In our business, there’s a million metrics, ratios, and expenses that we can track. With the help of our business coach, we’ve identified a handful of these that we call vital factors. These are 4-6 factor our leadership team should be looking at to assess the health of the business. We have a dashboard that our leadership consistently reviews and meets about religiously every month. For example, a few of the vital factors that we track are revenue, closed deals, and profit.
When it comes to parcel shipping, there are a wide variety of expenses, metrics, and ratios that you can monitor. How do you know which are the most important for your business? Have you identified what is vital? We’ve compiled the below list; if your business is anything like other high-volume small parcel shippers, then you might find some alignment with their most vital parcel metrics.
Total Spend
Your total spend is important to keep an eye on. You may also want to break this down by spend per service and track how your total spend fluctuates over time. Total spend as a percentage of sales is a common ratio that many of our clients need to watch carefully.
Surcharge Spend
As a part of total spend, it’s important to understand the impact surcharges make. Knowing and watching your surcharge spend is important because this is a really easy way for the carriers to hide price increases. We suggest watching your surcharge spend over time and also knowing your surcharge spend as a percentage of your total spend.
Average Cost per Shipment
Knowing what it costs on average to ship a package is essential for forecasting, modeling, budgeting, and strategic planning. We would also suggest breaking this down further into average cost per shipment by service (i.e., Ground, International etc.)
Average Weight
It may seem like you don’t have control over your average weight, but one area that is factored into average weight, that is essential to keep a watchful eye on, is dimensional weight. This is an area that you do have some control over, whether it be increasing the efficiency of your packaging or negotiating a higher dimensional divisor with your carrier.
Minimum Charge Impact
Minimum charges are price floors that the carriers set. Regardless of the discount they give you, they will not reduce your shipping price below the price floor. It’s important to know what percent of your total shipments are hitting this floor. When shipments hit the price floor, then you no longer receive your full discount. This is key in identifying your negotiation strategy. If you are hitting the minimum charge on a high percentage of your packages, then an additional increase in service discount percentage will not yield the results that you might hope for in reducing your cost.
Average Zone
Domestic zones are determined by how far the shipment has to travel from its origin. The further the distance, the more the price of the shipment increases. Many of our clients use their average zone to determine if they should open up a distribution center or use an outsourced third-party distribution center that is closer to their customer base.
Taking back control of your parcel shipping starts with intelligence. Using the vital factors that we’ve discussed will help guide you in keeping a close eye on what is important, helping you make smarter decisions and giving you piece of mind knowing that you’ve got your parcel shipping under control.
