What is Shipping Carrier Performance?
Carrier performance usually refers to how a maritime carrier manages to execute on its responsibilities, often based on shippers’ standards and expectations. Ideally, carriers are expected to improve logistics, while streamlining the shipping process. Criteria – such as timeliness, communication, compliance, and invoice accuracy – are included in the carrier performance review by shippers. Carrier performance results are used to select carriers, negotiate contracts, and identify areas for improvement.
Stages of Carrier Performance Evaluation in Shipping
Evaluating carrier performance is an ongoing process. It begins before choosing a carrier by evaluating historical data and performance metrics. Shippers analyze data detailing timeliness, pricing, customer service quality, safety history, and regulatory compliance.
After completing the shipping process, the carrier’s performance is assessed once again. Many shippers use a carrier scorecard, that grades the carrier based on agreed-upon KPIs, including on-time delivery, on-time invoicing and payment, customer support, and other related metrics. This process fosters transparency between carriers and shippers, and enables data-based decision-making when choosing a carrier.
Best Practices for Measuring Carrier Performance
To ensure proper measurement of carrier performance, the following practices should be followed:
- Set clear definitions: shippers must clearly communicate their expectations to the carrier. Lay out the key performance indicators (KPI) on which the evaluation will be based. It is also important to agree on issue escalation processes, and rewards or penalties, for meeting or falling short of targets.
- Monitor KPIs: utilize a reliable and verifiable system to track the KPIs. Compare the data with industry standards to determine if the carrier is performing above or below average, and identify trends and exceptions to understand anomalies.
- Provide feedback to the carrier: transparency is crucial for improvement. Share the results of KPI tracking with the carrier, highlighting areas where they exceeded expectations and areas that need improvement.
- Renegotiate contracts based on merit: if the data shows that a carrier is underperforming, renegotiate the contract and include clauses and bonuses tied to improvements in KPIs, or other quantifiable metrics.
Important KPIs to Measure Carrier Performance
Several KPIs can be used to measure carrier performance effectively. Here are the leading indicators of whether a carrier meets expectations.
- Timeliness: shipping delays are common and the experts expect that trend to continue, due to congestion and a lack of schedule reliability. Still, carriers must provide a reliable ETA that can compare the scheduled pickup date and time with the actual pickup, to assess if it falls within an acceptable time frame.
- Communication: updating the supply chain is important when it comes to streamlining the shipping process. Poor communication, or not listing milestones, can result in avoidable fees, such as demurrage and detention, and negatively affect the relationship between the shipper and consignor.
- Invoice accuracy: auditing invoices is necessary to ensure billing accuracy and that they are sent to the responsible party with correct and up-to-date documentation.
- Cargo inspection for damage: delivery of damaged goods can result in significant costs. Monitoring how well a carrier handles cargo can save money on replacement and recovery charges. IoT devices that monitor containers, check temperature, and track shock provide real-time updates for this KPI.
- Capacity capabilities: evaluating a carrier’s performance in managing shipments requires assessing specific KPIs, such as cost per unit, cost per shipment, percentage of flawless deliveries, dock usage efficiency, and duration from pickup to departure.
Grading Carrier Performance is Important
Regular assessment of carrier performance both before and after shipping is a good business practice. It enables shippers to choose the best carriers for their needs, negotiate better terms, identify areas for improvement, and ensure they are receiving high-quality service.
- Improve business relationships: an honest performance review highlights the carriers’ strengths and weaknesses. They will use this data to focus on the areas of improvement . This feedback helps build stronger, more collaborative relationships between shippers and carriers.
- Increases the shipper’s ROI: analyzing performance reviews from multiple carriers allows shippers to select the best carrier for their needs or region.
- Fact-based decision-making: grading carrier performance gives businesses clear, quantifiable data that can inform decisions, such as selecting a carrier, negotiating contracts, or improving logistics operations.
- Cost optimization: by grading carriers, companies gain insight into the value for money they’re getting from each carrier, enabling them to negotiate better rates, optimize shipping routes, and reduce unnecessary costs.
How to Improve Carrier Performance Methods
Conducting a comprehensive carrier performance review is a time-consuming process that involves analyzing hundreds of data points. Manual review and analysis are prone to errors and mistakes, particularly with larger shipments. A more effective approach is to leverage technical solutions that automate the process and eliminate human error.
One such solution is an Windward Ocean Freight Visibility, which utilizes machine learning and AI technologies to track and monitor vessels, providing accurate and updated ETAs. By leveraging this innovative technology, shippers can effectively manage their KPIs and conduct a comprehensive carrier performance review.