Are Your Key Performance Indicators (KPIs) Ready for a Tighter Freight Market?

By Ben Steffes, VP of Managed Transportation, RXO

But how do you know if you’re doing it right? No company ships freight in a vacuum, and if you don’t check your benchmarks and expectations against what’s happening in the wider market, you could be putting your transportation service levels (and budget) at risk.

For the past two years, shippers have generally enjoyed stable rates and reliable carrier capacity. As the truckload market cycle turns over and heads into inflation, the next two years could look very different; now is the time to make sure your metrics are in line with industry standards.

Using Third-Party Data to Vet Your Benchmarks

To help supply chain professionals get a gut-check on their data, we recently published the second edition of our original research study on logistics KPIs (following up our 2022 edition), titled The Logistics Professional’s Guide to KPIs. We worked with an independent market research firm to ask 1,000 shippers and carriers what they really think about transportation metrics.

5 Research-Backed Takeaways for Smarter Carrier Procurement

While every shipper’s network is different, these takeaways from the research can be a useful guide as you set your carrier procurement strategy for a shifting market.

1) Shippers and carriers want a standard more than ever.

According to the survey, 90% of carriers believe there should be set industry standards for KPI performance that everyone can agree on, which is an increase from 74% in 2022.  For shippers, this percentage increased from 78% in 2022 to 87%.

2) Carriers are more data driven.

The study showed 99% of carriers rate themselves as either intermediate or advanced at tracking logistics KPIs, up from 82% in 2022. Furthermore, 80% of carriers are referencing their KPIs at least weekly, up from 59% in 2022.

3) Carriers want to know where they stand.

To best serve their customers, carriers want to know how they’re doing and where they can help. 74% of carriers surveyed agree that carrier scorecards are a useful tool for improving performance, and 72% of carriers expect at least weekly updates on demand forecasts (i.e., load volumes).

4) Carriers take your benchmarks into account.

If you don’t employ shipper-of-choice best practices and/or set your expectations too high, it could cost you. 95% of carriers in the study stated that inefficient shipping (long loading times, inconsistent volumes, poor appointment times, etc.) impacts the rates they give to shippers, and 73% of carriers will factor in a shipper’s KPI expectations before agreeing to take a load.

5) Here’s what your carriers think is a reasonable standard.

We established from the study that carriers think twice about rates and service if shippers are out-of-line with industry benchmarks. According to the 1,000 shippers and carriers surveyed, here’s what’s most reasonable: 

• 95% on-time performance to an appointment with a 30-minute buffer
• 85% primary tender acceptance rate
• Two days of lead time for truckload shipments
• Payment within one week

Some respondents called for more demanding standards, and others for more lenient standards. However, these benchmarks are where shippers and carriers agreed the most. 

While the industry continues to evolve, one thing remains constant: the need for a more data-driven supply chain. Driven by shifts in consumer demand, technological advancements, and the dynamic freight market, supply chains are more data-driven than ever before.

Study findings suggest KPIs are essential for efficient management across the supply chain, and they’re always evolving. Businesses need consistent measuring and reporting to optimize performance, and should revisit these practices regularly to ensure they are up-to-date with industry standards. 

The Logistics Professional’s Guide to KPIs research study offers a great tool for both shippers and carriers. Please visit: https://rxo.com/resources/research/kpi-research-study/.