Have you ever heard the old adage ‘if you can’t measure it you can’t manage it’? Nowhere is this more accurate than in logistics.
It seems that few companies understand their current transport activity, what the cost drivers are or on the performance indicators that drive customer satisfaction. These are all areas that companies should be able to identify and seek to improve. However, the majority are failing to recognise the importance of measuring factors such as these.
There are many influencers on a company’s average transport costs – and these costs can vary from month to month. Most companies can put together an ‘average’ cost for their transport activity when pricing for new business, but they have no handle on what the true cost is and how to compare this with an alternative approach.
With so many variants impacting prices, by implementing a mechanism to capture true cost data, companies can truly understand the impact of any improvements made. Once a process for capturing accurate data has been made, key performance indicators (KPIs) within the business can be identified.
Key performance indicators
The reason they are known as key performance indicators is that they need to be key to your business success. To begin with, concentrate on the ‘what’ and the ‘why’: what is the right measure, why is it and what should the target be? This will do two important things: direct your business to the important measures and drive a meaningful KPI into your business.
KPIs should be to enable your business to measure levels of service, inefficiency and cost through aspects such as cost per unit, vehicle utilisation, delivery size and service level. By measuring levels like these and setting targets, businesses can achieve immediate improvements.
Personalise to your business
It’s easy to look at a KPI like vehicle utilisation with the view that, ‘currently I’m achieving far greater than this in my business, so I’m obviously doing OK’. Unfortunately, this is not the case as the KPI is individual to each specific client operation: every business has their own different challenges, be they internal, external or market driven. Therefore, it’s critical that the KPI is individually tailored to the client’s business.
Steps for continuous improvement:
- Define KPIs
- Agree on an achievable target which is higher than the current average
- Measure the KPI on a daily basis and record
- Ensure that the process continues
- Be more consistent
- Analyse the data and identify ways of improving
- Implement improvements
- Measure the KPI, record and capture the improvement
- Raise the bar – increase the target to higher than current levels
- Start again at step 1
Ultimately, having clear, evidence-based knowledge of your business is always a powerful tool, enabling the identification of what is working well, and what needs improvement. In the logistics sector, we should always be aiming to measure what we are doing – and to act on those results to ensure that processes, services and ultimately the business itself is continuously growing and improving.
3T’s Solo software automates much of the activity involved in managing a transport operation, including order consolidation, transport optimisation, carrier selection and allocation, carrier communication, shipment pricing and more. The transport management system is designed to enable clients to reduce their transport cost. For more information, call us today on 0116 2824 111.