Perfect Order Measure
Performance to Promise
Supply Chain Acronyms
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Freight cost per unit shipped: Calculated by
dividing total freight costs by
number of units shipped per period.
Useful in businesses where units of measure are standard (e.g., pounds). Can also
be calculated by mode (barge, rail,ocean, truckload, less-than-truckload,
small package, air freight, intermodal, etc.).
Outbound freight costs as percentage of net sales:
Calculated by dividing outbound freight costs by net sales. Most accounting systems can
separate "freight in" and "freight out." Percentage can vary with sales mix, but
is an excellent indicator of the transportation financial performance.
Inbound freight costs as percentage of purchases. Calculated by
dividing inbound freight costs by purchase dollars. It is important to
understand the underlying detail. The measurement can vary widely, depending on
whether raw materials are purchased on a delivered, prepaid, or collect
Transit time: Measured by the number of days (or
hours) from the time a shipment leaves your facility to the time it arrives at the customer's
location. Often measured against a standard transit time quoted by
the carrier for each traffic lane. Unless you
are integrated into your customers' systems, you will
have to rely on freight carriers to report their own
performance. This is often an important component of leadtime.
Transit times can vary substantially, based on freight mode and carrier
Claims as % of freight costs: Calculated by
dividing total loss and damage
claims by total freight costs. Generally measured in total and for each
carrier. A high number generally indicates packaging problems, or
process problems at the carrier.
Freight bill accuracy. Calculated by dividing the number of error-free
freight bills by the total number of freight bills in the period. Errors
can include incorrect pricing, incorrect weights, incomplete
information,etc. Generally measured in total and for each carrier.
Accessorials as percent of total freight: Calculated
by dividing accessorial and surcharges by total
freight expenditures for the period. Many freight
carriers will charge extra fees for trailer detention/demurrage, re-delivery, fuel increases, and other expenses or
extra services. Often, these are extra costs incurred due to
Percent of truckload capacity utilized:
Generally used for shipments over 10,000 lbs. Calculated by dividing the
total pounds shipped by the theoretical maximum. For example, assume your trucks can hold 40,000
lbs. of product. During the prior month, there
were 675 shipments totaling 22.95MM lbs. The percentage utilization was 85%. The 15% unused
capacity is an opportunity for more efficiency.
Mode selection vs. optimal: This is calculated
by dividing the number of shipments sent via the optimal mode by the total
number of shipments for the period. To measure this, each traffic lane
must have a designated optimal mode, based on freight costs and customer
Truck turnaround time: This is calculated by
measuring the average time elapsed between a truck's arrival at your facility and its departure.
This is an indicator of the efficiency of your lot and
dock door space, receiving processes, and shipping processes. This also directly affects freight
carrier profits on your business.
Shipment visibility/traceability percent:
Calculated by dividing the total
number of shipments via carriers with order tracking systems, by the
total number of shipments sent during a period. This is an indicator of the
relative sophistication of your carrier base, and one measure of the
non-price value available from your carrier base.
Number of carriers per mode: Calculated by counting
the total number of freight carriers used in a given period, by mode (ocean, barge, rail,
intermodal, truckload, LTL, small package, etc.). This is an indication
of your volume leverage and control over the
On-time pickups: Calculated by dividing the number of
pick-ups made on-time (by the freight carrier) by the total number
of shipments in a period. This is an indication of freight carrier performance,
and carriers' affect on your shipping operations and customer service.
Our goal is to guide companies that are looking to
optimize their Supply Chain. Originally, we intended on answering questions about Inventory
Control, Sourcing, Manufacturing, Distribution and Supply Chain Metrics. However, we currently do not have the resources to answer individual questions.
If you want to contact me, email me at: email@example.com
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