A new study recently issued by Charlotte, N.C.-based full truckload brokerage RXO Logistics examines how industry stakeholders work to set standards for key performance indicators (KPIS), as well as how KPI-related benchmarks are progressing, going back to the onset of the pandemic.
The study, entitled, “The Logistics Professional’s Guide to KPIs” was based on feedback from 1,000 North American logistics professionals, including 500 shippers and 50 carriers, across various business types, industry verticals, geographies, and company sizes. RXO explained that this study serves as a follow-up to a 2022 study, entitled “The Metrics that Matter,” which was published by Coyote Logistics, whom RXO acquired from UPS last year adding that this year’s study’s focus on how shippers and carriers have changed their approach to evaluating and managing KPIs.
Some of the study’s key findings included:
- 100% of shippers think they are either intermediate or advanced at taking action on the logistics KPIs they have, up from 91% in 2022, with 42% that think they are advanced, compared to 36% in 2022;
- 86% of shippers reference their logistics KPIs at least weekly (up from 79% in 2022), with 45% of shippers referencing them daily (up from 32%);
- 87% of shippers and 90% of carriers agree there should be set KPI industry standards, up from 78% and 74% in 2022, respectively;
- industry performance standards for core transportation KPIs (on-time performance, payables, tender acceptance, etc.) are generally consistent with 2022, but underlying data shows a tendency to be a bit more forgiving; and
- 95% of carriers said inefficient shipping practices impact the rates they give to shippers, and 99% of carriers take a shipper’s KPI expectations into account before agreeing to move a shipment
Ben Steffes, VP of Solutions & Strategy, RXO, told provided LM with a detailed overview of the study’s findings and the current state of logistics KPIs in an interview below.
LM: What are the factors, or drivers, helping shippers become more data-driven?
Steffes: A major driver is the increase in usage of technology platforms throughout the supply chain—in many cases, tech adoption is now a requirement to work with certain vendors and customers. Not only is there an increase in platform usage, but also an increase in the sophistication of those platforms. All of these factors enable shippers to be more data driven.
In the research, we also saw that both shippers and carriers are less likely to rely on manual processes and more likely to use digital solutions for KPI management in comparison to 2022. Combined with increased connectivity (API integrations, IoT technology) and nascent usage of AI, even though there is more data than ever before, it’s also getting easier to leverage it.
LM: What needs to happen for there to be set KPI industry standards?
Steffes: To truly create a set standard, it would at least take several of the largest shippers to adopt it (think large global retailers and OTIF, or on-time in full); however, in such a massive and fragmented market (from both the supply and demand perspective) it’d be difficult to get a single, market-wide point of unification.
Furthermore, the complexities in each individual shipper’s situation are going to vary, so KPIs should not necessarily be a one-size-fits-all.
That said, our goal in creating and publishing this research study is to drive awareness and visibility into where a majority of the industry is today so businesses can be more realistic in their own standards. If we can at least have a conversation, we can start moving towards a more unified industry.
LM: Are there specific reasons as to why some performance benchmarks are more lenient/forgiving?
Steffes: In 2022, businesses were coming off the worst shipping environment in recent history (perhaps ever). Rates were high, capacity was tight, and service was, broadly speaking, low.
Flash forward to the present and the situation is reversed. Shippers have been able to take carrier performance for granted and have focused on getting their transportation budgets back in line. We can see that in 2022, when 77% of shippers prioritized service over cost—now it’s down to 65%.
When we enter back into a tighter capacity environment, perhaps later this year, we might start to see shippers once again raise their performance standards. That said, the actual benchmarks were generally consistent with 2022, which is encouraging to see—standards ultimately lose their utility if they shift dramatically from year to year.
LM: 42% of shippers think that they are advanced in taking action on logistics KPIs compared to 36% in 2022. What is driving that growth?
Steffes: In addition to being more data-driven, the rise in technology platform usage, more tech adoption requirements imposed by shippers, and more powerful technology overall are all driving this growth.
With more digital solutions in place that talk to more systems, and with those systems being smarter, shippers are getting better at putting it into action. For example, 67% of shippers said they’re using AI, and it’s likely some of that is through accessing features in their existing 3rd-party platforms (e.g. their TMS). Of the shippers using AI, 63% are using it specifically for KPI management, making it the most likely use case.
Finally, practice makes perfect. COVID forced many areas of the shipping process to transition from pen and paper to digital solutions. In 2022, those were still sinking in. Now, shippers have three additional years of experience implementing tech solutions in the place of formerly manual processes.
LM: In what ways can third-party providers help shippers manage their logistics KPIs?
Steffes: There are several ways 3PLs can help, with technology being a major area. Most large, established 3PLs will have proprietary systems purpose-built for freight shipping. Working with a technology-driven 3PL is an easy way to quickly access and manage digital solutions that will help make shipping more data driven.
Furthermore, 3PLs, especially large, scaled providers, will work with thousands of shippers and carriers every day. This broad perspective can be helpful to get better insight into how other best-in-class companies are managing KPIs and what works broadly across multiple situations.
Finally, 3PLs excel at vendor management, especially if you’re working with an outsourced or managed transportation provider. They can do things like manage your carrier scorecarding— something that 84% of carriers find a useful tool for better performance.
