Whether you're a small parcel shipper looking to optimize your operations or a larger shipper seeking to further refine your processes, tracking the right metrics is key to achieving success.
Our Parcel Solutions team presented with GreatNeck Tools and our customer Grove Collaborative at Parcel Forum about the parcel Key Performance Indicators (KPIs) that you should measure based on the maturity or size of your business. In this blog post, we will explore the essential KPIs that small volume and large volume shippers should utilize to monitor performance, unlock valuable insights and make data-driven decisions to enhance shipping operations.
KPIs for Small Volume Shippers:
It's imperative for small volume parcel shippers to focus on metrics that provide a clear perspective on performance while considering cost-effectiveness. Here are the vital KPIs to track:
1. Cost per Invoice and Cost per Package: Efficient financial management is crucial for small volume shippers. Tracking the cost per invoice and cost per package provides insights into the overall expenses associated with each invoice or package. By understanding these costs, you can identify areas for cost optimization, streamline operations and improve profitability.
2. Packages per Invoice: Measuring the average number of packages per invoice allows small volume shippers to evaluate their packaging efficiency. By monitoring this metric, you can identify opportunities to consolidate packages or improve packaging practices, leading to potential cost savings and streamlined processes.
3. Order Cube vs. Package Cube (Cube Utilization Percentage): Effective space utilization is essential for small volume shippers to optimize storage and transportation efficiency. By tracking the order cube versus the package cube, and calculating the Cube Utilization Percentage, you can make sure your shipments don’t use higher-cost dimensional weight over actual weight and eliminate excess packaging needed (and overpack required). This insight enables you to adjust, such as consolidating orders or utilizing packaging that better matches the available space, to minimize wasted capacity and increase operational efficiency.
4. Actual Time in Transit: Monitoring the actual time it takes for packages to reach their destination allows small volume shippers to evaluate their shipping processes and identify areas for improvement. By optimizing transit times, you can enhance customer satisfaction, improve inventory planning and manage customer expectations more effectively.
5. Accessorial Breakdown: Accessorial charges can significantly impact shipping costs for small volume shippers. UPS and FedEx often increase these charges when they release their annual General Rate Increases. Tracking and analyzing accessorial breakdowns – additional charges for special services or requirements – helps you identify trends and opportunities to manage these costs more efficiently. By understanding your accessorial charges, you can make informed decisions, optimize your shipping strategies and potentially negotiate better rates with carriers.
KPIs for Large Volume Shippers:
For larger shippers with higher shipment volumes, additional KPIs come into play. These metrics provide greater visibility into complex operations and focus on optimizing efficiency:
1. Cost per Invoice and Cost per Package: Larger volume shippers should monitor their cost per invoice and cost per package just like small volume shippers. These metrics offer insights into overall expenses and enable effective cost management, allowing you to maximize profitability across larger shipment volumes.
2. Expense as a Percentage of Sale: Tracking shipping expenses as a percentage of sales provides a broader perspective on how your shipping operations impact your overall revenue. Not all SKUs are created equal and some cost more than others. We often see that eCommerce brands create kits to increase their overall sale amount to offset some of the parcel shipping costs. By evaluating this metric, you can gain insights into the financial health of your business and make strategic decisions to optimize profitability and growth.
3. Shipments to Same Address Delivered Same Day and Shipped Same Day (+1, +2): For large volume shippers, the ability to deliver multiple shipments to the same address on the same day or ship them incrementally (+1, +2) is crucial. Tracking these KPIs enables you to evaluate your efficiency in grouping and delivering orders, optimizing routes, reducing costs and enhancing customer satisfaction.
4. Detailed Accessorial Breakdown and Accessorial as Percentage of Shipment Cost: Similar to small shippers, larger shippers should track and analyze detailed accessorial breakdowns to understand and optimize additional charges. Additionally, measuring accessorial costs as a percentage of shipment costs provides a clearer picture of their impact on your overall expenses, enabling you to implement strategies to mitigate these costs effectively.
5. Cube Utilization and Package Confirmation and Compliance: Optimizing space utilization is crucial for large volume shippers. Tracking the cube utilization rate allows you to ensure efficient use of storage and transportation capacity. Additionally, focusing on package confirmation and compliance ensures that your packages adhere to regulations and carrier guidelines, reducing errors, delays and potential extra charges.
By tracking the right KPIs, parcel shippers, regardless of the volume of packages they ship, can gain valuable insights into their operations, improve efficiency and optimize costs. In the simplest form, this can be done with Excel spreadsheets or you can use more robust tools (we are big fans of Beon Insight).
Whether it's monitoring costs per invoice and package, examining cube utilization, evaluating transit times, managing accessorial charges or considering metrics specific to larger shippers, such as expense as a percentage of sales, same-day shipment or package confirmation and compliance, diligent monitoring and analysis empower you to make data-driven decisions and drive success in the competitive world of parcel shipping.
Stay vigilant, measure what matters and propel your shipping operations forward.
