Using KPIs To Improve Profitability and Customer Service

The idea of Key Performance Indicators (KPIs) isn’t a new thing. It’s not uncommon for shippers to use KPIs to quantify service levels from you as a freight forwarder and their other carriers.

KPIs should be a vital part of managing the performance of your suppliers as well. You may not be a shipper in a literal sense, but it’s important that you manage your carriers against the same benchmarks you use.

In fact, discussing KPI measurements with your customers and suppliers should be a regular practice. It’s a mistake to wait for customers to approach you first—proactively talking about service performance (whether good or bad) is important to strengthening long-term relationships. KPIs are a straightforward, objective way to measure how your suppliers are doing.

Typical KPIs include a considerable amount of delivery and service-based metrics, which are clear indicators of performance. On-Time Delivery, for example, is vital no matter the circumstances.

And while not as common, but also of import, are KPIs related to financial measures. Here are 3 types of KPIs you may not have considered before. They are important to your profitability as a freight forwarder and the service you provide to your customers.

Budget Versus Actual

In the past, it was typical for companies to set a transportation budget then not think about it again until the end of the fiscal year. Now, many shippers are monitoring costs in near real-time to enable faster action and control cost overruns.

Shippers also look to KPIs like Routing Guide Compliance and Tenders Accepted vs Tenders Declined, as well as Budget vs Actual as important barometers.

If shippers are exceeding their budget or trending unfavorably in any of these areas, understanding root causes and solutions is critical. As their vendor, the first call will be to you—and being prepared with the right data and actionable ideas is crucial.

Accounting For Variable Costs

Accessorials, surcharges, and fees all present a unique challenge. They’re costs that will happen, but it’s hard to predict when and how often. Detention, Unloading, and Lumper Charges are common examples of these types of costs. Many companies track Accessorials as a % of Freight as a KPI to identify problem trends.

Historically, it’s been tough for shippers and forwarders to closely track these charges. Many now use integrated rate management tools that enable better visibility—and therefore better management—into these types of variable costs.

Administrative Costs

Today, transportation managers are more actively involved in monitoring their freight payment process, knowing freight invoicing errors can add 5% or more to their total logistics spend. However, freight audit and payment can be a tedious manual process, as is dealing with OS&D issues and freight claims.

Helpful KPIs include Number of Freight Claims and Invoice Accuracy. Both are a way to monitor carrier quality and safety. Each KPI is a key step in tracking expenses correctly. Again, it’s access to the right data and supporting technology that makes this possible.

As a forwarder, what’s the best way to manage these new KPIs?

There is a common thread with all these measurements, and it starts with data. Most meaningful KPIs require access to cost and shipment information that’s timely and accurate. This doesn’t happen without the right process and the right technology.

Forwarders implementing an integrated technology solution that includes accurate rate and shipment information gain visibility into vital KPIs. These forwarders consistently exceed the expectations of shipper customers while improving service levels from their own carriers and suppliers.