Key Metrics in Carrier Scorecards
The dynamics of the transportation industry have undergone significant shifts in recent years, where data leads the way. The abundance of data is generally seen as a positive within supply chain management, but there are challenges associated with too much data, especially when an organization doesn’t have the tools to process the information or understand which metrics have the biggest impact on their bottom line.
While data undoubtedly impacts each piece of the supply chain, carrier performance is a critical component that can be effectively analyzed with reliable data and carrier scorecards.
Carrier scorecards provide an objective way to measure performance, allowing manufacturers to enhance transportation performance, reduce spend, and improve vendor relationships. Items like response and acceptance rate can be understood in real-time when technology plays a key role in the process, leading to better visibility and decision-making.
Trax is dedicated to helping global organizations solve complex challenges through comprehensive and reliable data. Backed by industry-leading technology, our partners are able to reduce operational costs and improve their bottom line.
The Importance of Aggregated Data
As your business scales, the amount of data streaming in on a daily basis will only continue to grow. For many organizations operating in the global supply chain, the process revolves around third-party data. While insights can be gained through an outside source, the process of collecting, analyzing, and turning data into actionable insights is cumbersome at best.
Far too often, third-party data is incomplete, creating information gaps. Gaps used to be a necessary evil, but with modern tools like freight audit and payment(FAP) systems, visibility is easily attainable.
FAP systems aggregate data, making it easier to get a clear understanding of which carriers are performing and which are struggling to meet their agreed-upon contractual obligations. With aggregated data, there is no middleman, and information can be pulled in real-time, creating a more proactive evaluation process.
When data is combined in the form of a carrier scorecard, you are able to get a holistic view of each carrier’s performance and the strength of your relationship. Each individual component that would otherwise only reveal a small piece of the puzzle can be combined for an objective analysis.
5 Core Carrier Scorecard Metrics
As you dive into carrier metrics, you may be inclined to try and measure everything all at once. For organizations that have systems and processes and a clear understanding of what they are measuring, this can be achieved. For those who are just getting started with a centralized system and process, starting small and expanding will help avoid data overload.
The following five metrics are a great starting point, even if you plan on expanding your scorecard to include other components.
Response Rate
Response rate is one of the first metrics to put under the microscope as you start evaluating the carriers in your network. This is simply the percentage of tenders with 'Accepted' or 'Rejected' responses out of the total tenders issued.
Response rates will fluctuate throughout the year and vary from carrier to carrier. Capacity issues, seasonal freight, and more will cause responses to ebb and flow. When included in your carrier scorecard, you can quickly evaluate and have a conversation with the vendor, then pivot if necessary to keep goods moving and customers happy.
Acceptance Rate
Acceptance rate is one of the best indicators of carrier performance. If performance is high, the percentage of tenders accepted out of the total tenders issued to the carrier should be reflected. Alternatively, lower acceptance rates can be a clear indication of larger underlying issues such as capacity challenges, payment timeliness, and more.
Average Response Time
Everything within supply chain management moves at an incredible pace, and carriers are expected to be responsive when problems arise or a shift is needed. Within a carrier scorecard, response time can be broken down into elapsed between tender creation and receiving a response (Accept or Reject).
On-Time Invoicing and Billing
Cashflow is one of the most important KPIs that you should be measuring, and predictability requires carriers to invoice on time based on their contracts. The agreed-up billing cycle may vary from one carrier to another, but when carriers invoice on time, you can have a clear understanding of your transportation management spend and respond in real-time.
With respect to the carrier scorecard, this KPI should carry significant weight because it directly impacts your bottom line, especially during peak freight seasons.
Billing Accuracy
On-time is certainly important, but billing accuracy should also be closely monitored. Carriers that are plagued with incorrect billing throw a wrench in the entire payment process. FAP systems can help curb the problem by catching billing errors in real-time, but frequent billing problems should be considered a red flag.
Carrier Scorecard Customization
Even if you are only monitoring the scorecard components that we highlighted above, the possibility of data overload still exists. Customization is essential because no two businesses operate exactly the same or have the same goals.
Depending on your organization’s needs, you may discover that the billing and backend KPIs need to be a focal point as opposed to front end components such as response rate. The FAP system in use should easily accommodate the need for customized scorecards that can be adjusted and filtered easily.
Setting up the scorecard and aligning the KPIs with your business needs should be the first step in the process. Even if the FAP system in use provides an out-of-the-box carrier scorecard, it may not highlight the metrics that are most relevant to your organization.
Improving Carrier Performance With Trax
Carrier scorecards are one of the most effective tools for measuring vendor carrier performance. The insights gained through aggregated data and real-time analysis open the door to better vendor relationships, increased ROI, and improved visibility, helping to enhance efficiency and reduce transportation costs.
Trax’s freight audit and payment system streamlines data and provides actionable insights into carrier performance through a comprehensive scorecard that can scale with your business. Our systems leverage cutting-edge machine learning and AI to drive performance and reduce costs.
To learn more about the carrier scorecard within our FAP system, connect with our team and schedule a consultation.