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April 27, 2023
- Written By
Annie Asai
The shipping industry in the U.S. is a massive behemoth. In fact, parcel shipping volume reached a whopping 21.6 billion parcels in 2021, nearly double from 2016's 11 billion. With so many packages being sent out by shippers like eCommerce retailers or 3PLs, there's a lot that can go wrong.
Even more, there's also quite a bit at stake. 13% of consumers say they would never order again from a retailer if a package arrived late. To avoid losing customers in an increasingly competitive landscape, there are a lot of KPIs and metrics that companies in the shipping industry need to track to ensure they're on top of their game. But in a sea full of data, how can you extract the most relevant insights to make informed decisions that improve their overall performance?
In this article, we'll dive into the top carrier metrics your company needs to track to ensure sustainable, long-term success.
One of the most important metrics you should monitor in the transport or logistics industry is on-time performance aka OTP. These are based on service level agreements (SLAs), which determine how shipments get categorized based on delivery time (like same-day, overnight, or standard shipping).
In an ideal world, there would never be late deliveries, but it's a fact that situations do arise, and packages might get delayed. On-time performance can be delayed by either the customer or the carrier.
Let's say a customer makes a typo when inputting their shipping address. This could mean the carrier can't deliver the package and might need confirmation from the customer to re-deliver.
On the other hand, a package might be delayed because of the carrier due to a technical or routing error, sorting facility issues, or other transportation-related delays like poor weather conditions and road closures.
Either way, it's smart to know where the delays are coming from and how to best mitigate these issues when possible.
As of the holiday season of 2022, the on-time performance benchmarks of leading carriers are as follows:
Source: ShipMatrix
Calculating your on-time performance involves the following steps:
For instance, if you had 100 shipments during the period, and 80 of them were delivered on time, then the On-Time Percentage would be (80 / 100) x 100 = 80%.
Each shipment requires a shipping label, which is basically an identification document with important info about the shipment to ensure it arrives at the proper destination. However, shipping labels are another way of referring to a shipment and are a good way to determine the average cost of all your shipments.
The best way to extract financial insights from shipping labels is to segment them. Doing so can help identify patterns and trends in shipping costs, such as the most expensive carriers, shipping routes, or package sizes.
It can also provide information on which customers or products are driving the highest shipping costs, allowing you to make data-driven decisions to optimize your shipping strategy.
For instance, certain states might have higher label costs because most of your clients live in more rural areas or because of supply chain issues. It could also reveal insights into overall carrier performance: carriers that charge more could provide better delivery service (or not!) The only way to tell, of course, is by monitoring these metrics.
According to FitSmallBusiness, here are the average carrier costs for 2022:
Shipping TypeFedExUPSUSPSFlat RateStarts at $11.10Starts at $10.20Starts at $9.35OvernightStarts at $61.25Starts at $67.44Starts at $28.75GroundStarts at $10.10Starts at $10.10Starts at $8.95Small PackagesStarts at $12.40 for a small box (up to 420 cubic inches)Starts at $13.35 for a small box (up to 250 cubic inches)Starts at $6.15 for 12-ounce parcelLarge PackagesStarts at $24.95 (up to 1,100 cubic inches)Starts at $21.05 (up to 1,050 cubic inches)Starts at $11.90 for a five-pound parcel
If you want to run the numbers and determine your average carrier costs, do the following:
So, if you had 100 shipments during the month and the total carrier cost was $10,000, then the average carrier cost would be $10,000 / 100 = $100 per shipment.
Another KPI that eCommerce companies and 3PLs should be tracking is average transit time. The difference between this and on time performance is that the latter determines the percentage of shipments that are successfully delivered within the given SLA, rather than the actual number of days in transit
Let's say a standard shipping SLA indicates three to five days; in this instance, packages that arrive within three, four, or five days would all be considered to successfully meet the SLA. By tracking average transit time, you'll have a richer understanding of how long it's taking for your packages to get from point A to point B. There are various ways to mitigate or reduce shipping time, including route optimization software.
These steps will help you estimate your carrier's transit time:
For instance, if you need to ship a package from Los Angeles to New York and select a carrier offering standard ground shipping, their service map indicates an estimated transit time of 5 business days. However, if you require expedited shipping, the transit time may be two business days.
Shipping zones are groups of ZIP codes that are used to determine how far a package is going, starting from the warehouse all the way to the end customer. If a shipper’s fulfillment center is based in New York City, a customer in Philadelphia might be zone 2, while a customer in Las Vegas could be zone 6.
If most of your shipping labels are in a relatively higher zone, that means you're spending more money on eCommerce shipping and transit costs. This is why shippers might have multiple warehouses; they’re designed to keep packages closer to their destinations, thus bringing prices down.
Let's say the same shipper opened a warehouse in the Bay Area: the Las Vegas customer would likely drop down to somewhere around zone 3 due to being closer in distance, requiring less transit time and a lower label cost.
Another potential logistics strategy instead of opening a full-blown warehouse could be zone skipping. Zone skipping involves consolidating multiple loads into a single shipment, rather than just sending individual packages through multiple zones
Basically, instead of individually shipping packages through many zones, it could be worthwhile for larger organizations to consolidate multiple loads and collectively send them to the nearest distribution center or sort facility. From here, they can then send individual packages from that location (bonus points for using a regional carrier partner!)
Zones are calculated by carriers and are relative and based on a package's origin and destination. They're typically determined by mile radius and presented in a chart or table format like this:
Shipping ZoneMile RadiusZone 10-50 milesZone 251-150 milesZone 3151-300 milesZone 4301-600 milesZone 5601-1000 milesZone 61001-1400 milesZone 71401-1800 milesZone 81801-2100 milesZone 92101 miles and over
If you want to make this data more actionable, you can calculate the average zone for your shipments. Suppose you have one facility in Las Vegas, and you see that your average zone across all your packages is 8 because you're constantly shipping to locations on the East Coast.
With this in mind, you could consider adding another facility to lower your average shipping zone or working with a logistics company that can help you move shipments across zones more efficiently.
The claim ratio is a measure of the total number of claims against a carrier compared to the overall shipments that they delivered. It's expressed as a percentage and is an important metric to consider when choosing a carrier to partner with.
A low claim ratio indicates that a carrier is taking appropriate measures to prevent damage or loss of shipments, while a high claim ratio suggests that there are issues with the carrier's processes or handling of packages.
When a shipment is damaged or lost, you may have to issue refunds, resend the package, or replace the lost items at your own expense. This not only leads to a loss of revenue but also increased costs in customer service, logistics, and potential damage to your reputation.
That’s why it’s essential to partner with carriers that do their utmost best to keep their claim ratio as low as possible—while providing full transparency.
While there aren’t any specific studies comparing each carrier’s claim ratio, Speed Commerce claims that the damage rate of the top three carriers are as follows:
You can figure out a carrier's claim ratio by taking these steps:
For instance, if you had 100 shipments during the month and five claims were filed for lost or damaged shipments, then the carrier claim ratio would be 5 / 100 = 0.05 or 5%.
It's important to partner with a carrier that provides excellent customer service, quick response times, and open communication. With your company's reputation on the line in your customer's eyes, you shouldn't work with a carrier that takes days to respond to your question or only provides generic answers to your concerns.
Always check customer reviews left on third-party sites, or take the time to evaluate how happy your organization is with the current level of service from your national or regional carrier.
There isn't one set formula for calculating a carrier's communication and responsiveness. However, you can glean insights into the quality of their customer support by looking at ratings and reviews on websites such as G2 or Trustpilot.
Asking other shippers about their experiences can also help. This can help you understand the experiences of other customers and their perception of the carrier's communication and responsiveness.
And if you have existing carrier relationships, you can keep track of their response time and the quality of the support you receive when you have an inquiry or issue. These actions can help you make informed decisions about which carriers to use and improve your shipping processes.
Now that you know what carrier performance KPIs you should be on the lookout for, you might be wondering how to actually collect the information you need to gain insights and implement changes.
Here are three ways you can do just that.
Chances are high that the different carriers you work with have a TMS they use to track carrier performance and optimize operational and financial stability. However, if you work with multiple carriers that offer tiered subscriptions, you might not have access to their performance metrics or data analytics to save money.
Some TMSs might also only capture raw data, which can be challenging to synthesize and act upon without seeing it visualized, like via a carrier scorecard. Without the help of industry experts, you may also struggle with taking actionable steps to improve your offerings.
While internal tracking systems can be a viable method to collect carrier performance data, it often costs significant time and resources, so there are better options for most shippers.
Another option could be to check industry benchmarks. This is a great way to understand the most important trends within the shipping business and help see how you stack up.
That said, it's crucial to remember that one size doesn't fit all—you'll likely be comparing yourself against players with a significantly larger budget than you, organizations targeting different customers, and much more. Different variables could play a role in why you're not on the same level as the industry average, so it's essential to take this with a grain of salt and complement it with your own findings.
If you already have shipping and logistics data but need help extracting actionable info, consider partnering with Tusk Logistics.
One of the first things we do for potential clients is conducting an Impact Analysis. We take your current shipping data and analyze it, considering factors such as average weight, pricing, and shipping destinations. We then compare your current rates with what you could be paying by partnering with us.
Tusk's Impact Analysis provides a clear and concise breakdown of the potential savings you could achieve, so you can see the impact our logistics solutions could have on your business. It is a crucial tool that helps you make informed decisions about partnering with us and improving your shipping performance.
In addition, Tusk simplifies the shipping process by seamlessly integrating it into your existing operational software. Once shippers have been onboarded into our environment, you start receiving our monthly performance recaps, which clearly outline the carrier performance metrics we just talked about.
We provide insightful visuals that spell out the most important metrics you need to be tracking, allowing you to quickly evaluate your performance and carriers' relationship health. Tusk's monthly performance recaps can empower your organization to make informed decisions and improve your supply chain. It's a breeze to understand critical factors like truck performance, shipping labels categorized by state or day, and much more.
While there's no one-size-fits-all strategy for improving carrier performance, you could implement some general best practices to lower shipping costs and streamline your shipping operations.
Consider the following.
Using these metrics paired with industry benchmarks allows you to quickly see if a particular partner is underperforming. Whether it's a high percentage of labels arriving outside their SLA or packages in a certain state taking longer to arrive than average, you'll have quantifiable data to start targeting the issues.
If a certain route, state, or carrier has a higher claims ratio than the rest, you may need to take proactive steps with the regional or national carrier to see what can be done to optimize your current offerings—all with hard data to back up your findings.
If you work with multiple carriers, you'll be able to see what the cost-efficiency balance is for each carrier and can use insights from your carrier scorecards to negotiate better rates and contracts, improving your cash flow and customer satisfaction in the long run.
Another option? Work with a logistics partner like Tusk. Our technology gives you access to pre-negotiated rates from regional carriers so you can lower shipping costs and improve transit time.
If you're an eCommerce or 3PL shipper that's (considering) working with multiple carriers, tracking carrier performance metrics like on-time delivery and claim ratios is a must-do if you want to ensure long-term, sustainable success. While this can seem like a daunting task, partnering with Tusk Logistics makes the entire process more manageable.
With our extensive regional shipping network, we provide reliable services, transparent pricing, and proactive support, all at significantly lower costs than national carriers. Through one centralized platform, you can lower your transit times, provide better customer service, and reduce your shipping expenses with our pre-negotiated rates.
And with our powerful monthly performance recaps, you can stay on top of carrier performance metrics and make informed decisions to improve.
