If the process of data collection, analysis, and intelligent decision making wasn’t a determining factor for business success, these articles might be fewer and farther between. The other reality — in the shipping world — is that too many experienced folks that I speak with often forget why parcel/freight audit tools are so important. Are you simply interested in that one to two percent GSR return that you end up splitting with your audit provider, or are you interested in leveraging the business intelligence to effectively manage your supply chain?
A well-constructed key performance indicator (KPI) picture paints a thousand words. Luckily for you, I’ve shortened it to exactly 772 words below to identify the most common data points that you should understand to elevate your supply chain IQ.
Starting with the obvious, carrier performance is your lifeline to customer experience. Shippers need to understand what the experience is from a customer perspective — not just how the carriers tell you they perform. Knowing when packages are delivered late is one thing. But for the vast majority of shippers, striving for improvements in customer experience should always be your #1.
Carrier performance is the online customer experience. Providing a best-in-class customer experience will not only bring higher rates of customer retention, but it will make your marketing department happy knowing that you’re committed to driving your customers through the marketing funnel from buyers to brand advocates. Who doesn’t like referral business?
Cost per Package vs. Cost per Pound
Which one do you measure? We’re all good at managing results through numbers, right? Aren’t these conflicting KPIs? Managing cost per package will drive you to lighter weight packages resulting in a higher cost per pound. Managing cost per pound will result in heavier packages and higher cost per package. You need to measure both to make informed decisions.
Variations in these indices can be caused by a variety of factors. Noticing these variations will start you down the path to getting answers to root causes and, ultimately, driving toward best practices.
Cost per package and cost per pound are leading indicators to underlying root causes. Don’t manage them independently; use them in combination.
Zonal distribution can measure customer experience AND cost. How’s that? First, zone is a function of distance, and distance is a function of time-in-transit. Today’s consumer is becoming more sensitive to delivery times. The major e-retailers (you know who they are) actively market free two-day shipping.
Second, zone is a function of distance, and distance is ALSO a function of cost. Carrier networks align rate structures to support their respective cost models. The further a package travels through a carrier network, the greater the carrier expense. The only way to overcome time-in-transit associated with distance is expedited shipping, but, oops — there goes cost per package and cost per pound.
For those of you sophisticated supply chain professionals that say, “This doesn’t apply to me, I have regional DCs,” hold on. Your zonal distribution can help you manage, rationalize, and confirm your inventory management strategy. Regional DCs with duplicate inventories should have compressed zonal distributions. Have you looked at yours?
Efficient shipping isn’t a “one-size-fits-all” answer. Efficient shipping is like a fingerprint; every solution and subsequent answer is unique.
Weight distribution helps you tackle a lot of things. It can help you manage your cost per case, cost per pound, and better understand packaging solutions. It offers an additional perspective to help you better understand your supply chain and any hidden opportunities to improve efficiencies. Have you ever applied your weight distribution to your contracted rates? What about the growing sensitivity carriers have toward dimensional billing? There are some fantastic insights to be gained from understanding these, but that’s a topic for another day.
Knowing your weight distribution will help you understand fluctuations in cost per package and cost per pound, enhance sales, and marketing strategies and assist you in understanding how the carriers view and analyze your business.
Visibility to Total Landed Costs, Inclusive of Accessorial and Surcharges
Wouldn’t it be nice if the carrier rate card revealed the total expense of shipping a package? Unfortunately, we don’t live in that world. What about all of those accessorials, surcharges, and “value-added” services? You can’t manage what you can’t measure. You need visibility to total landed transportation expenses. Full visibility will allow you to make intelligent and informed sales and marketing decisions, execute on well-constructed subsidized shipping programs, and offer better insight to what you’re actually paying the carrier.
Here’s another nugget for you. How do you think the carriers achieve such phenomenal financial results and improve their margin on your account year over year? It’s something to think about and paints a picture worth another thousand words.
Manage KPIs and Elevate Your Supply Chain IQ
Of course, managing KPIs and optimizing your operations and transportation expenses requires a good business intelligence platform. Don’t simply google search “audit software.” Think “parcel audit and business intelligence software” and find a platform with customizable dashboards, analytics, and reporting that you can customize based on your operational needs. If you currently have an audit platform, you should be more excited about the business intelligence rather than the one percent hope that your platform will detect carrier errors. There’s no better way to elevate your supply chain IQ than to consistently dive into your data to better understand your KPIs.
Glenn Gooding is Executive Vice President of iDrive Logistics and the industry thought leader in carrier cost model methodologies and data analysis. He spent more than two decades at UPS, where he engineered the cost and pricing models for the world’s largest enterprise shippers. Glenn now leverages his expertise to help shippers better understand their shipping data in pursuit of shipping optimization and cost reduction. Glenn can be reached at firstname.lastname@example.org or 678.567.6847.