April 2012 | Sponsored | Thought Leaders

KPI Data Creates Improvement Opportunities

Tags: Logistics I.T.

Steven Shoemaker is Owner, RateLinx, 262-565-6150

Q: What are the latest logistics software innovations?

A: Improving how key performance indicators (KPIs) specific to freight are developed, measured, and managed seems to be a growing theme with leading software providers. KPIs are used to collect and measure actionable data to help improve accurate shipping decision-making and processes. The key word is actionable. As the old adage says, "You can't improve what you can't measure."

Take, for instance, a "Lost Savings" KPI. This indicator shows where decisions were made to ship with less-than-optimal (or less-costly) carriers for particular freight transactions. Companies can compile this shipment data for a given period to identify shipments that did not comply with its freight program.

Suppose 95 percent of the shipments were processed in accordance with the company's rules, and five percent were non-compliant—that is, not using the optimal carrier. Software tools can provide details about the non-compliant shipments, including which employee shipped them, which carrier they should have been shipped with, and what the shipping costs should have been. Detailing the "lost savings" in this manner holds everyone accountable.

Most companies know it is not practical for 100 percent of their shipments to be in compliance. The non-compliant five percent, however, represents an opportunity to improve.

A Lost Savings KPI paired with a "Freight Savings" KPI—which compares each freight transaction's current cost/carrier to its previous cost/carrier—should work in concert with each other. A Lost Savings KPI shows the opportunity, while a Freight Savings KPI measures the success.

Q: Why do companies have such a hard time embracing global trade management?

A: Entering the global marketplace allows companies to increase sales, and importing goods from international vendors may help cut costs. But for companies not used to processing international freight transactions, the documentation and regulatory issues involved can be intimidating. Lack of experience and overall knowledge about harmonized tariff code, ever-changing security regulations, and countries designated as "denied parties" can be a challenge.

Software is available to help companies navigate the paperwork, procedures, and processes, as well as service companies that focus on international trade. An issue that could be a problem is that these service companies resist setting up their smaller accounts with electronic data exchange billing because of the expense involved. This can create a paperwork nightmare when performing the audit function internally for these companies as their international volume increases. It may also be difficult to ensure that proper international shipping requirements are adhered to.