How do shippers know if their carrier selection process for less-than-truckload (LTL) shipping is working? The answer is simple; shippers must track the right data. Knowing the proper metrics and data points to track promotes cost-effective shipping practices and can improve vendor, carrier and consumer relationships, reports Merrill Douglas of Inbound Logistics. Unfortunately, there are thousands of less-than-truckload data points shippers can track, but the most prominent indicators include these LTL metrics.
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1. Cost Per LTL Shipment.
First, shippers should track the average cost per LTL shipment. This measure may vary, but the key lies in tracking the average costs across multiple carriers. Thus, shippers can identify trends toward lower-rate carriers over time. In addition, shippers should track the average cost of LTL against other shipping modes. Since most shipments are sent via road, LTL cost tracking is among the best ways to identify baseline changes in shipping cost.
The best-laid plans and metrics to track LTL shipping are only effective when a high on-time performance score exists. Use Less-than-Truckload data points to monitor on-time performance as an extension of delivery-acceptance rates. In other words, poor on-time performance may lead to increased rate of returns and additional costs to the company.
3. Freight Damage.
Freight damage occurs, but it should not be occurring frequently and without reason. Shippers tracking damage need to also track average costs associated with damaged freight, including returned items, refused shipments, insurance claims and changes in insurance premiums using Less-than-Truckload data.
4. Billing Accuracy.
Next, shippers should only pay for what they send, but the volume of today’s shipments can amount to millions of invoices and occasional problems in billing. Monitor on-time payments to and from vendors, and verify all sent payments for accuracy. If a carrier does make an error, like double billing or under-billing a shipment, make sure the issue is corrected. All occurrences should be tracked to identify trends and issues with the carrier’s billing system.
5. Inbound Freight Routing Guide Compliance.
Vendors and suppliers are businesses too, but that does not mean they can skirt the rules in the inbound freight routing guide. Track each vendor’s adherence to routing guide rules for compliance. If issues appear consistent, consider punishing the vendor by altering delivery windows or renegotiating contract terms.
6. Accessorials as Part of Total Freight.
Accessorial charges, like re-delivery attempts or fuel surcharges, should be tracked against total shipping costs. In addition, this metric can be broken down into individual modes, allowing shippers to track the accessorial charges of LTL shipping against total LTL costs.
7. Percent LTL Selection Against Total Shipments.
LTL shipping has the greatest potential for errors and problems due to frequent stops and more touch points per shipment. However, it is often the lowest-cost shipping solution when used in conjunction with freight consolidation and route optimization. Shippers need to track the percent of total shipments using the LTL mode.
8. LTL-Capacity Available Versus LTL-Capacity Used.
Over the past year, industry experts have pointed to a coming capacity crunch. To ensure your company is using LTL shipping correctly and to meet capacity demand, track the available LTL-capacity against LTL-capacity used. In other words, if you have capacity available in your LTL shipping, you may be losing money. This data point indicates if LTL availability could be used in place of other modes that may cost more or require longer delivery windows.
9. Number of EDI/ API Invoices.
A successful shipper needs to know how many shipments are going out, as well as the inventory of items shipped. Track the total number of electronic data interchange (EDI) and application program interface (API), two automated systems, processing invoices. These systems should also be tracked in comparison to billing accuracy.
10. Acceptance Percentage of LTL Shipments.
You can use Less-than-Truckload data to track the percentage of LTL shipments sent against those returned or refused. This results in both an acceptance and refusal rate, indicating likely problems with the carrier.
11. Percent of Internal Resources Used.
Each shipment uses internal resources, but your carrier and third-party applications may be considered external resources for shipping. Track the percentage of internal and external resources used per shipment and for total shipment volume. Consider labor and equipment costs as well to pick, package and send freight via LTL.
12. Less-than-Truckload Data Shows Carrier Performance Scores per Carrier.
The last metric may include all aforementioned metrics relevant to specific carriers, but its primary use is in assigning a performance score to each carrier. The score provides a quick reference sheet for preferred carriers, and if using an automated system, performance scores can provide leverage during contract negotiation and legal issues, if they arise. The simplest way to determine performance score is by creating a scorecard that contains all carrier-specific metrics and assigning an average value to the carrier’s dealing with your company.
Staying profitable in a world driven by e-commerce is hard and may require unexpected investments. However, you can increase your company’s profitability and decrease costs by managing your inbound and outbound freight through data. In addition, today’s systems, like the Cerasis Rater, built with transportation business intelligence in mind, can help track these metrics by analyzing shipping patterns and system use to give you a better idea of how you can leverage LTL shipping to improve your bottom line.