Scorecards hold the key to shifting industry pricing power

In today’s recessionary freight market, cost efficiency and productivity are crucial components of safeguarding profits while providing top-notch customer service. Pinpointing — and correcting — inefficiencies is an important part of achieving a streamlined supply chain. Fortunately, modern technology makes it easier than ever to keep a close eye on freight.

By utilizing tech to track specific key performance indicators and issuing carrier scorecards, shippers can improve pricing efficiency, increase customer satisfaction and optimize operations. These data points can also help companies facilitate better performance management and communication with their industry partners.

Shippers can use a wide array of KPIs to score their partners. Jeff Trease, Branch Director FLS Transportation Springfield mentioned that some of the most important metrics his organization tracks include load tender acceptance, on-time pickup, on-time delivery and in-transit tracking. 

“Tracking logistics and transportation metrics is important from a pricing standpoint,” said Betsy Dean, head of marketing at FLS Transportation Services.

“Tracking logistics and transportation metrics from a pricing standpoint helps businesses assess costs accurately, meet SLA requirements, enhance customer satisfaction, improve operational efficiency, and optimize pricing strategies. It enables companies to make data-driven decisions, improve performance, and maintain a competitive edge in the market.” said Betsy Dean, head of marketing at FLS Transportation Services.

Monitoring and addressing these metrics can ensure efficient pricing, improve customer satisfaction, optimize operations, and facilitate effective communication.

Analyzing those metrics gives shippers the background they need to be proactive in several areas, including:

• Cost analysis: Monitoring these metrics allows companies to analyze and assess their transportation costs accurately.

• Service level agreements (SLAs): Many logistics and transportation contracts include SLAs that define the expected service levels, such as on-time pickup and delivery. Monitoring these metrics enables companies to measure their performance against these agreements.

• Customer satisfaction: On-time pickup and delivery are crucial factors that directly impact customer satisfaction. Tracking these metrics helps businesses ensure that they are meeting their customers’ expectations. 

• Operational efficiency: Monitoring logistics and transportation metrics allows companies to identify areas where operational efficiencies can be improved. 

• Pricing strategy optimization: By analyzing these metrics, companies can refine their pricing strategies.

Companies that utilize data-driven decision-making in these areas gain a competitive edge over their peers in any market. By having access to these metrics, shippers or third-party logistics providers (3PLs) can assert more control over pricing negotiations with carriers.

When carriers consistently underperform, shippers can take decisive action, by removing them from spot boards and bidding opportunities. Companies also have the power to exclude low-performing scorecard providers from pricing their freight altogether. This strategic approach ensures top-tier service and upholds uncompromising standards, leaving no room for mediocrity in this industry.

Responding to carriers with poor scorecards does not have to be all or nothing, however.

If a shipper cannot — or prefers not to — end a relationship with a low-performing carrier altogether, it has the option to allow providers to pull back awarded lanes and reprice them based on unmet KPI measurements. 

“Depending on customers’ requirements, there may be savings with a lower-priced carrier that is less sensitive or equipped to deliver on a tight performance measure,” said Eric Ecker, Director of Branch Operations at FLS Transportation Springfield.

In many circumstances, scorecards actually provide an opportunity for shippers and transportation providers to work together and improve their relationships. While measuring KPIs provides shippers with the ability to grade their transportation partners, it also provides carriers with the information they need to improve their own operations.

“Scorecards should be used by transportation providers to identify weaknesses in their network. Lanes with low OTP/OTD, high mechanical issues and any other service measurements not being met usually give a good indicator that a lane may not be suitable for that given transportation provider,” according to Nick Ryan, Branch Director of FLS Transportation Dallas.

Click here to download FLS Transportation Services’ KPI worksheet for shippers.