Transportation - Supply Chain Metric

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Transportation Metrics:

Freight cost per unit shipped: Calculated by dividing total freight costs by number of units shipped per period. Useful in businesses where units of measure are standard (e.g., pounds). Can also be calculated by mode (barge, rail,ocean, truckload, less-than-truckload, small package, air freight, intermodal, etc.).

Outbound freight costs as percentage of net sales: Calculated by dividing outbound freight costs by net sales. Most accounting systems can separate "freight in" and "freight out." Percentage can vary with sales mix, but is an excellent indicator of the transportation financial performance.

Inbound freight costs as percentage of purchases. Calculated by dividing inbound freight costs by purchase dollars. It is important to understand the underlying detail. The measurement can vary widely, depending on whether raw materials are purchased on a delivered, prepaid, or collect basis.

Transit time: Measured by the number of days (or hours) from the time a shipment leaves your facility to the time it arrives at the customer's location. Often measured against a standard transit time quoted by the carrier for each traffic lane. Unless you are integrated into your customers' systems, you will have to rely on freight carriers to report their own performance. This is often an important component of leadtime. Transit times can vary substantially, based on freight mode and carrier systems.

Claims as % of freight costs: Calculated by dividing total loss and damage claims by total freight costs. Generally measured in total and for each carrier. A high number generally indicates packaging problems, or process problems at the carrier.

Freight bill accuracy. Calculated by dividing the number of error-free freight bills by the total number of freight bills in the period. Errors can include incorrect pricing, incorrect weights, incomplete information,etc. Generally measured in total and for each carrier.

Accessorials as percent of total freight: Calculated by dividing accessorial and surcharges by total freight expenditures for the period. Many freight carriers will charge extra fees for trailer detention/demurrage, re-delivery, fuel increases, and other expenses or extra services. Often, these are extra costs incurred due to inefficient processes.

Percent of truckload capacity utilized: Generally used for shipments over 10,000 lbs. Calculated by dividing the total pounds shipped by the theoretical maximum. For example, assume your trucks can hold 40,000 lbs. of product. During the prior month, there were 675 shipments totaling 22.95MM lbs. The percentage utilization was 85%. The 15% unused capacity is an opportunity for more efficiency.

Mode selection vs. optimal: This is calculated by dividing the number of shipments sent via the optimal mode by the total number of shipments for the period. To measure this, each traffic lane must have a designated optimal mode, based on freight costs and customer service requirements.

Truck turnaround time: This is calculated by measuring the average time elapsed between a truck's arrival at your facility and its departure. This is an indicator of the efficiency of your lot and dock door space, receiving processes, and shipping processes. This also directly affects freight carrier profits on your business.

Shipment visibility/traceability percent: Calculated by dividing the total number of shipments via carriers with order tracking systems, by the total number of shipments sent during a period. This is an indicator of the relative sophistication of your carrier base, and one measure of the non-price value available from your carrier base.

Number of carriers per mode: Calculated by counting the total number of freight carriers used in a given period, by mode (ocean, barge, rail, intermodal, truckload, LTL, small package, etc.). This is an indication of your volume leverage and control over the transportation function.

On-time pickups: Calculated by dividing the number of pick-ups made on-time (by the freight carrier) by the total number of shipments in a period. This is an indication of freight carrier performance, and carriers' affect on your shipping operations and customer service.