The tracking of key performance indicators (KPIs) allows an organization to improve its business decisions. Creating success metrics is increasingly important to transportation companies such as asset carriers. As a component of objectives and key results (OKRs), KPIs help logistics companies find problems and track progress. Let’s discuss the top 4 indicators we have determined to be the most critical KPI’s for asset carriers.
The top 4 KPI’s for asset carriers
Carrier performance management relies on the ability to collect and apply data to understand the true health of the business. Analytics-driven processes are increasingly critical for freight companies that seek to increase their profitability. One challenge for fleet managers is understanding the data that is most useful in determining what information is actionable. There is an enormous amount of freight data being generated daily. Figuring out which trucking data holds the most value is tricky for trucking companies. Freight professionals need to know which supply chain KPIs add value. These are the metrics that we have determined are the most critical KPIs for asset carriers:
· Deadhead miles
· Avg rate/mile
· Operating ratio
· Detention time
Let’s take a look at these asset carrier KPIs one by one.
Deadhead Miles
Deadhead miles, aka “empty miles”, occur when a truck is driving empty. This can be en route to pick-up or post-delivery, whether they are headed home or to their next shipper. Some research has estimated trucks are driving the road empty 35% of the time. Logically, empty miles mean lost money. Trucking carriers must track the percentage of empty miles compared to the overall volume of miles driven. Percentage of empty miles = [(total miles – revenue miles ) / total miles ] * 100
Average Rate per Mile
A common question asked by asset carriers is “how much are we earning per mile?” Freight rates for truck loads paid per mile fluctuate daily. The industry average ranges between $1.50-$2.50 per mile. Factors include equipment/trailer type, number of drops, weight, market conditions, and many more. This calculation determines the average per mile for that lane going in one direction. However, you should also consider the total revenue and miles to return to your original point of departure or your next pickup location. It is not unusual for a load going in one direction to pay a different rate than a load coming back in the opposite direction. Average pay-per-mile = (revenue per load / the total number of miles driven)
Operating Ratio
Trucking carriers also have a strong need to proactively manage the operating ratio. The operating ratio is a measure of expenses to total revenue and reveals carrier profitability. Operating ratio = total operating costs / operating revenue * 100
Detention Time
Driver detention occurs when the shipper or cosignee impedes the truck driver from loading or unloading through no fault of the carrier. The acceptable industry standard is two hours. Asset carriers have no control over whether a truck and its driver get detained. Unfortunately, this is one of the ongoing struggles carriers face regularly. Regardless of the reason, any delay for drivers is significant. Time spent in detention reduces a carrier’s ability to earn money and achieve profitability. According to Business Insider, nearly 10% of all truckers detained at warehouses say they were detained by six hours or more.
Contact FreightFriend for Asset Carrier Management
FreightFriend offers asset carriers the ability to communicate capacity directly to the 3PL’s and shippers of their choice and receive instant matching to all of their available freight. Through keeping your trucks running with partners you have relationships with you can limit unforeseen delays & issues that cause your trailers to remain loaded for longer than expected, limit deadhead and keep your trucks running at the operating ratio needed to keep your business growing. Reach out to us here at FreightFriend to learn more about our relationship-based approach to digital freight matching. Make procurement your competitive advantage.