If you’re a volume shipper, you have to manage your parcel carrier. If you don’t, you miss significant opportunities to improve service and save money.
A formal evaluation strategy is particularly crucial to online retailers, as transportation partners represent the critical and often final interface between merchant and customer. The quality of delivery—on time and in good condition—has enormous impact on customer satisfaction, return rates and repeat sales.
High cost is another compelling reason to develop a formal carrier evaluation process. Transportation expenditures contribute significantly to the cost of goods sold (COGS), and shippers are dependent on relatively few service providers.
To begin your carrier evaluation program, you need to develop a comprehensive list of evaluation metrics that reflect your overall service performance and cost improvement objectives.
Your list may include service choices, packaging options, quality of carrier automation tools, tracking systems, Website features, pickup and delivery times, convenience of package pickup and drop-off options, returns processes, ease of use, and so on.
Evaluation criteria should include quantitative as well as qualitative measures. Quantitative factors are objective and based on empirical “hard” data. These include on-time delivery performance, claims ratios, billing accuracy, cost performance and other measurable criteria.
Qualitative measures are subjective and based on perception or opinion. Examples include driver and sales representative responsiveness, the quality of customer service, stakeholder surveys, customer complaints or other value-based assessments.
You then must determine the best sources to provide data for each metric to be evaluated. Evaluation data can come from many sources, including internal and external stakeholders such as your carriers.
Use customer satisfaction surveys and questionnaires within the departments that have the greatest involvement with or impact on the quality of carrier service. Ask these stakeholders to grade performance in the areas you’ve identified.
Audit carrier invoices for billing accuracy. If you lack automated processes for auditing, consider outsourcing to a freight audit firm. You should also audit carriers for on-time delivery performance by using systems that capture proof-of-delivery (POD) information such as ERP, WMS, TMS, carrier manifest or other automation systems.
The carriers also offer a variety of tools to capture POD information including your invoice, visibility software, exception reports and electronic POD upload. At a minimum, ask your carrier to provide a monthly service audit and time-in-transit reporting.
Request that carriers report “raw” service audit numbers. These reports typically reflect the actual delivery experiences of your customers, as they do not take into account the dozens of carrier service exceptions such as delays due to weather, shipper errors or other non-controllable events.
Service audits should include overall percentages of on-time delivery as well as lane-specific service performance. Analyze lane reports to identify poor performing areas, and work with your carriers to improve service. Track data over time to measure progress.
You can continually improve delivery performance by carefully managing your carrier—on an ongoing basis—through three simple steps:
• Measure performance
• Analyze the gap between the actual and desired state
• Design an improvement plan
Specific tools to measure supplier performance include key performance indicators (KPIs), scorecards, internal surveys, carrier surveys and self-assessment.
Scorecards are an effective method of collecting and evaluating quantitative and qualitative supplier performance information. Enterprise management systems like SAP or Oracle offer scorecards and other evaluation tools. SPM software providers like VerticalNet, Emptoris or Procuri also have sophisticated and customizable solutions.
The effectiveness of your evaluation efforts is directly related to your carriers’ participation in the improvement process. Collaborate with your carriers to gain support early in the process.
Create and communicate performance expectations that are measurable, actionable and attainable. Encourage carrier self-development, and set “stretch goals” to encourage continuous improvement.
Focus on underlying causes of shortcomings. If you discover recurring problem delivery areas, work with your carrier to conduct root-cause analyses and establish service improvement protocols. Track improvement over time and hold carriers accountable to agreed upon service goals.
Similarly, create direct and indirect cost savings objectives with your carriers. For example, you might collaborate with your carrier to identify opportunities to ship ground instead of air.
The process of evaluating your shipper may be designed to improve the supplier’s performance, but it can also unearth ways that you can help them help you. And that makes for a win-win partnership.
Rob Martinez is a partner at Navigo Consulting Group.