Key Performance Indicators That Matter to Shippers
Want to get and keep work from shippers? It’s all about measuring up to their expectations when it comes to Key Performance Indicators (KPI). It’s not enough for a carrier to say they have delivered on time or successfully moved something from A to B. Today’s shippers require careful tracking and measurement of data points that help them determine a carrier’s ability to execute on the service.
CLDA Board Member Kelly Picard has spent over two decades in the transportation industry and is a second-generation CEO of Hackbarth Delivery Service.She has held positions in operations, sales strategy development and execution; sales and customer service management; account development and administration; P&L accountability; executive leadership; marketing and public relations. She started in the industry as a driver and steadily progressed through various management roles. As part of Hackbarth Delivery Service’s executive team she plays key roles in creating and implementing the strategic plan for their company.
In this month’s column Picard talks about measures of success that shippers use to evaluate carriers before awarding them the business and throughout the relationship.
Question:What are KPIs for shippers?
Answer:Key Performance Indicators that shippers are looking for are the data points that are going to drive service to their customers. They want to be able to track and measure these elements to determine if a carrier has the ability to execute on the service. The common term is “The Voice of the Customer,” referring the shippers’ customers. Shippers want to measure the delivery experience received or perceived by their customers. The goal is accuracy and consistency: to deliver the right package to the right person at the right time, every time.
Question:What are the KPIs shippers use to evaluate carriers before awarding contracts?
Answer:It’s a combination of what the shipper requires and the carrier submits in their RFP response, in addition to information from third parties such as the DOT’s rating, driver CSA scores through the FMCSA, and TSA scores and audits results.
On the RFP side, shippers will want information that helps them evaluate whether a carrier can do the job such as:
o Scanning performance
o Real-time vs batch capabilities (GPS component)
o On-time delivery percentages
o Signature capture capabilities
o Damage rates/cargo loss
o Driver screening procedures
o Security audits – are they doing them internally or are they audited by other shippers?
o Quality of Service Scores
Questions: Let’s say you are awarded the work. What are the KPIs shippers want to see moving forward?
Answer: Most have score cards that are part of the service level agreements they put in place with carriers. These KPIs are typically defined in a metric-based system that outlines what they will be tracking.
These metrics usually measure scanning, on-time delivery, proof of delivery and security issues.
Scanning assures the shipper that the delivery was made on-time and was accurately documented. It’s particularly important if the shipper is guaranteeing specific time windows, for example, within two hours. Scanners help answer questions such as: Was the delivery made in the time frame promised? How was the delivery performance of a particular driver? Were all packages delivered to the right place at the right time?
Shippers look at percentages of received scans. These are completed at the unloading of the freight at the carrier’s hub. This is a check done to verify the packages on the load received from the shipper and is usually performed by a supervisor. Next, the packages are sorted to the route level and a load scan is performed by the delivery driver. These load scans are done before going out on the routes to ensure the correct packages make it to the correct route. The third scan is the delivery scan at the end point to measure whether the package was delivered and signed for. Today’s shippers demand real-time visibility to what’s going on with their deliveries. They value carriers with systems that show this and can integrate with their own. They want systems that make it as easy as possible for them to have high visibility to each delivery.
That’s where proof of delivery comes in. Shippers want proof of delivery from the driver or, better yet, signature capture from the receiver. With B to B customers, signature capture isn’t a problem. When we make the delivery to this customer endpoint there is usually someone there to get the package. But with residential and ecommerce it’s more of a challenge. Packages are being left at the doorstep without a signature. That obviously opens the door to cargo loss or claims. Shippers want to know how delivery companies will manage through these issues.
With the volume of ecommerce items coming through shippers will be relying more and more on advanced technology scanning devices with GPS that are cross-referenced with time stamps. Today, most of us depend on these, but I expect the trend towards app-based solutions in this area to increase. Right now the technology exists in smart phones to make that happen in a cost-effective manner. Some companies are starting to develop their own driver apps. The devices need to be able to read barcodes quickly and accurately, and integrate with the carriers and shippers systems. It’s going to take some work to give this sort of visibility that would include transmitting the address location at the time the package was scanned and left unattended at a residential delivery, along with capturing the barcode simultaneously. It may evolve into a picture of the residence with the package left on the doorstep being transmitted at some point.
Question:You mentioned security issues. Talk about that.
Answer:Shippers will often do a pre-award security audits before they give you the business. In addition, they expect carriers to do regular security audits that are part of an ongoing evaluation of performance. These could be once a year or even once a quarter. Shippers will also do surprise security audits, and the objective is to drive consistency of processes, with the goal of catching the carrier doing things right.
Shippers will want the answers to security questions such as:
o What type of product are you handling?
o How secure is your building?
o What kind of cameras do you have?
o Where are they located?
o How do workers check in and out of the building?
o How is the building monitored after hours?
o What kind of offsite monitoring do you have?
o Do you have security cages with limited access?
Question:What about contract renewals? What KPIs do they look at in addition to what we’ve discussed?
Answer: They’re going to look at the past history of the account. In addition to the aforementioned service KPIs, others will include damage and cargo loss, efficiency, accounting and billing procedures and driver survey scores.
Damage and cargo loss are ongoing issues for all of us. This is a particularly challenging area when it comes to residential deliveries. Clearly, signature POD becomes important in defending claims for cargo loss. But it’s complicated. There will be some damage that’s easy to spot as you unload the boxes. For example, boxes on the bottom that were crushed. But what about concealed damage where there’s something inside a box that can’t be seen by the driver or the carriers when unloading? For example, an appliance delivery where you uncrate the item and there’s a dent in the stainless steel door. You can’t see that until you uncrate it. Or, you’re delivering liquids that are damaged in transit, causing them to leak and damage other products.
In a contract renewal conversation they’ll want to discuss where damage and cargo loss occurs. You might be doing work in five of their distribution centers and in four of them there are low damage rates. But, in one location there is five times the damage rate compared to the others. That could be the shipper’s issue because they have a packing problem. Or, it could be a carrier issue where the product is not being handled correctly.
Shippers may also want to discuss fuel efficiency. They’ll ask about your efforts to right-size the equipment as it relates to fuel efficiency, particularly on longer routes.
Accounting and billing are also KPIs shippers will want to discuss at the time of renewal. They will want to make sure accounting and billing is accurate and timely. They will want you to have a good reconciliation process. Larger shippers, for example, have a push-pay system in which they create their own invoices for the carrier before they get the invoice generated by the carrier. If the carrier doesn’t have a good internal system for reconciling they could be short-payed or overpaid. A good reconciliation system validates that they did indeed deliver a shipment on a particular day and then creates a charge associated with that shipment. If the push-pay systems are linked to the system where orders are generated, that helps. Often times the shippers are working with multiple internal systems and these are separate.
The driver survey scores can be another tool in the evaluation, if the shipper uses these. This basically is a survey the consignee takes after receipt of a shipment that asks how the driver performed and, really, how the driver made them feel. This gets back to the Voice of the Customer. More and more shippers are trying to qualify the customer experience in terms of both product and delivery experience. The drivers are the front line people who have the face time with the end customers, so the shipper wants this interaction to be both pleasant and professional.
Question: How do shippers use KPIs to improve performance?
Answer: Ultimately, KPIs get translated into reports that give visibility to areas that may need improvement, but also show where the high performance is occurring so that best practices may be replicated. The goal of KPIs in simplest terms is to improve performance. As an example, one shipper, a little over 10 years ago, started with a goal of carriers achieving 89 out of 100 to be considered “good” and 92 or above was “excellent”. Fast forward to today and many changes to the metrics, and now, to be excellent, the carrier must be at 4.87 out of 5. They did this because over time, many of the carriers were hitting the goal, so they raised the bar. Not only did the percentage increase, but the scale was reduced, compounding the challenge to be excellent. So the shipper, through careful use of KPIs, improved performance.
Question:Help us to understand the KPIs that are most important to shippers in general.
Answer: KPIs are just that – Key Performance Indicators. Shippers want to know you’re doing the job and keeping a handle on all phases of the pick-up and delivery. Shippers want careful tracking and measurement of data points that tell them you can do the job. We are generating large volumes of data, but to make this useful, it needs to be visible and accessible.