to those carriers in question. Moreover, this is a vital factor in annual contract negotiations too.
On-time delivery is yet another carrier metric that amounts to overall success of logistics. And it is largely reliant on the on-time pickup rate. If the delivery service level fails, it becomes evident that a carrier cannot meet realistic pickup or delivery expectations. In turn, that means notifying customers of possible delays or resetting standards for delivery windows. In addition, it may be pertinent to use this data to justify expanding the carrier network or revoking existing contracts.
Among the key performance indicators for the shipping industry, tracking zone distribution measures experience and logistics costs. As the zone increases, the distance for transport and its coinciding costs increase as well. Recognizing variations amounts to reassessing current distribution strategies, such as implementing or creating new distribution centers closer to customers. And it may also include added value by helping create a mix of modes to reduce delays and avoid waste.
The next two key performance indicators are relatively simple. They are the average post per shipment and per pound. These views help shippers identify their typical costs per shipment, see deviations that fall outside of the normal run rate, and identify their causes. As such, it also helps with retooling shipping strategies, including justifying costs that are passed along to customers in the form of higher price points or shipping costs assessed.
Weight distribution, another of the key performance indicators for the shipping industry, helps shippers realize what's happening and apply data to understand how carriers view and analyze their business. The fluctuations in cost per package and per pound amount to predictive insight into what's driving current logistics spend.
Dimensional pricing (dim pricing) is another factor to consider. While a package may weigh a set amount, excess space or bulky items may have a larger dimensional weight. In general, the highest weight is the billed weight. So, tracking the changes in dimensional weight versus actual weight helps to maximize cost savings and possibly send parcels to alternate carriers with better dim factors.
Another metric is approved carrier and service routing. This is a simple metric for tracking whether you shipping department or vendor's shipping on your behalf adhere to the prescribed route to reduce total transportation time and use the right carrier. Often, it's more valuable for shippers as a tool for measuring compliance across multiple carriers than a single, partnered carrier.
And the last of the key performance indicators for the shipping industry is perhaps the most important—freight invoice accuracy. It's a ratio of the total invoices free of errors compared to the total invoices. If carriers continuously exhibit a low accuracy rating, it coincides with unnecessary and costly changes to the budget. Duplicates, incorrect classes, accessorial errors and subpar rating can affect invoice accuracy. Regardless, the key is to stay positive, look for the highest performing carriers based on invoice accuracy and build on those relationships.
These are only a fraction of the possible key performance indicators that the shipping industry could help your enterprise thrive. Start by getting access to the data you need for advanced analytics. And continue by normalizing data from within and beyond your company. Fortunately, vendors like Intelligent Audit have already taken those steps for you. They are ready to help your company put the power of the top key performance indicators for the shipping industry to work in your enterprise. Connect with Intelligent Audit to get started.
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