How to Use Transportation Metrics to Drive Profit and Service
How do you measure efficiency when you are already doing the best job possible? Talk to any over-the-road shipper that finds itself increasingly handcuffed by institutionalized transportation and fuel-related costs and it would likely tell you the "best job possible" doesn’t cut it anymore.
Still, Invariably, that shipper may need to look outside its enterprise and consider outsourcing non-core transportation functions to a third-party intermediary or delegating more responsibilities to its core carriers to squeeze out hidden costs and further streamline its supply chain.
Outsourcing transportation functions can provide a more objective and relational context for understanding how transportation best practices can drive improvement elsewhere in the enterprise while simultaneously unbundling hidden efficiencies and costs in an otherwise tight market.
The sidebar below presents three problems and the strategic ways shippers, carriers, and 3PLs can work together to develop a methodology for tracking metrics, analyzing data, and setting goals— while creating a platform for continuous improvement.
WHAT TO DO IF YOUR COMPANY IS…
…HAVING DIFFICULTY MANAGING EXCEPTIONS AND DELIVERY DELAYS
Schedule routine operating meetings with your support team and on-site carrier manager to review your approach to creating a continuous improvement strategy. After examining basic solutions such as revised routing, and advanced strategies including altered delivery times to relieve delays, devise action plans for improvement.
Use these plans to help change how and when you manufacture product as well as improve the transportation department’s standing in the eyes of the operations and sales teams. The transportation team is no longer told who and when to deliver product to; instead, the department works with customer service representatives and operations managers to plan its manufacturing schedule, leading to improved delivery times and volumes.
…FACING SEASONAL VOLUME DEMANDS AND HAS DIFFICULTY EFFICIENTLY SCALING CAPACITY TO DEMAND AND HOLDING CARRIERS ACCOUNTABLE
Consider building better relationships with carriers by implementing key performance indicators (KPIs) to benchmark success. Carriers that don’t want to participate are likely not meeting set standards; those that are doing their job and meeting expected service requirements would value the extra due diligence and your recognition.
KPIs benefit the carrier and the manufacturer by allowing both parties to accurately forecast seasonal demand peaks as well as track and ensure that all orders are delivered on time.
…GROWING BEYOND ITS MEANS, BUT STILL STRUGGLING WITH SERVICE AND COST ISSUES THAT ARE IMPACTING PRODUCTIVITY
Consider looking at replacing a local carrier with a dedicated carrier that is empowered to manage the entire shipping process. Let the service provider take responsibility for tracking deliveries, setting delivery appointments, and directing load building to maximize trailer cube.
Schedule regular meetings when the carrier can provide tracking data, as well as plans for increasing load volumes and better utilizing transportation assets such as drivers and equipment.
Placing the entire onus on a service provider can help reduce transportation costs and improve customer service. The transportation function becomes a defacto change agent, helping the manufacturing and customer service departments enact improvements.
Employing effective transportation best practices can go a long way toward impacting the way the rest of the enterprise operates.
Whether a company handles transportation in-house or outsources to a third party, certain consistent factors—data tracking, reporting, and action—must always be included.