KPIs

11 KPIs to Measure Your Carrier Performance

by Nadia Brosious

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1) On-Time Payment

Cash flow is a crucial indicator of business health and profitability. It’s measured by dividing the number of on-time payments by the total payments made. A rate below 90 percent is unacceptable, as it may indicate underlying issues in financial management or vendor relationships.

2) Number of EDI or API Invoices

Transitioning from paper-based to EDI (Electronic Data Interchange) or API invoices can significantly improve your business operations. These methods are approximately 35 percent cheaper to process and significantly reduce errors and inefficiencies associated with manual invoice handling.

3) Capacity Issues

A carrier’s inability to manage your shipments can lead to numerous problems, including late pickups, delayed deliveries, and unmet customer needs. KPIs like cost per item, percentage of perfect shipments, dock utilization, and time from pickup to departure can help measure performance in this area.

4) Routing Guide Compliance

Ensuring compliance with your routing guide can improve productivity by avoiding costly errors in your supply chain. Providing vendors with clear routing instructions can reduce service delays and unnecessary expenses. Compare your expected savings against actual results to measure the effectiveness of your routing guide.

5) Monitor Tenders Accepted Versus Tenders Declined

Tracking the ratio of accepted to declined tenders reveals whether carriers are meeting their contractual obligations. If a preferred carrier frequently declines tenders, costs may increase, potentially affecting your budget. Understanding the reasons behind declined tenders can help you improve this KPI.

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6) Monitor Driver Performance

Driver performance is a crucial factor when evaluating carriers. Assess whether drivers comply with safety rules and drug and alcohol regulations, handle freight properly, and meet pickup and delivery schedules. Choosing carriers with high-performing drivers ensures timely and safe delivery of your goods, reducing the risk of damage.

7) Transportation Utilization

Optimizing space utilization in transportation—such as switching from LTL (Less-than-Truckload) to FTL (Full-Truckload)—can maximize your spending efficiency. Efficient transportation is also environmentally friendly, reducing emissions and fuel consumption and contributing to a greener business operation.

8) Accessorials as a Percent of Freight

Divide any accessorial charges, including fuel, permits, or fees, by the total freight expenditures for a period. If you notice an increase in these costs, consider re-evaluating your processes to eliminate inefficiencies. A high percentage indicates inefficiencies or transportation issues. It is essential to control and optimize accessorials and avoid excess accessorials, which can erode profits. High accessorial percentages can mean operational inefficiencies.

 Some examples include long loading and unloading times, inefficient route planning, or communication breakdowns. Identifying the inefficiency can lead to improvements in operational efficiency. Another critical reason to avoid excess accessorials is to maintain customer satisfaction through transparent, accurate pricing and reliable services. Tracking accessorial usage makes it possible to track trends and patterns. If the number of accessorials rises, it might be a signal to improve processes and or renegotiate contracts. Resources can be better allocated to address underlying issues that lead to the charges. Minimizing charges is attractive to customers seeking cost-effective solutions. Monitoring this KPI as a percentage of freight helps ensure compliance with various regulations and standards. 

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9) Invoice Accuracy

 Invoice accuracy is crucial in maintaining financial integrity and customer satisfaction. Accurate invoices ensure the amounts billed and received match the goods and services provided to avoid discrepancies or errors. Another economic benefit to invoice accuracy is that it helps create better cash flow management. Businesses can predict and plan for revenue numbers more effectively and plan better financing and decision-making. It is essential to measure the number of accurate invoices and categorize the inaccurate invoices by carrier and reason. Continual issues with incorrect invoices can indicate performance, and you can limit or avoid using this carrier.

This will also reduce the need for additional administrative work to fix errors, like reissuing paperwork and handling customer disputes, which frees up time to dedicate to other business activities. Maintaining invoice accuracy also prevents legal troubles because many industries have regulations regarding billing and invoicing.

Invoice accuracy is critical. Inaccurate invoicing compromises data integrity and can lead to finance mismanagement. Over or undercharging clients because of billing errors can reduce profits. Lastly, accurate invoices are essential to financial reporting. Stakeholders, investors, lenders, and regulatory authorities need precise information to assess the quality of your business correctly. 

10) Number of Damage Claims

This KPI measures the frequency or count of damage claims filed against a freight company. It monitors and assesses the performance of a freight business regarding the damages incurred to the goods transported. There is always a risk of damaged freight during shipping; however, the number of freight claims is essential as it can significantly impact the bottom line. You can calculate the effect by dividing the total cost of loss and damage claims by the total freight costs. The higher the number, the higher the likelihood that packaging or processing carriers will occur on the carrier’s end.

The resulting numbers provide insights into how often customers receive damaged shipments. Monitoring these numbers periodically (monthly, quarterly, and annually) can reveal trends, with increasing numbers indicating a worsening issue and decreasing numbers indicating improvements in operations. A high number of damaged shipments likely indicates customer dissatisfaction and a potential loss of business, while a low number indicates higher customer satisfaction.

The number of damage claims is an important KPI to monitor because it indicates potential financial risks. Every damage claim has a cost associated with the investigation, processing, and customer compensation, and the more claims, the more fees your business faces and an increase in operational expenses. Frequent claims can even be a sign of potential legal risks if the claims are filed due to negligence or non-compliance with standards and regulations. Determining the numbers can significantly improve your quality control by identifying areas where improvements are needed, like packaging, handling, and transportation. 

KPIs

11) The Carrier’s Performance

A carrier’s ability to meet On-Time Pickup, On-Time Departure, and On-Time Delivery will directly affect your shipment and customer success. Measure the percentage of shipments picked up, departed, and delivered on time. A rate of 90% or higher is generally considered acceptable. It is vital to always strive for on-time performance to maintain a good reputation and fulfill contract obligations and regulatory compliance. 

Improving your company’s on-time performance KPI will significantly benefit your business. This metric is critical for shaping your brand image, reputation, and financial stability. Implementing procedures that ensure timely pickups and deliveries will lead to satisfied customers, fostering trust and loyalty. As your brand becomes known for reliability, it encourages word-of-mouth referrals, repeat business, and the potential for new partnerships.

Managing time wisely will make you a more efficient carrier and save your company costs in the long run. Analyzing late deliveries can help improve processes, routes, and resource allocation. Customers prioritize the reliable carrier over the untrustworthy one, and a high on-time performance can boost your company’s competitive advantage.

 Analyzing your supply chain processes can increase cost efficiency. Late deliveries can incur fees and additional costs for the company and freight customers. Maintaining on-time performance can reduce these extra costs. At FreightCenter, we continuously evaluate our carriers and most recently awarded our Carrier of the Year Award based on these criteria and the dedication and commitment to customer service standards.

Are you ready to ship? Compare carrier rates today. Our shipping agents are always available to assist; call us at 800.716.7608 to speak with an expert, or get a quote online now for free!

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