An LTL carrier scorecard is essential if you are managing a lot of LTL shipments.
In a perfect world, LTL carriers would pick up freight and deliver it on the agreed upon day for a fair price. Of course, all the freight would arrive undamaged and the invoice would always match the quoted price.
Unfortunately, we don’t live in the perfect world and not all carriers are created equal. So we need a good carrier scorecard to objectively measure carrier performance.
The scorecard should measure carriers on the four most important attributes: cost, on time performance, billing accuracy and damage free shipments.
LTL Carrier Scorecard – Cost
The ultimate metric for measuring cost performance is cost per pound. The metric is easy to create, completely transparent, and will give you great insights into your freight spending.
To create the cost per pound metric, take the cost of the shipment and divide it by the shipment weight (pounds). Example: $507.34 divided by 1440 lbs. equals $0.35 cost per pound.
Cost per pound for LTL shipments will vary depending on the freight class, carriers, and pick-up and delivery points. Cost per pound will vary between $0.10 and $0.75 with most shippers falling in the $0.22 – $0.42 range. Lower cost per pound is obviously better because it means the shipments were less expensive.
The cost per pound metric can be used to compare individual shipments, carriers, and even weekly invoices.
LTL Carrier Scorecard – On Time Performance
All LTL carriers provide an estimated transit time for shipments, however those transit times are not guaranteed. Most carriers will have on time performance of 90% or better, but understanding exactly how a carrier performs on your lanes will help your company make better choices.
The metric is easy; simply divide the number of on time shipments by the total number of shipments. Example: 40 on time shipments divided by 43 total shipments equals 93% on-time performance.
LTL Carrier Scorecard – Billing Accuracy
Incorrect freight bills drive the accountants crazy! In addition to the hours of reconciling bad bills, the added cost has to be accounted for somehow. Sometimes it has to be passed on to clients, who were already billed for freight or the added cost has to be absorbed by the company.
Some companies pay outside auditors to identify and recover billing errors. Auditors usually get paid for each bill audited and some even get a percentage of the recovered savings, so they have a vested interest in more incorrect bills.
A freight bill should match the quoted price, unless the shipper provided an incorrect weight, freight class or NMFC number. From my experience, most shippers can begin saving money immediately by doing those three things correctly. The carrier and or the logistics companies involved can help the shipping group identify the correct NMFC and freight class.
To calculate the billing accuracy, divide the number of correct bills by the total number of bills. Example: 61 correct bills divided by 64 total bills equals 95% billing accuracy.
LTL Carrier Scorecard – Damage Free Shipments
Cost, on time performance and billing accuracy don’t mean much if the carrier damages the freight so freight damage must be measured.
Be sure to measure all damage not just freight claims filed. Damaged packaging, small scratches, and loose pieces are all upsetting to the receiver and the end customer so they should be documented and measured, even if there isn’t a freight claim filed.
Freight damage should always be far less than 1% of total shipments. If freight damage is over 1%, there is something seriously wrong with the packaging, loading / unloading process or the carrier.
To calculate the number of damage free shipments, divide the number of damage free shipments by the total number of shipments. Example: 112 damage free shipments divided by 113 total shipments equals 99.1% damage free shipments.
LTL Carrier Scorecard – Continuous Improvement
The first goal of the carrier scorecard is to document the current state (what’s happening today). The second goal is to continuously improve the metrics, which will improve your shipping function and ultimately your bottom line.
The scorecard should be reviewed and discussed by the team on a regular basis. When there are scorecard reviews, leave plenty of time for planning future improvements.
Additional Reading on LTL Carrier Scorecard