Design is not just what it looks like and feels like. Design is how it works. -Steve Jobs
Are you prepared to make the correct choices for your business when the capacity crunch comes? Do you have the information to help your customers identify inefficiencies in the supply chain? Improving your freight mix, customer mix and rates is a 7 day a week, 52 week per year endeavor. To do this properly, one needs visibility into the efficiency of each customer and lane. Identify which is the best business, which is the worst is and what is in between. Armed with this information, work on the least profitable, most inefficient business by working with the customer to address the inefficiencies, increase the rates, or replace the business with better opportunities.
If you ask your sales personnel to rank their customers as A, B, C, D or F, most of your customers will be rated an "A." If you ask your customers the same question, all will score an A. This is a very subjective and inaccurate method. Rates don't paint the entire picture.
Lack of knowledge... that is the problem. -W. Edwards Deming
You can't improve what you don't measure. Scorecards provide an objective means of measuring the profitability of each customer. Your sales force and your customers gain visibility into the reality of what is happening.
The process should start with an investigation into the operational details of existing business and each new piece of business before you provide pricing. Customer scorecards enable you to compare performance to the understandings you obtained when pricing the business. The result is constant improvement and the optimum decisions when freight exceeds capacity. Although each carrier's operation is different, the following are some issues to consider when drafting your scoring system.
Rate Per Mile.
The scorecard should reflect rates in a variety of different ways, line haul rate, fuel surcharge, accessorial rates, rate per total miles and rate per billable miles. Note whether the miles are calculated on short or practical miles.
Fuel Surcharge Schedules.
Not all fuel surcharges are created equal. Some are "light." When providing a line haul rate for a customer with an inadequate fuel surcharge, the base rate must be padded for increases in fuel. Note on the scorecard if the fuel surcharge is light, so this can be addressed when fuel spikes.
Regulatory changes, including CSA, changes in the HOS regulations and electronic logs put time at a premium. Time is a scare resource and once wasted can never be regained. Your trucks and your drivers must to generate certain amount of revenue per day. A high rate may look good, but if it was based upon a one day run, and the reality is it is a two day run, it is unprofitable. This measure can take a lot of forms, including detention, dwell time or revenue per diem.
Track dwell time, late loading and unloading, truck ordered, not used, overweight loads, trailer abuse, cargo securement issues, and other operational factors critical to productivity.
Cash management is a critical skill for trucking companies. You pay fuel, wages, repairs, and other items very quickly, gather the paperwork, send a bill to the customer and at some point get paid. The time value of money is your cost between the time of incurring the expense and the time you are paid. Measure the turnaround. Track late detention payments.
You should have had an understanding with the customer when pricing the business of the trailer pool requirements and the trailer turns. Measure and watch for changes. Some customers have local shuttle services that are abusive of trailers. Measure trailer repair costs per customer or location.
Some customers either by practice, the nature of the cargo or their securement practices file more cargo claims or indemnification claims than others, resulting in additional time and money. Measure the amount claimed per customer.
Obtain an understanding with the customer as to volume or seasonality when you price the business and measure the volumes. This will reveal seasonal trends which are important in deciding what your customer and freight mix should be to balance your network. Surges in a tight market on committed lanes often mean deadhead miles. Identify "one way streets" where the customer expects you to commit to a certain volume, but then doesn't provide the volume you were promised when you priced the business.
Some pick up and delivery points are in out of the way places and a carrier will incur empty miles to service the lane. To do so profitably, one needs both a rate and fuel to cover these empty miles. Keep track of which lanes you have included the empty miles in the rates, and which you haven't. This will provide visibility into the true rate per mile on that lane.
Are you committed to a lane or is it flexible? Make sure your customer service representatives have an understanding as to which tenders they must accept, and which they may choose to accept or reject.
Load Tendering Practices.
Does the customer tender the load in advance or at the last minute? How much order entry work is placed on your customer service department? What time of day is pickup and delivery expected? Is EDI used or it is web based, email or fax? Is the CSR allowed to develop a relationship with the customer or it is based strictly on a routing guide? Track tendering mistakes, TONU, and other inefficiencies.
In addition to dwell time, track driver complaints and other indications that business is not driver friendly. Driver turnover and recruiting is very costly, especially when a carrier must increase driver pay.
Keep track of the length of the relationship you have had with the customer, how often they bid, whether you have access to decision makers and how often your network is disrupted by changing of carriers. There is a lot of cost involved in deadheading trailers in and out and rebuilding networks for customers who change carriers on lanes often in search of cost savings. Track all compliments and scorecards received from customers as well as any abusive communication.
Develop a scoring system to compare customers and lanes to the rest of your business by assigning grades to each customer of lane. Your sales department and customer service representatives will have a better understanding or their priorities and roadmap for issues to work on with customers.
As a small businessman, you have not greater leverage than the truth. -John Greenleaf Whittier