Winning the Unfair Game:
Utilizing KPIs to Reduce Logistics Costs
In 2003, Michael Lewis wrote the book Moneyball: The Art of Winning an Unfair Game. The Oakland Athletics and General Manager Billy Beane revolutionized baseball by focusing on wins, and not just players. You see at the time baseball was dominated by major market clubs like the New York Yankees and Boston Red Sox, whose payrolls were unlimited in comparison. This required Billy Beane to focus on statistics that were traditionally undervalued. By doing this the Oakland Athletics not only fielded a competitive baseball team but won 103 games including a streak of 20 wins.
What does this have to do with Logistics and Freight? Traditionally value is measured by rates. On the surface this makes sense, if you can control your rates, you can control your freight spend. However, should your goal be to ship your products for the lowest rate, or the lowest cost? Rates tend to increase over time, but there are multiple ways to reduce costs. You can create more multi-stop loads, eliminate manual time-consuming steps in your process, or negotiate different delivery windows just to name a few. The challenge we see with shippers is the lack of any reliable information to understand their current state, let alone the insights that point to strategic shifts.
Today, most shippers are data rich and knowledge poor. They have thousands of rows of data in dozens of spreadsheets that almost require a degree in analytics to even determine total freight spend. This is where today’s shippers can find their Money Ball Opportunity. We understand that each company’s freight is different, but here are the Top 3 key performance indicators (KPIs) that can help you move from a game of chasing rates into winning at lowering costs.
Weight Break by Mode:
It is common knowledge that 20,000 pounds will max out an LTL and 45,000 pounds will max out a Full Truck. The power is in tracking how consistent you are at getting as many pounds as possible in each mode. In a Full Truck, each pound you can use reduces your cost per/pound which creates savings opportunities.
Number of Orders per/load:
Determining the number of orders per load is the first step to understanding load optimization for your freight. You can ask yourself if you are shipping as efficiently as possible or could you have combined more orders and created a multi-stop shipment?
As you work to cover your loads, you may find yourself using 10-20 carriers. Understanding your carrier mix helps keep your negotiation power strong. Ideally, a range of 5 – 10 core carriers ensure that you have coverage for your loads and increases your bargaining power with your selected carriers. In addition, this consistent volume allows carriers to learn the nuances of your business and increase their service levels.
At Dynamic Logistix we believe establishing clear benchmarks and having consistent discussions drive strategic changes that deliver long term savings. You can begin assessing your freight costs using the 3 KPIs above. If you find yourself struggling to “Win an Unfair Game” like Billy Beane, we would love to share our approach designed specifically for today’s shippers.
At Dynamic Logistix we are boldly changing logistics management, one client at a time. Our Tier 1 TMS program includes a leading Cloud-Based TMS that streamlines freight logistics from order entry, load building, route optimization, and carrier selection. We offer our clients 24/7 visibility, ERP integration, freight audit and pay, business intelligence reporting, and dedicated account managers Dynamic Logistix is eager to help your company save money and time. Click here to schedule a complimentary process review with our logistics team.