As the management consultant Peter Drucker once said, “If you can’t measure it, you can’t manage it!” This is definitely true for anyone involved in Transportation. Large shippers will have a huge number of shipments, on a variety of carriers, going to thousands of places, creating a mind-boggling array of data points.
Even if we can get the data to measure this activity, we also need to summarize and organize it into insightful Transportation Management Reports that provide “actionable information”. Here are the 5 most important Transportation Management Reports we believe all shippers need.
1. On-Time Performance
A certainty in the manufacturing, wholesale, and retail industries is that the value of the product and the customer relationship you are managing far exceeds the cost of the freight to get it to them. Unfortunately a lot of shippers are not aware they have a delivery problem until they hear about it from their Sales team – usually because the customers are complaining – loudly!
Ensuring that your product is delivered within the time-frames expected by your customer is the single most important measure of success for many shippers. Leading shippers measure their performance proactively – breaking down results by mode, carrier, customer and region. Worrisome trends can be identified and corrected before they translate into customer relationship issues. And when it does become an issue, shippers have the data they need to isolate the root cause and ensure that the solutions have the desired impact.
Unfortunately a lot of shippers compile this information by aggregating (a fancy word for “cutting & pasting”) reports submitted by carriers. This is tedious and time consuming for both carriers and shippers. However this information can also be generated by collecting it electronically either via a TMS or Freight Audit solution.
The objective of a company’s Transportation team is to safely ship the most amount of freight at the least amount of cost, while meeting delivery expectations, minimizing damage or defects – and still understanding and addressing associated supply chain impacts. This is basically a fancy way of saying “you need to be as productive as possible”.
Measures of productivity are usually financial (i.e. $/lb, $/Case, $/Load) but can also be operational (i.e. Lbs/Load, Cases/Order). These can be hard variables to benchmark, because so much can change from period to period. Sales volumes change, order sizes change, and the mix of customers and locations change. However over the long term, good transportation managers will show a consistent trend of improved performance because they are actively managing each factor that affects productivity. This will include modal utilization, carrier rates, order sizes, consolidation strategies, and systems adoption.
The key to managing this is a daily/weekly/monthly report that shows current productivity and changes in the primary drivers that are impacting this. Breaking this information down by customer, region, line of business and so on will allow trends and potential solutions to be more easily identified.
3. Product or Business Level Costing
The tight economy we have been experiencing for the last few years has resulted in sharpened focus on costs and profitability. In the past it may have been possible to allocate transportation costs broadly across all product lines or locations. However, with the need to understand and manage costs, these allocations are becoming much more specific. Without this information, it is very possible that the actual or real cost of transportation makes some of your product lines or customers unattractive, or even unprofitable.
Also, with increasing fuel surcharges affecting everyone, knowing how these are impacting your COGs will be vital in establishing pricing strategies to pass these increases along to customers.
4. Customer Cost-To-Serve
Not all customers are created equal. They order in different quantities, from different geographies and have different policies for receiving products that can result in fines, detention or claims. All of these factors can roll up into a vast difference in Cost-To-Serve, which should be taken into account when managing customer relationships and pricing products.
Another reason why this report is so important is the growth in Customer Pick-Up (CPU) orders. In this situation the receiver will often ask for a Freight Allowance (discount) to be applied to the cost of the product. A solid Cost-To-Serve report will arm your company with the correct information to strike a beneficial agreement with your customer.
5. Accessorial Reports
While there are some accessorial charges that are just part of doing business, many of these are avoidable and result from volatility in a firm’s transportation process.
Unlike some cost-reduction opportunities that may take months to implement because they require contract re-negotiations or changes in shipping policies, eliminating certain accessorial charges can be done in a matter of days or weeks.
A good example is Detention, which could result from a number of service related factors caused by a shipper, carrier or even consignee. Getting a weekly and monthly report on all accessorial charges incurred is the first step in enabling a Transportation Manager to focus improvement efforts and reduce these costs.