Overachieve on 3 Transportation Metrics KPIs
We often hear the question, “I want to improve my supply chain performance, but what are the transportation metrics I should focus on?” Today’s data-driven supply chain offers a vast arsenal of numbers, statistics and transportation management measurements that can make your head spin. With so much data available at your fingertips, it’s challenging to know what to measure and where to start with building out key performance indicators (KPIs).
To paraphrase British billionaire Richard Branson, you need to define success so that you know when you have achieved it. That said, every business is somewhat unique, and while there are some standard KPIs that are common across the transportation industry, your specific KPIs really need to be a measure of your organization’s goals and an output of your strategy.
Business decisions today are powered by data
If you don’t already have a reporting process, you probably just want to start with a few, essential measurements across each segment to ensure efficiency. As you begin to see results, you can build on it by looking at your supply chain across different data points to identify any areas of opportunity that you would like to tackle next.
Measuring your KPIs is only the beginning; you also need to a plan and a process to perform against them. We have compiled a list of key performance indicators (KPIs) to help you effectively measure your transportation metrics and performance goals.
3 KPIs to Transportation Management Success
KPI #1: On-Time Final Delivery
One of the most crucial transportation metrics to track for success is to deliver on time to the scheduled required arrival date or to the appointment time. In doing so, you avoid fees and build further business value among your partners and customers.
How to get there: Seek data and analysis from your Transportation Management System (TMS) to quickly pinpoint the exact areas in which there is an issue to be addressed.
Your TMS will evaluate the carriers who have provided the highest on-time delivery and on pickup performance and those in which we may be keeping you from producing your numbers. In doing so, you are better armed with figures and numbers to move forward with an actionable plan and adjust with more precision.
KPI #2: Truckload Capacity Utilization
Better capacity utilization allows your company to reduce the number of freight runs needed and lower your truck emissions, thus simultaneously helping you accomplish two goals at once.
Research indicates that 15% – 25% of U.S. trucks on the road are empty creating a lot of opportunity maximize space and reduce the number of trucks on the road. Reducing emissions creates more opportunity to acquire new business with those that adhere to sustainability practices or standards.
How to get there: Through a TMS, you’ll be able to better identify the capacity utilization constraints and performance. Your TMS will optimize your freight routes for you utilizing external and internal data sources to make automated, real-time recommendations. One of the most critical TMS benefits is load planning functionality that takes all facets into consideration, including weight, dimensions, densities, stackability constraints, and compatibility constraints.
KPI #3: Transit Time
From the time a shipment leaves a facility until it arrives to its destination, it is measured by days (or even hours) to ensure maximum efficiency. The time it takes to move from one point to the next is a crucial element to your overall cycle times. Equally as important is the turnaround time of a particle vehicle arriving until the time it departs your facility. You might consider that as another KPI to add to your list, depending on your goals.
How to get there: Transit time should be measured across each mode of transportation plus the overall time. Your TMS will allow you to see how each mode is performing and where you may be able to reduce time and cost by selecting a new carrier or trying a different route.
Transit time variations can become cumbersome to keep up with if you do not have a TMS.
Several factors could play a role in lower transit times, such as on zone, season, road conditions, drivers, operational hours of shipper and consignee, and payload. Your best plan of attack is to shift from reactive to proactive by setting up alerts and notifications within the TMS to notify you of shifts and changes that might impact transit time before it impacts your transportation metrics.
Other important KPIs:
- Required Arrival Date (RAD) Compliance
- On-Time Performance on Fulfillment Orders
- Appointment Compliance
- Load Factor
- Cube Utilization
- Claims Ratio
- Product Storage Costs
- Freight cost per pound or per unit