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7 most important KPIs for freight management

5 min read
06.09.2020

7 most important KPIs for freight management

Freight management is a quite complex process and it can be broken down into many operations. In order to keep them under control and optimize the workflow, a lot of time should be spent on improving the system. This may seem complicated due to a large number of tasks. However, if you have the proper tools to set up the process, this becomes much easier.

To succeed in managing freight, it is important to highlight the key performance indicators and monitor their changes. Of course, each organization has its own characteristics, and its metrics may differ. But there are several universal KPIs for the logistics industry and freight in particular, which will be equally useful to all companies specializing in shipping.

In this article, we offer you to get acquainted with the few indicators that will help analyze the main logistics processes.

  1. Lead time

    This KPI helps to track the time for the operation from start to finish. It is most effective for freight forwarders. Timing metrics can guide professionals on how much time is spent at each stage of the supply chain. After that, defining strategies for optimizing processes becomes much easier. Delivery times can be considered as one common metric or can be broken down into components. As a rule, there are three main stages. Order processing time, loading and delivery itself.

    Processing time starts from the moment when the customer places the order and before you start working on it. You can consider this KPI as a metric tracking administrative tasks related to the order. The loading process is calculated according to the time spent on loading the vehicle. The third stage is delivery. This is a key performance indicator that helps calculate the time required to get the order to the client. This metric refers to the time starting after loading the products.

  2. Truck turning

    This KPI, as well as all the others, applies to all types of shipping- trucks, ships, aircraft. It helps to measure the entire distance the truck travels, that is, the average time spent on the way to the client, and the return of the truck/ship/aircraft to your company. For transportation by land, this metric is particularly effective.

    It is important to consider when the starting point for the indicator is. It is better to start the countdown after completing the paperwork with the client so you can also control the time of loading the order into the truck to speed up the process.

  3. Labor productivity

    If you look at labor productivity in the context of freight management, then it refers to whether the salary of employees matches to their efficiency. Labor productivity is directly related to how easily the cargo is transported. If for some employees, you notice a decrease in the results of this metric, it means that they have some issues with sorting, loading or unloading the cargo at their destinations. If the time spent is more than it is mentioned in the initial plan it can lead to additional costs.

  4. Fuel efficiency

    Fuel efficiency is another key indicator in freight management. It is critical to consider this not only because it makes it easier for you to calculate the expenses but also because sometimes government agencies require accountability and compliance with environmental initiatives to reduce emissions and fuel use. In addition, the prices rise as well as the demand. Not tracking this KPI, puts the organization in a position where it can incur losses as well as get a penalty statement from higher authorities.

    More importantly, fuel efficiency is crucial to the organization itself. After all, fuel is one of the main operating costs for companies specializing in shipping. Tracking fuel efficiency makes it easier to understand whether it is necessary to reduce its use or otherwise optimize the loading. This will be possible in case you purchase large vehicles and decide to keep those filled when in circulation.

  5. Loading time

    When speaking about the loading time, we mean tracking the process of timely delivery. There are several reasons why considering this KPI is so important. If you know that the loading might take long, you can quickly take action. For example, you could redirect the existing load while leaving the rest of the trucks to complete the task. Also there exists a personnel shortage among the freight companies. These are actively looking for drivers, who in their turn ask for wage increases since they are familiar with the situation on the labor market. And this leads to additional costs.

    Tracking the loading time will also help you an understand that you are having problems somewhere in the process. This may be poor lighting in the warehouse, and may even be because of its size. In other words, a given KPI can indicate if there is anything to be improved physically in order to achieve the greatest efficiency.

  6. On time pick up and delivery

    Another important metric that is useful for organizations specializing in shipping is keeping track of how much time is spent picking up the shipment and delivering it to the customer.

    As soon as the customer has paid for the delivery, they expect you to follow the schedule. The task of freight companies is meeting the deadlines. This KPI helps inform everyone involved in the process about when the packages are sent and delivered. This means that it is possible to make a plan the package delivery, taking into account all the risks and reserving some additional time for unforeseen situations. The tracking process ends when the customer receives the ordered shipment.

  7. Number of incidents

    The number of incidents as a key performance indicator will help to take control of possible risks and to take into account all possible incidents. Freight forwarders who want to increase their productivity, are the ones that will need this KPI the most. Given these details and information, they can rectify the situation on time or prevent it, which will make the shipping not only faster, but also safer for both the driver and the company.

All of the above mentioned key performance indicators for freight management optimization are very important but there are many others as well. It all depends on the segmentation of tasks within a particular organization and the scope of its activities. While tracking the main ones we have listed above and applying those to the management of your sipping activities it will be easier to understand what additional KPIs you need to improve the performance of your company.

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