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10 supply chain metrics you should be tracking in 2020
From sourcing your materials to ensuring on-time delivery of your goods, it’s crucial that your supply chain works seamlessly to keep your costs low and your profits (and customer satisfaction) high. Without accurate and targeted tracking, inefficiencies can slip through the cracks, and it becomes difficult to know exactly where improvements need to be made.
Establishing key performance indicators (KPIs) within your supply chain allows you to make strategic decisions based on hard data, as well as be agile within your supply chain to address specific issues (rather than reinventing the entire wheel of your processes). It’s important, though, to not only make sure you use KPIs to track your supply chain efficiency, but that you choose the right KPIs to measure—ones that are directly tied to your business’ success.
Wondering where to start? We’ll help you understand how to target the right KPIs for your supply chain, as well as some of the top metrics to consider implementing for the coming year and beyond.
Setting up the right KPIs
The first way to tell whether your chosen supply chain KPI is a good match for your business is to determine whether it’s SMART. This isn’t a measure of its relative intelligence; rather, SMART is an acronym used throughout the global business community to whittle down a massive list of potential metrics into ones that genuinely fit their business. Your KPIs are SMART if they are:
- Specific: Steer vague statements into more granular detail. Be able to list out the “who, what, where, when, and why” of your chosen performance metric.
- Measurable: You should be able to put a number or relevant figure to your performance indicator, so that you can track tangible differences. Rather than, “We want fewer claims ratios this year,” consider, “We want to reduce our claims ratio to .05% or less.”
- Achievable: It’s excellent to set lofty goals for your company, but make sure that they’re truly possible to meet. You want to challenge yourself to improve or maintain an already excellent standard, but not set yourself up for failure or lose focus by shooting for the moon.
- Relevant: Simply put, stay in your lane! (Pun intended.) If the supply side of your business is entirely out of your control, don’t set metrics based on acquisition of materials. Your KPIs should be directly tied to what you do now, and what you have real potential to do in the future.
- Timely: Without a target, it’s unlikely you’ll be able to focus and achieve everything you want to. Giving a timeline provides your team with a set window within which to accurately scope and plan. That said, your target should be realistic so that you have the highest possible opportunity to meet it.
It’s also important that you not go overboard and set too many metrics to which you end up holding your business hostage. If your list of KPIs reads more like a phone book, you’ve spread yourself too thin; it will be virtually impossible to meet your goals and accurately understand where your supply chain is truly succeeding and where it needs support. The word “key” in KPI is, well, key—you want the most high-leverage metrics that actually fit your business.
Top 10 supply chain KPIs
With all of that said, let’s go into some of the most popular supply chain KPIs that freight businesses like yours are using to measure their success. Remember, this is a general list for the freight industry as a whole—when you’re choosing your own KPIs, be SMART about it!
1. Freight bill accuracy
Freight bill errors beget even more headaches—issues such as incorrect weights or incomplete information can lead to reclass fees, unbudgeted accessorials, and more. Ensuring your freight bills are consistently accurate is perhaps one of the lowest-hanging fruits to keeping your business profitable and preventing unnecessary shipment delays.
2. Perfect order index
Tied closely to a few other KPIs in this list (such as freight bill accuracy, damage claims ratio, and on-time delivery), this metric tracks the percentage of your orders that have absolutely zero associated errors. The perfect order metric includes each stage of a purchase order: procurement, production, transportation, and warehousing. Taking an order correctly and executing it without incident every time isn’t an easy task, but by tracking your POI, you can identify exactly which stage improvements can be made within.
3. On-time delivery rates
As is likely self-evident, this tracks how many of your shipments arrive at their final destinations on time versus those that are delivered late. Measuring how many of your goods arrive to your customer on time is an excellent way to identify bottlenecks in your supply chain. For example, perhaps you’ve consistently experienced late pickups that contribute to a lower on-time delivery rate … in which event, that may be another KPI you want to track!
4. Customer order cycle time
Your order cycle time calculates how long the process takes from your customer’s initial purchase order all the way to the delivery of their shipment. This supply chain KPI is very closely tied to your on-time delivery rate: the higher the rate of late shipments, the higher your cycle time will be.
5. Fill rate
Tracking your fill rate helps you compare how much of an entire order you’re able to fulfill with the first shipment you send. This KPI is especially important if you’ve found spikes in your shipment costs. The lower your fill rate, the more shipments you’ll need to execute to deliver the client’s freight, which can undoubtedly increase your overall shipment costs.
6. Transit time
In order to properly forecast to customers how long a delivery will take, you’ll want to track the average transit time from when the shipment leaves your business to when it reaches its final location. Overpromising on delivery windows can lead to unhappy customers and lost business. Relatedly, if you notice this number fluctuating wildly, it indicates inefficiencies somewhere in the delivery process.
7. Load & unload time
In the freight and shipping industry, every moment matters. The faster you’re able to load and unload a truck without errors, the quicker those trucks can get out the door and be ready for your next delivery. Creating efficiencies in your loading and unloading processes can pay massive dividends down the road.
8. Maintenance costs
Maintenance is necessary to the health of any freight and shipping business. It’s wise to understand where the majority of your maintenance costs lie—for example, are they mostly preventative, or are you finding you need consistent repairs? Are you outsourcing most of your maintenance needs or handling them in-house? This KPI is especially important if you’re on the carrier side of the freight industry, where your trucks and equipment are constantly in use and under threat of harsher wear and tear.
9. Damage claims ratio
Understanding how and why damage occurs to your freight is your first line of defense toward preventing it. For example, suppose you consistently notice that shipments are being delivered damaged when a truck travels a specific route. In that case, you’ll be able to reroute your future freight to avoid this scenario altogether. Tracking your damage claims will reveal patterns that otherwise may have gone unnoticed.
10. Fuel efficiency
Tracking your fuel orders and output can help you answer questions such as: Are you ordering too much fuel for what you actually need? Are your shipments optimized to the right size/weight to maximize your fuel efficiency? Is your loading and unloading on point, or are trucks often sitting idle (and wasting fuel)? Plus, if you’re looking to implement more sustainable shipping practices into your supply chain, improving your fuel efficiency is one of the first ways you can reduce your carbon output.
Improving your freight supply chain KPIs
Once you’ve begun tracking your chosen metrics, there are multiple approaches you can take to address inefficiencies that crop up. However, what if you could address multiple supply chain KPIs with just a single step?
Choosing FlockDirect guarantees shared truckload (STL) shipping, which will help you address nearly every one of the key performance indicators above. Shared truckload pools multiple shipments moving in the same direction onto one multi-stop truck. Here’s how it helps:
- The Flock Platform is intuitive and transparent, walking you through all of your freight bill information (including any accessorials that you may miss). The result is an accurate bill of lading and a clear path to purchase order efficiency.
- FlockDirect taps into the TL network to find a carrier that can move your shipment directly to its final destination. Our proprietary technology finds the most efficient route for your shipments and ensures they bypass terminals, where they’re far likelier to incur damage due to handling. With FlockDirect’s shared truckload service, freight arrives safe, sound, and damage-free.
- Utilizing FlockDirect’s efficient shipping method means your items arrive on time, every time. Your transit time goes down, your on-time delivery ratio goes up, and your customers stay happy.
- Flock Freight is a proud B Corp and EPA SmartWay partner, doing our part to provide and implement sustainable freight solutions to achieve environmentally responsible shipping. When you choose FlockDirect, you remove innumerable trucks from the roads, resulting in fewer miles driven, less carbon output, and higher fuel efficiency.