By Bryan Wyatt | Senior Manager, Transportation | Chainalytics
With the amount of complexity surrounding today’s transportation operations, managers need to stay in front of issues and anticipate problems with their transportation network. They need to have the right metrics at their disposal so they can see when their operation is trending in the right or the wrong direction.
There are several metrics each network should create. It is important, though, not to create too many metrics or you will lose focus on the few which truly drive your business. Metrics to consider should be accurate trailer closing times at the DC, product count the carrier receives, and carrier milestones throughout the transportation network. Additional metrics include on-time performance to commitment, EDI compliance, truck close deadlines, product accuracy of items loaded, and on-time delivery.
Costs also need monitoring and a good ratio should be created to represent transportation as a cost of goods sold (COGS) percentage. Furthermore, transportation teams should also manage and monitor the utilization of each truck. Even if the trucks are managed by parcel, home delivery or LTL carriers, it is important to treat the truck as your own and maximize trailer utilization as you are loading it at your DC.
Transportation teams should also develop the means of forecasting transportation demand based on sales forecasts and track the performance to the forecast. This forecast should be shared on a regular basis with the carriers to make sure they are preparing for changes in demand due to seasonality or planned spikes in sales.
Timeliness of this information is critical. Without timely data which can be reviewed on at least a daily basis, transportation managers lack true visibility to rising issues. They will struggle to confront issues once they’ve started in the wrong direction, which could potentially create long term deficiencies across the network.
Transportation leadership should demand their teams have access to the latest tools for transforming their transportation data into relevant, real-time information. One of the most robust data analysis tools on the market today is Tableau. Transportation teams should create a high-level dashboard with drill-down capabilities into your key metrics. Tableau also offers mobile device options allowing transportation managers to view their network status and quickly access information currently in the field.
How do you take action on the metrics you see going in the wrong direction?
Like the gauges in your car, the dashboard designed for your department gives you an indication when things are going wrong. The ability to identify a problem is the first step, but the real key to successful transportation department/operation is the ability to take action against specific issues quickly and correctly. Transportation leadership should spend time and energy developing contingency plans for various scenarios so that quick and decisive action occurs as issues emerge.
One of your key metrics for a retail company is freight cost as a cost of goods sold percentage. Take for example, you’ve noticed a disturbing trend and your freight costs have risen as a percentage to COGS. As you research it further, you’ve identified more truck loads are leaving the warehouse than in previous months; however, sales have remained constant. You research a second key metric and noticed that your utilization for each trailer has decreased as well.
Following the processes which you’ve designed, your transportation team plans a trip to the DC to understand what’s happening. It turns out there has been a high turnover rate lately on the warehouse floor and there’s new staff loading the trailers.
Your team is empowered to review this with the DC leadership and they jointly follow the plan for training new employees on the optimal loading of each trailer. A follow-up meeting is scheduled and clear corrective action is agreed to by all parties. Within a few days, the average utilization for each trailer is back in line and freight as a cost of goods sold is on track. By monitoring and acting upon the metrics crucial to your operation, you can quickly correct any issues before they become sustaining problems.
All transportation networks encounter issues at various times, and those with the right tools remain best equipped to identify problems before they evolve into operational epidemics. Investment and implementation of a key metrics dashboard for your transportation network takes a great deal of time and effort, but should be an integral part of all transportation departments. In the long term, the costs associated with an inefficient network can have a devastating effect upon your bottom line. Make sure your organization has invested in the tools you need to achieve optimization.
Read more about how Chainalytics supports better transportation strategies for our clients:
- (BLOG) How Transparent Is Your 3PL Network?
- (BLOG) Is your operation structured to ensure the next link in the supply chain is more efficient than the last?
- (BLOG) Five Strategies to Maximize the Value of Freight Market Intelligence in the Face of Tightening Trucking Capacity
- (BLOG) The Benefits of Maintaining Transportation Sourcing Analytics through a Platform Dashboard
- (BLOG) How Will Walmart’s New OTIF Policy Affect the Supply Chain’s Transportation Component?
- (BLOG) Drinking from the Transportation Market Fire Hose Part 2