The business terms, “Metrics” and “Key Performance Indicators” have been around for as long as companies have been measuring organizational performance. More commonly known as a “KPI”, metrics are intended to gauge outcomes in areas that encompass customer service, operational execution, employee satisfaction, and financial results. Of course, the KPIs used by a company will depend on its industry, business model, strategic objectives, and value proposition.
The Full Truckload space is no stranger to KPIs and for many years now, the industry has been committed to measuring performance and finding ways to improve operations. Applicable to both shippers and carriers, traditional Full Truckload KPIs include load, lane, and carrier-specific metrics for On Time, In Full (OTIF) shipments, Overage, Shortage & Damage (OS&D), load rejections, and billing accuracy.
In addition to these (and many other) KPIs, the FTL industry has also stepped up its game in what is now called, “Environmental, Social & Governance” (ES&G). In this category, shippers and service providers pay close attention to measuring their carbon footprint, the reduction of empty miles and the extent to which they can use alternative energy. Taken as a whole, the Full Truckload shipping community has benefited immensely from the use of KPIs and the continuous improvement initiatives that they inspire.
Although he never worked in logistics, it was the musician and songwriter Bob Dylan who made an unintentional, but very accurate observation about Full Truckload shipping in his song, The Times They Are a Changin’. From advances in engine design and fuel economy to the use of GPS, Electronic Logging Devices, and sophisticated Transportation Management software, the trucking industry has been a leader in pushing the envelope in technology, operational performance, and customer satisfaction.
With the above said, the Key Performance Indicators that measure performance are only as good as their relevance to the ever-changing FTL landscape. And whereas certain trucking KPIs will always be important, the ways in which shippers and carriers measure themselves (and each other) must keep pace with Mr. Dylan’s changing times. One area that clearly demonstrates this point is the shipper’s use of the yearly Request for Proposal, and the KPIs that measure how well they work.
Since the deregulation of U.S. trucking in the early eighties, shippers have engaged in the annual ritual of conducting a Request for Proposal. As everyone in the FTL space knows, shippers invite their incumbent carriers, along with a handful of potential new service providers to bid on freight for an entire year. Based on the results of the bid, shippers then measure basic, but important KPIs that include budget vs. actual spend, on-time performance, and shipper/consignee satisfaction.
Over the course of the last few years, the launch of the Emerge Dynamic RFP platform has not only changed how shippers manage RFPs; it has made the yearly bid event obsolete. Through its mini-bid functionality, shippers use the Emerge platform to shorten bid periods and open RFPs to untapped carrier capacity that in turn, produces rates and service levels that reflect genuine market conditions. A breakthrough in FTL bid management, shippers can also use the platform to automate other functions like bid awards, load execution, and payment.
Of course, such monumental changes in FTL bid management require that the KPIs used to gauge results evolve with the times, too. To that end, when shippers combine a modernized suite of traditional KPIs with new metrics enabled by the Freight Procurement Platform, a virtual cycle is created where all parties benefit from improvements that were inconceivable just a few years ago.
With shorter bid periods, exponentially greater access to pre-vetted carriers, and support capabilities that include lane-specific rate benchmarking, shippers will get the most out of the Emerge Freight Procurement Platform by focusing on KPIs that measure the impact of these advantages. To do that, shippers must design a suite of metrics that can be deployed quickly, cover multiple carriers and lead to real improvements both internally, as well as with their partner carriers. This includes:
In a mini-bid period that can last a quarter or even a month, carriers need to know that they’re going to be tendered the volume of loads that they were awarded. And in scenarios where multiple new carriers are awarded freight or service providers can be changed quickly, keeping track of volume by carrier is essential to healthy business relationships. Important for both shippers and carriers, this metric must remain a key element of any effective suite of FTL KPIs.
One of the biggest problems with yearly bids is the increase in load rejections that shippers experience as time passes and market conditions change. By shortening bid periods and becoming much more sensitive to market pricing, load rejections will go down dramatically. An “oldy, but goody” load rejections should still be measured, albeit for shorter periods of time and with multiple carriers. With this KPI, if a shipper experiences load rejections after a mini-bid, they can quickly adjust their list of invitees for shorter RFPs in the future.
It’s bad enough to have a load rejected, but paper rates can be especially annoying. Basically, the term “paper rate” is code for when a carrier really means to say, “We’ll move your loads, but not at the rate we quoted in the yearly RFP.” Once again, mini-bids that shorten the bid period should all but eliminate paper rates, but it still needs to be measured across all carriers. Combined with load rejections, these two metrics identify carriers that live up to what they quoted in a mini-bid.
Also known as “OTIF”, the On Time, In Full metric is especially valuable because it measures not only the carrier but the shipper, too. In other words, it’s not as impactful for a carrier to pick up and deliver a load on time if the order inside the trailer isn’t complete, or if it’s the wrong merchandise. This dual focus on both speed and accuracy will help shippers to improve their Customer Experience and improve the odds of clients buying more products in the future. It is also important to understand how you measure on-time service and how the carriers you use measure it. Is something considered on-time if it delivers the day promised or does on-time require delivery at appointment times? Know that carriers may have different ways of measuring on-time performance, be sure that you communicate how you measure on-time and clearly state your expectations.
Not only does the Emerge Platform make traditional KPIs more impactful, but it also enables shippers to implement new measures that reflect broader strategic goals. Ideally, shippers will take full advantage of the platform by measuring established, as well as innovative metrics that haven’t been available until now. Below are some examples of those KPI innovations.
Long before carriers are awarded business, shippers should solicit a carrier’s KPI data as part of a mini-bid. Integral to Emerge’s automated mini-bid process, shippers can create templates within the platform to gain insights on key factors like driver safety, on-time loads, OS&D, and customer satisfaction. With this approach, not only do shippers gain insights into potential new carriers, they can easily measure live KPIs when loads are tendered.
A recently added feature to the Dynamic RFP platform is benchmarking. With just a few keystrokes, shippers can benchmark their lanes to see if they are at, above, or below the market. This KPI is a first in the FTL industry and is ideal for making sure that the rates garnered from a short-term, mini-bid are competitive throughout its duration.
Another unique element of conducting mini-bids with Emerge is the ability to award specified volumes of loads to special designation carriers like minority, veteran and/or women owned companies. A big part of any shipper’s commitment to responsible ES&G, this feature not only allows shippers to award loads to special designation carriers, but they can also measure how well they live up to those commitments, too.
Although they weren’t famous musicians like Bob Dylan, the founders of the tech company Hewlett Packard (Bill and Dave, respectively), made an equally important observation in the early days of their company when they stated, “You can’t manage what you don’t measure”. With a corporate culture that focused on tracking performance and then getting better based on what they learned, their KPI-oriented approach became the title of their book, “The HP Way”.
Regardless of industry, the best way to improve performance is to create a suite of KPIs that measures what’s important to customers, suppliers, and internal operations. In the case of FTL shipping, the Emerge Freight Procurement Platform not only strengthens the use of tried-and-true KPIs but also adds new metrics that allow users to take a much broader view of their operation. Moving forward, it will be this combination of super-charged KPIs that allows shippers to really manage what matters most!