By Brian Fish, Sr. Manager, Transportation Practice
Tuesday, November 15, 2011
A transportation business intelligence client of ours recently asked if it was possible to measure transportation performance using a single metric. I was curious to see if this question is common in other industries as well. A quick search of the internet reveals that this question is quite common in fields such as public relations, marketing, advertising, PC performance, and computer programming. The most interesting revelation from this search is that each industry drew the same conclusion — NO. There is not a single metric that can tell you everything you need to know about the effectiveness or health of a business.
Evaluating transportation “health” on a single metric is like evaluating your own personal health in the same regard. For example, a physician cannot simply check your weight and know whether or not you are in good physical condition. The doctor would order a pre-determined basket of tests, such as blood pressure and cholesterol, and check to see if any results fell outside a specified tolerance. Looking at a single metric is not only unwise, it can also be dangerous.
Since there is no single measurement to deploy, how many do you need and what should they be? Unfortunately, there is not a single set of measurements that apply to everyone. There is, however, a set of guidelines that can help you develop a comprehensive set. Measurements fall into one of three categories:
- Metrics indicate WHAT is happening in your transportation operations. One example is total cost (or cost per pound) vs. budgeted cost. Metrics provide views of overall performance.
- Key Performance Indicators (KPI) indicate WHY things are happening. Weight per shipment has a direct impact on cost per pound, for example. Tracking this KPI over time will likely provide insight into why the cost per pound metric is behaving the way it is. KPIs provide views of overall efficiency.
- Exceptions indicate issues that need immediate attention. A few examples are the cost of not using a primary carrier and occurrences of loaded trailers that are less than 10,000 pounds. Exceptions provide the quantitative impact of known operational issues.
Rest assured. There is no silver bullet to transportation health. People in a variety of industries have tried and failed to find the single metric. The transportation sector is no different.