We all know that managing a freight forwarding business or being a freight forwarder becomes way more challenging due to the number of uncertainties and external factors constantly influencing your work.
That’s where freight forwarding metrics and KPIs come in.
To stay on top of your freight forwarding operation, offer the best service to shippers and carriers, and maintain profitability in face of the high transport rates in the market, tracking key performance indicators (KPIs) that provide insight into your business's performance is essential.
Freight forwarding KPIs can help you:
- Evaluate the performance - of transport managers, bookings, and general business;
- Identify areas for improvement and how to differentiate yourself from competitors;
- Identify possible disruptions in your process and planning;
- Be more certain about your decision-making process;
- Identify trends and patterns in the transportation industry.
Check what will affect changes and what to expect about freight rates in 2023.
So, to help you gain effectiveness, we’ll discuss 7 of the most important KPIs your business should analyze to stay competitive and improve your bottom line.
Based on Time and Tracking
On-Time Delivery
This metric measures the percentage of shipments delivered to the customer within the agreed-upon timeframe following the delivery ETA.
This is extremely important for freight forwarders to evaluate their ability to meet supplier expectations & provide clients with accurate information about reliable shipping routes and carriers.
A high on-time delivery rate indicates that your business is meeting customer expectations and building trust with your clients. This ratio is a benchmark for clients when choosing a forwarder for their needs.
It also helps Freight agents evaluate how well and often their carriers meet their ETA, understanding the possible need for any partner changes.
On-Time Pickup
Similar to On-time Delivery, it measures the percentage of shipments picked up from the supplier within the agreed-upon timeframe. A high on-time pickup rate indicates you manage logistics metrics effectively and meet supplier expectations.
Average Wait Time
This measures the time it takes for cargo to be loaded into a truck or other transport by measuring from the truck arriving at the loading warehouse till the container is loaded & departs the location.
Carriers charge high fees when there are high wait times. That’s why forwarders should calculate this while processing freight rates.
Since freight forwarders act as middlemen throughout the delivery process for both the carrier and the shipper, it’s essential to understand and identify potential delays.
Based on Freight Rates
Average Freight cost per tonne shipped
The average freight cost per tonne shipped ratio measures the costs associated with shipping cargo on different routes and during different seasons.
Understanding these costs is crucial for freight forwarders to offer their customers accurate and updated information, with advice on cost-effective routes.
Plus, understanding these costs allows freight forwarders to stay knowledgeable about industry trends and make better rate and route selection decisions.
Ratio of Value-Added Costs
This metric measures the percentage of value-added costs (such as packaging, handling, and insurance) compared to the average margin earned on each shipment.
These costs vary depending on factors like terminals, destination, routes, fuel usage, product type & security requirements.
They’re often unavoidable, and freight forwarders must understand these costs and help their clients minimize their exposure to them. So transport managers must map out the costs and ratio involved in surcharges to land and retain clients.
KPIs based on internal operations
Quote Conversion Ratio
In freight forwarding, a quote conversion is when a prospective client agrees to a quote and converts it into a final shipment order.
Shipping rate prices are quite volatile. The quote conversion ratio decides the rate at which leads accept or reject quotes from your pricing team.
Clients might decline quotes for many reasons, but by using this indicator, digital freight forwarders can examine the reasons for each client or shipment type and enhance their quoting procedure for better efficiency & conversion ratios.
Tracking this metric is important since it helps understand how effectively your sales team converts leads into customers. Plus, it helps identify any issues preventing leads from closing, such as:
- Sales expertise;
- High quotes;
- Lack of transparency in the quote process.
By monitoring the quote conversion ratio, you can make data-driven decisions to improve your sales process and increase your conversion rate.
Transportation Sustainability KPIs
Tonne-Kilometer
Sustainability is important. And so is measuring your carbon emissions. Emission intensity helps you measure your Co2 emissions. That’s where tonne-kilometer comes in.
Tonne-kilometer (Tkm) is a KPI that measures the amount of carbon emissions generated by the flow of goods over a certain distance. This is necessary for the freight forwarding industry as it helps companies understand the environmental impact of their operations and make informed decisions to reduce carbon emissions.
Measuring Freight Forwarding operational success
Whether you’re using these metrics to evaluate the health of your forwarding business, manage your clients and quote conversion, or understand logistics industry trends, tracking and analyzing KPIs is critical for any professional in the transportation market.
So whether you're a new or experienced freight forwarder, track and analyze these 7 metrics to stay competitive and improve your business's performance.
Guaranteeing you have easy access to real-time data about any shipment is the best way to grow your client base and reduce operational costs. Understand how all-in-one solutions like rouvia can provide the tools you need to be more effective.
