Typical Distribution Business Goals
The main goals for most organisations can be broadly placed under the overarching goal of increased profits. This ultimate goal ensures the success and longevity of your business for the benefit of your customers, suppliers, stakeholders, and employees.
There are two main methods for achieving this: Increase Pricing and Reduce Costs; both increase your margins. An increase on pricing is generally harder to achieve because customers will readily look elsewhere if there is not strong, clearly communicated evidence for a higher level of value.
Our area of expertise is with Freight & Logistics. That is what we want to focus on in this article in examining what goals are important for Shipping Organisations. So firstly, we will explore the two main levers for improving the profitability of the freight activity of an organization and, secondly, we will explore how you can make these lofty goals pragmatic, measurable and specific to your businesses’ freight operational requirements.
Increasing customer satisfaction leads to increase in sales orders, and may allow you to increase the prices of your products where you have sufficiently differentiated your company from your competitors. Increased volume of activity also increases profitability; you can make more from the sheer dollar increase; and both the cost of acquisition and the cost to serve are positively impacted.
Obtaining and keeping happy customers is without doubt one of the highest goals for any company. For a distribution organisation this includes not just criteria such as that the product purchased works, but also those involved in dispatching the products.
Those freight criteria include:
- It was the one they ordered; with the right specifications; in the right colour, size, amount, etc.
- It came within the timeframe chosen / agreed upon
- The delivery instructions were properly implemented; ATL, JIT, tailgate etc.
- There were no scratches, dents, leaks; the consignment was undamaged
- Automated alerts asissted with updating the receiver / customer
- The Customer Service team were proactive, communicative, and helpful if there were any issues such as those listed above
Improving Customer Satisfaction is important as you can increase the loyalty of your customers; reducing churn, increasing their volume of, and regularity of their orders with you which then positively impacts your market share and profitibilty.
Software System Smarts
Through system smarts that optimize the efficiency of your warehouse and improve communication (including data exchange) with 3rd party carriers or fourth party logistics, you can move toward your customer satisfaction goals, such as becoming a 1st tier supplier for your customers.
From a freight perspective this entails having modern systems that meet with your customer’s approval for tracking freight proactively, and costing freight fairly. Systems such as:
- Advanced Shipping Notifications, reaching SLA targets; offering options in communication, phone and email
- Measuring and proving your delivering; independent DIFOT Reports
- Providing options such as Express; Premium vs. General; Standard
- FIS vs. a tailored, automated Freight Cost Recovery System that is fair
- Alerts and Updates that inform your team and your customers; improving efficiency and improving your ability to positively adjust tactics to improve outcomes
Happier customers may even accept higher fees, either product or transport fees, if they know your service is reliable, and meets their needs over other suppliers in the market. Which is great for your profit goals.
Reduce Costs to Supply Customers
There are a range of ways that you can reduce the costs of your shipping organisation.
- Improve the efficiency of your warehouse; automation & integration of supply chain systems is key to this
- Ensuring your integrated supply chain platform is tailored to your business needs and is carefully designed to cater for all customers, and all business parameters
- Guidelines for organising bulk buying can lower costs; freight systems that can consolidate consignments can greatly reduce freight costs
- Automated Least Cost Carrier vs. ETA functionality options; least costs system can significantly reduce freight costs by up to 20%
- Using data is key to profiling and benchmarking your freight so that you can assass and work to improve your carrier distribution, including optimising freight spend
- Freight Audting & Carrier Invoice Reconciliation further reduces your freight spend and provides accurate, granular freight cost data & reporting
SMART Freight Goals
Again, connecting these lofty goals to something that you can monitor for success requires you to tailor them to your particular organisation’s current situation. Your current capabilities, your freight profile, your market, and so on. This is not an article on how to write a Marketing Plan so we will leave that to your boardroom meetings to discuss. Suffice to say that there are many processes that assist for this such as SMART goals – Specific, Measurable, Attainable, Relevant and Time-bound, and SWOT Analyses: Strength, Weaknesses, Opportunities and Threats.
Going through the process of defining these over-arching goals will enable you to move on to the next stage of enabling your company to measure your success with these stated goals, which is best achieved via Data Analysis.
Getting visibility on these aspects of your business will help you with ensuring you are in fact moving toward your distribution goals. So, how do you do that?
Firstly, you need to capture the relevant data that aligns with these freight goals. You should make sure that the metrics / KPIs you have chosen support your goals and will enhance discussion and insights during freight management strategy meetings.
For example, metrics on freight costs tie into the key goals mentioned above; particularly freight cost reductions. You need to be able to see if freight costs are rising or dropping and, more importantly, why. For this, you need to measure:
- The volume of consignments (order) shipped and average number of items
- Charge Weight vs. Dead Weight
- Average Charge per Consignment and Average Weight per Consignment
- Across, Branches, Carriers, with Ship To & From details
So, if for example, you see an increase in average weight per consignment and a decrease in average charge per consignment you can infer from that that this is related to overcoming a minimum charge, or less impact from a basic charge on higher charge weight consignments, or activating a higher weight break price that is lower based on volume.
You would of course want to analyse this further to understand exactly what was having the influence on these metrics.
Let’s take it back a step with the above example and say that previously we had set KPIs to lowering the average cost per consignment by tweaking the average weight of a consignment. Perhaps the goal is to get a Melbourne to Perth consignments averaging under $0.8/kg (currently averaging above $1.00/kg).
A strategy meeting might have gained insights from previous data / reports that they could work towards creating new guidelines in the warehouse and / or with customers to say, ship to a customer twice a week, (rather than ad hoc). Or to use freight software smarts to automatically consolidate where the system recognises a second (and third, and fourth…) order prior to manifesting for the same address, (if this was noticed as a factor via receiver data metrics). Or, use analysis and least cost smarts to recognise that a different carrier is stronger at a different weight level.
In the next months’ meeting stakeholders would focus on these two interacting metrics to confirm whether this was working and what impact it was having on overall freight cost percentages (for that shipping lane).
For KPIs that align to Customer Satisfaction goals you would want to look at metrics on:
- DIFOT & SLAs
- Number of freight customer service enquiries
- Time that it takes to resolve issues
- POD data
Setting goals around carrier SLAs would then be easily and independently realised by reviewing reports regularly to see if a carrier’s performance matches what is outlined in the contract. This can then inform when and how you implement a Freight Tender, which will positively affect the outcome for you and your customers.
It is somewhat stating the obvious that these KPIs also still do align to freight cost and profit goals as damaged or lost freight needs to be compensated for. Also, that cheaper rates do not necessarily lead to lower freight costs; and you need data analysis to get the balance right.
It’s one thing to have strategy meetings around business goals, (as opposed to urgent, tactical meetings), on a regular basis between key stakeholders. It is another thing to create a niche Freight Business Intelligence System that caters for your individual business requirements, and is measured through the right KPIs and appropriate Dashboard graphs, charts and tables that will lift the calibre of your meetings, providing rigour, and a foundation for discussion that is both accountable and uplifting.
Those organisations that seek to stay at the cutting edge of what’s available with technology and build the right systems to align their data with their goals are the ones that will fulfill their obligations of being a thriving, profitable business.
If you’d like to learn more about how to align your freight business goals with your systems and data analytics, please feel free to contact us for a consultative meeting on how our services may assist.