A Guide to Carrier Scorecards

Any shipper responsible for transportation knows the importance of maintaining high service standards. This requires that shippers actively monitor their network performance and work with carriers to adapt and refine their strategies.

Recently, carrier scorecards have emerged as a tool for evaluating and managing carrier performance. Scorecards are a systematic approach to assessing carrier performance, allowing you to create and maintain high standards, build trust with your carriers, and mitigate risks such as fraud and double brokering. 

This article delves into the essentials of implementing and managing carrier scorecards, providing practical insights to help you work with the best in the business.

1. Initiating a Scorecard

The first step in setting up a carrier scorecard is defining clear criteria. Depending on your needs as a shipper, you may prioritize different performance standards. For example, some shippers require extremely precise on-time performance for pickups and deliveries, while others may prioritize high visibility and customer service.

As such, selecting the criteria for your carrier network that best reflects your business's demands is essential. 

Begin by listing out the KPIs that are important in your transportation strategy. Some common KPIs are: 

1. On-time Delivery
2. On-time Pickup
3. Tender Acceptance/Rejection
4. Missed Pickups
5. Freight Damage & Loss Ratio
6. Claims Ratio: The ratio between freight claims filed against the carrier against the total number of shipments. Shows how liable the shipper is for damaged or lost goods.
7. Invoice Accuracy
8. Customer Service Responsiveness, Visibility & Overall Satisfaction
9. Safety Performance
10. Service Level Agreements (SLAs) Compliance
11. Carrier Capacity Rating: A carrier's maximum and minimum handling capacity in volumes over time. 

2. Decide Where You Want to Store Information

The next step is to choose how to record your carrier scorecard. Select a system that best reflects the KPIs identified in Step 1. A Transportation Management System (TMS) is the optimal choice for most cases due to its ability to integrate various data points and provide real-time analytics. However, for highly specific operations, building a custom scorecard in Excel may be more appropriate.

3. Calibrate KPIs and Align Expectations with Carriers

As you create these scorecards, you should also communicate your expectations to your carriers. Each KPI will have constraints that are unique to the shipper.

For instance, some businesses may define “on-time-pickup” to be within 15 minutes of a dock appointment. Others may tolerate an “on-time-pickup” within 3 hours of the dock appointment. 

Additionally, there may be situations where on-time pickups is extremely important for your network, but deliveries can be flexible. 

Your scorecard should define the KPIs within their relative context, and your carrier should be aware of these expectations so they can maintain service-levels.

4. Updating Carrier Scorecards

Now that your carrier scorecard is set up, it is essential to update it frequently and identify areas for continuous improvement. 

Certain software providers, such as Portex, will automatically collect and store this data for you, significantly reducing the operational toll of managing a scorecard.

Carrier scorecards should be reviewed regularly (e.g., monthly and quarterly) with your carriers to help contextualize their performance and iterate on future transportation strategies. 

5. Mitigating Fraud and Avoiding Double Brokering

To combat fraud effectively, you may also want to include a "Compliance" KPI. "Compliance" can be based on regular background checks, audits, third-party verification, or even manually checking that the equipment used to service your freight matches the identity of your contracted carrier. 

It's harder to put a functional equation here, but suspicious discrepancies in information should be flagged and investigated.

Best Practices

To maximize the usefulness of carrier scorecards, you should be actively communicating your findings to your carriers. Scorecards are not rubrics that carriers are oblivious to. They are a tool that promotes alignment and higher service levels across your transportation network. 

If you find that your SLAs need to be stronger, talk to your carrier. They may be able to increase their service levels. Depending on your demands, you may need to change your equipment type (e.g., from Normal Dry Van to Expedited) or switch carriers.

In the event that a carrier underperforms, the scorecard should give them specific and actionable feedback. If a carrier still shows no improvement, it may be time to switch up your carrier network.

There may also be instances where a carrier consistently exceeds expectations. In this case, you can inscentivse a continuity of solid service levels by rewarding carriers with bonuses such as greater volume allocations, more consistent freight, or greater fuel subsidies.

If you are interested in partnering with a software provider to help automate the management and iteration of your carrier scorecard, consider moving forward with Portex. 

Portex is an easy-to-use freight procurement platform with built-in carrier scorecards to help you develop your transportation strategy. It takes 15 minutes to implement, saves shippers 30% on freight spend, and improves efficiency by 10x.