It’s long past time to standardize freight industry performance metrics.
As the freight market settles into a recession, shippers, brokers and carriers have a moment to catch their collective breath and address the underlying performance and collaboration issues in the supply chain that nearly halted the global economy over the past three years. That’s why it’s so crucial for the industry to adopt industry performance standards now.
We’ve observed how performance standards have transformed many of America’s biggest industries for the better. Now, it’s time to follow in their footsteps.
The first step we need to take as an industry is to agree on the most common performance metrics to standardize. Once these standard definitions are in place, we’ll see positive, industry-wide transformation. Most importantly, aggregating important data across the entire freight industry will unlock unprecedented collaboration between brokers and their network partners. So which metrics should we all be measuring the same way?
Freight Performance Metrics Everyone Should Be Tracking
Here at ISO, we have access to a large volume of freight performance data thanks to our growing network of shippers and logistics service providers. Analyzing our network data has helped us identify the most common and essential metrics everyone should be tracking right now for maximum impact.
These are the first and most important metrics logistics service providers should standardize:
The first critical metric everyone should be tracking is whether a carrier is on-time to appointments. This includes pick-up and delivery dates and times.
Proposed standard measurement thresholds:
- When measuring whether a carrier is on time to an appointment, we propose a 30- or 60-minute threshold.
- To determine on-time to RDD, we propose a 24-hour threshold.
On Time Pickup and On Time Delivery
On-time pickup is the standard measure of timeliness for a scheduled pickup at a shipper facility. By the same token, on-time delivery is measured by whether a carrier delivers to customer and retailer facilities in a timely manner.
Proposed measurement definitions:
- On time to the appointment
- On time to the appointment + 60 minutes
- On time to the required delivery date (RDD) (24 hour threshold)
These options will allow brokers to filter a range of carriers based on specific customer requirements.
Tracking tender acceptance metrics will help shippers better identify carriers and brokers that accept their tender, and how frequently they do so.
Bounce rate describes how frequently a broker bounces from a load it was scheduled to pick up. The ability to access these rates at a glance will help brokers find their next carrier after a bounce.
Finally, it’s important to monitor how well a broker or carrier complies with the tracking requirements specified in the contract agreement between them and their shipper.
Looking Ahead: A Roadmap To Standardization
Standardization is a collaborative effort across the industry. It will take as many key stakeholders as possible working together to solidify these new standards. There is an essential roadmap to standardization that must be in play in order to adopt these industry-wide changes.
1. The industry works together to define how we measure service KPIs.
In order for performance metrics to be adopted, the entire industry must be involved. All parties in the logistics supply chain will have to work together to decide which metrics we standardize, and how the industry will measure them. Through this highly collaborative process, stakeholders across the board will get a chance to make their voices heard.
We need to hear from shippers, carriers, and brokers. What metrics do you believe should be standardized? It will also be essential to hear from industry groups such as CSCMP, Consumer Brands Association, TIA, ATA, and others.
Institutions of higher education that focus on supply chain research, such as MIT and the University of Tennessee, would also provide invaluable insights. Together, these groups would form the first Freight Performance Standards Consortium.
By facilitating regular meetings, events, and conferences, the consortium would help to maintain industry standards and advance the conversation. Third-party tech partners would be invited to weigh in, as they are instrumental in helping these groups track and measure performance.
2. Neutral technology facilitates performance measurement.
The next step toward standardization is selecting a neutral technology or platform that facilitates consistent and unbiased performance management. Existing players in the logistics supply chain naturally have conflicts of interest and are not neutral, so they can’t be the arbiters of their own performance measurement. An unbiased third party is necessary to take this task off their hands.
Third-party tech partners that can play “Switzerland” and maintain neutrality and transparency regardless of market shifts or pressures. When resources are constrained, conflicts of interest and opportunities to profit will always win the day. A neutral platform that can process transportation data from each party and function as a single source of truth for performance measurement is essential to avoiding these conflicts of interest.
3. Industry leaders drive adoption.
Once industry leaders have begun to collaborate on standard measurement definitions and a neutral technology emerges, it will be time for industry leaders to adopt both in practice. It will take time to revolutionize performance measurement across the freight industry. This process will be iterative, and will require ongoing industry communication and collaboration.
Because industry change will take a significant amount of time, and since there are currently no standards in place, the most important thing to do right now is just to get started. All it will take to start demonstrating meaningful change is a few decisive industry leaders adopting and implementing these new standards.
4. As Industry Leaders Drive Adoption, Performance Standards Will Start to Impact Everything We Do
Once we’ve defined and adopted standards, they will begin to trickle down into everything we do in the industry.
Performance Standards will Raise the Bar
Metrics will force every stakeholder to prioritize doing their jobs as clearly defined in every rate confirmation, load tender and order that’s issued. That’s because metrics inform access, and pricing, to freight based on performance.
Each party will be able to see performance reports at a glance, and will likely be more willing to work with partners that consistently deliver top performance. Every load accepted will become a commitment to do the job as described in the tender. RFPs can be administered appropriately according to their performance metrics, service, and customer expectations.
Pricing Structures Will Become More Dynamic
Top performers will be better compensated for their work. As standards are adopted, they will open the door to more creative pricing structures and incentives for a job well done. Shippers and brokers may begin to adopt more dynamic pricing structures that factor ongoing performance into the mix.
Industry-Related Waste Will Be Reduced
Adopting industry profiling will also help to eliminate waste. This is a bonus for companies looking to address sustainability in their business models. Here’s what that might look like.
- Digital freight matching will be powered by a universal understanding of performance and the true costs behind every load.
- Reduction of empty miles will result in reduced overall shipping costs, ultimately reducing consumer costs.
- Carriers with distinct operating networks that were once difficult or impossible to find will be visible to the industry.
- Metrics will enable carrier networks to be matched with the right broker and shipper networks.
- Industry stakeholders will turn their focus to driving efficiencies to meet customer expectations.
Share Your Feedback on Industry Performance Metrics
It’s crucial that all industry parties come together to define and adopt industry standards. We invite you to come alongside us in making this roadmap to performance metrics a reality. Now is the time; the freight industry can’t afford to wait.
We need your collaboration and engagement in driving these standards forward. If you agree, reach out to us directly. We want to hear from you and welcome your feedback. Be a part of the consortium and help us determine how to define these metrics for the industry moving forward.