What Is a Carrier Scorecard?
Carrier scorecards are a tool used to breakdown qualitative and quantitative attributes of carriers to evaluate performance. ‘Carriers’ is a term that also encompasses logistic service providers (LSPs) and third-party logistic providers (3PLs).
Different carriers come with different qualities, strengths, and weaknesses. Carrier scorecards offer a way to objectively analyze carriers through KPIs, providing a significant step in the maturity of transportation spend management in your company. It’s a step beyond just seeing what’s happening—it’s maturing into managing expected performance. Carrier scorecards provide visibility so you can be proactive, not reactive.
Think of carrier scorecards like a “baseball card” crossed with a report card—it offers a set of stats and results that form a quantifiable report, which automatically assigns a grade to each carrier based on a shipper’s objectives. It’s a great way to get a macro view of each carrier, grading them based on their track record and attributes. Carrier scorecards provide the decision-maker with a clear view on which carrier to choose for a certain job.
Carrier scorecards an effective tool that you can customize based on what KPIs are most important to your company or the job. At Trax, we believe that the most important KPIs to consider are:
- Timeliness—On-time freight delivery is crucial. Knowing the timeliness and accuracy of any potential carrier could make the difference between a successful relationship and a costly one.
- On-time invoicing and payment—Cash flow is a huge measurement lever. Having money set aside in accruals that isn’t’ being invested in projects or technology elsewhere is ineffective money. The ability to manage carrier invoice timing creates free cash flow.
- Frequency of damaged shipments—Damaged shipments is an issue that incurs high costs, lost clients, and a bad reputation. Understanding the processes of a carrier and how they deal with shipments is another important KPI to include in a scorecard.
- Billing accuracy—Accurate billing can make the difference when it comes to cutting unnecessary costs. The more precise the carrier’s billing, the less time, money, and effort are spent on remedying mistakes rather than transportation optimization. It also simplifies auditing. Ensuring that a carrier has high billing accuracy is paramount. According to Gartner, as many as 5-15% of all shipping invoices are inaccurate. For example, if a company manages $40M in transportation spend, inaccurate invoices can add up to approximately $4M in expense.
- Responsiveness—Assessing how quickly a carrier responds, and more importantly, how they resolve your request is important in deciding a long-term partner. Evaluating carriers’ abilities to respond promptly and jump into action to resolve potential problems gives you a clear indication on who to trust with invaluable shipments.
- Equipment condition—If a carrier’s equipment is deemed subpar, it may affect delivery times, damaged goods, or create superfluous problems. Assessing the condition of a carrier’s equipment gives you a better indication of their service quality, and what type of shipments they’re prepared to handle.
- Carrier load preferences—Carrier scorecards can aid in segregating your carriers into divisions based on their preferred load types. By dividing carriers into those that prefer FCL or LCL, you can make micro-level comparisons, ensuring you get the best possible option for each type of shipment.
- Data governance—Carriers that can provide enhanced data management, along with an unambiguous audit process, give you better data to streamline operations, make informed decisions, and adjust when needed.
Benefits of Carrier Scorecards
Because carrier scorecards help transform every aspect of a carrier’s performance into a gradable metric, your company gains a multitude of benefits. Here are some of the benefits that our Trax clients have experienced:
Strengthens a partnership
Carrier scorecards impact the relationship your company has with its vendors. The partnership between client and carrier is one built on mutual growth—the bigger your company gets, the more business the carrier obtains. This translates to both entities growing in tandem.
Implementing scorecards helps you to define strengths and shortcomings of any possible carrier. Discussing these strengths and weaknesses with the carrier helps them improve and, ultimately, gives you better carrier service. Companies that use consistent performance measurements, such as carrier scorecards, enhance supplier performance by more than 26%, on average.
Cutting your company’s redundant costs, billing errors, and more boosts your ROI. Carrier scorecards help you identify which carriers perform well in what areas, saving you time and money. Logistic services come down to two things: quality of services and the bottom line. Using carrier scorecards effectively can improve both.
Offers proactive course correction
Being proactive to course correct before a problem arises saves time, money, and headaches, which is another benefit of carrier scorecards. For example, pandemics, natural disasters, and other unexpected factors often lead to a plethora of issues in the logistics industry. Carrier scorecards help you be better prepared to determine which carriers are best equipped to meet your needs during uncertain times.
Carrier scorecards help create a simplified algorithm so your decisions are data driven rather than guesses. Increased visibility means you’ll get better results. Tracking and managing carriers via scorecards gives you an edge over competitors that overlook this process.
Many top-tier vendors request that their clients keep scorecards to help them improve performance. According to an Aberdeen/iSource study, enterprises that shared performance data with their vendors were able to generate a whopping 61% improvement in overall vendor performance. This approach, which benefits both the vendor and client, is becoming common practice in order to remain competitive.
Boosts brand image
Choosing the right vendor for the job will undoubtedly affect the overall quality of your service. So, it’s no surprise that carrier scorecards play a vital role in maintaining the company image. High-quality services offered for reasonable prices are a staple of any good brand, and carrier scorecards can help you achieve both.
Trax is the global leader in Transportation Spend Management solutions. We partner with the most global and complex brands to drive meaningful optimizations and savings through industry-leading technology solutions and world-class advisory services. With the largest global footprint spanning North America, Latin America, Asia, and Europe, we enable our clients to have greater control over their transportation performance and spend. Our focus is on your success.