As president of CFI, one of the largest truckload carriers in the nation, Herb Schmidt could get submerged in details quickly without his daily activity report. Schmidt and other executives at the Joplin, Mo.-based fleet use the report to start each day with a bird’s eye view.
The daily report shows key performance indicators – rate per mile, percentage of fuel charge collected, percentage of empty miles, number of empty trucks and so on. Each KPI has in-house responsibility attached to it: If the rate per mile goes down, Schmidt says he contacts sales; if empty trucks go up, he calls recruiting.
“We’ve always tried to automate work measurement as much as possible,” Schmidt says. “We’ve been able to do so because of how we capture data.”
Today, many fleets track KPIs by using real-time performance management tools from leading enterprise software providers. Often called “dashboards,” these tools automatically capture, calculate, display and refresh key metrics throughout the workday.
From a technical standpoint, these new tools are user-friendly. However, fleet managers often have trouble determining what they want to measure, and how to change their business processes to maximize the use of so much real-time information.
Information up front
Enterprise software systems are a virtual warehouse of data detailing a fleet’s operations and finances. Data entry into these systems continues to grow faster and become more accurate through integration with various “third-party” technologies such as mobile communications, fuel cards and electronic data interchange.
With so much data streaming in and out electronically, many fleet managers no longer wait on accounting to prepare reports in spreadsheets or applications such as Crystal Reports. As a result, key trends and performance metrics are available instantly, not days and weeks after the fact.
Fleets like Southern Pride Trucking have made this transition to real-time, automated reporting. Managers at the Las Vegas-based company can see and predict critical errors before they happen simply by looking at their desktop computers or at plasma screens on the wall of the company’s control center, says Jeff Potts, general manager.
Southern Pride uses Maddocks Systems’ Command Center, a management tool that provides access to real-time performance information. For example, the company uses Command Center to monitor a KPI – earnings per mile – to predict the weekly earnings of owner-operators. The KPI alerts operations to possible complaints from drivers before settlement checks are cut.
Previously, the accounting department prepared various driver productivity spreadsheets to monitor driver pay, but by the time the reports made it to operations, drivers already were upset. Now, managers see all drivers on a plasma screen, plotted individually by icons on a graph. A horizontal line spans across the graph and represents the goal for driver earnings. Drivers can fall above or below the line, based on their current earnings per mile.
If managers have a new trend they wish to monitor, Potts simply writes a new KPI with “a simple SQL command” and loads the KPI to the users’ individual screens, or to one of the plasma screens. “We are very dynamic,” Potts says. “We don’t stagnate on one thing.”
Last August, Little Rock, Ark.-based CalArk began using a product from Advanced Systems Concepts (ASC) called Sequel – a dashboard tool designed specifically for use with the carrier’s Innovative Enterprise System (IES) from Innovative Computing Corporation.
“I love [Sequel] because I’m the only programmer at the company,” says Connie DeNoon, programming analyst for the 750-truck carrier. “It saves a lot of time. I can whip out one of the Sequel reports, and [managers] can run it themselves.”
The IES system runs only on IBM i-Series and AS/400 platforms. Without having a tool like Sequel, IES clients such as CalArk would have to use Query 400, write RPG report programs, submit report requests from their vendor, or just do without, says Donna DelMuro, sales manager of ASC.
DeNoon recently created a single dashboard for all freight coordinators. By clicking on an icon on their desktops, coordinators instantly can see how many loads they have in the region for the day. With another mouse click, they can tell if loads are inbound or outbound. They also can drill down to see the actual customers and revenue per mile on each order. “It is helping them make better business decisions,” DeNoon says.
Not always easy
Fleet executives that use dashboard applications often go through lengthy trial-and-error processes before discovering what metrics really drive their business, what their goals or targets should be, and how frequently to monitor and take action on each KPI.
“The problem we’ve found is not the KPI itself,” says Bob Maddocks, president of Maddocks Systems. “It’s the journey to get to the KPI. Most people don’t understand what is important.”
Most fleets begin with a few standard KPIs, and then refine, dump or replace them over time. This journey typically lasts about a year, Maddocks says.
Another challenge of using these applications is learning how to sequence or schedule data entry to produce an accurate KPI. Suppose a manager of a less-than-truckload carrier wants to set up a KPI to monitor the profitability of each daily trip or manifest. If dock hours, for example, were included in the KPI calculation, the information – collected from time sheets – may lag too far behind to be relevant.
One way to improve the KPI’s validity is to use a separate set of KPIs to monitor the accuracy and speed of your data entry. Carriers that use ResultsNow by TMW Systems – a Web-based, executive performance monitoring application – often set up daily scorecards for data entry. For example, in order to ensure that a KPI for revenue per day is accurate, a manager could monitor the billing lag for loads to ensure that delivered shipments are processed into invoices the same day, says Dave Mook, chief operating officer of TMW Systems.
Real-time performance management systems offered by the major software vendors are flexible and adaptable to any type of KPI, but each vendor has a unique strategy for present and future product development.
McLeod Software, which offers the LoadMaster enterprise system, released a business intelligence suite last year that includes a module called Profitability Analysis. The module allows users to prepare quick historical analysis of the profitability per load/move, as well as profitability reporting by lane, tractor and driver, says April Simpson, product manager for McLeod Software.
The suite also includes Executive Dashboard, a browser-based application for real-time KPI monitoring. Using the application, an operations manager could set up a chart to project the balance between loads and available equipment for the next week, says Tom McLeod, president of McLeod Software. Users also can set up alerts if any metrics fall below certain thresholds.
After TMW Systems launched ResultsNow in 2003, it created an optional “watchdog” or exception alert mechanism called “The Dawg.” If a company had a KPI for on-time percentage, and the system detected if one or more loads would be late, it would send an instant e-mail alert to a certain person or group of people, Mook says.
TMW now is rolling out a further enhancement that will allow fleets to create custom workflows or business processes when such exceptions occur. For example, if a load is delayed, a screen will pop up and prompt the user to send a late notification to the consignee.
Many carriers already have hundreds of quality control procedures in place through programs such as ISO 9000. TMW Systems’ new workflow application will help fleets standardize those procedures electronically in their software, Mook says.
However, Bob Maddocks says that automated e-mail alerts and workflows do not fit what he believes is the true purpose of KPI management systems – to help managers predict exceptions, and not just react to them.
The best way to use a real-time management tool like Command Center, Maddocks says, is to have a large visible screen in the room for everyone to see. The screen displays exceptions, color-coded to denote urgency: The moment a problem is fixed, it automatically disappears off the screen.
“You do your workflow through this,” Maddocks says. “At the end of the day, the big thing about KPI screens is that it identifies problems as they are about to occur, so you have the opportunity to correct the situation.”
Each vendor of real-time performance and business intelligence tools may incorporate unique features and have different future product plans. However, the common denominator of the different products is that fleets use them to facilitate communication among employees by making KPIs and other key information visible and well-known.
Savvy executives take the next step and authorize their employees to take immediate, appropriate action in response to KPIs. “The last thing you want is informed but powerless users,” says Wayne Eckerson, director of education and research for the Data Warehousing Institute. “That’s a recipe for disillusionment and poor morale.”
CFI’s Schmidt uses KPIs to empower employees and foster teamwork. All individual KPIs contribute directly to the most important KPI of all – the company’s operating ratio. CFI uses a bonus system based on OR. The amount of bonus money available depends on the company’s profitability, and OR determines how much of that money is awarded in bonuses. Top management creates quarterly scorecards for individuals and departments that tie into the OR, and each individual uses the same set of metrics.
For example, a KPI called roundtrip or factors in the empty miles to pick up a load and the empty miles after releasing a load. For sales, top management may set a goal each quarter to balance an area – to increase the rate per loaded mile out of the Northeast, for example. The goal for a different salesperson may be to downsize an area because of better opportunities elsewhere.
For operations, the incentive is based on the performance of teams. Each quarter, upper management assigns a team of people from operations, marketing and sales to be responsible for the OR of four or five key accounts that have different challenges and problems.
“It forces that group of people to completely break down the wall of communications between nights, weekends, operations and sales,” Schmidt says. “All of them become generalists. They all take ownership.” The team’s area of responsibility includes everything from detention to fuel surcharges, relay costs, pay terms, service guarantees and insurance waivers. “All of those things affect profitability,” Schmidt says.
Overall, performance management tools such as dashboards represent an evolution from static to dynamic reporting. But within a company, the net effect is increased communication, teamwork – and accountability.
Taking KPIs to customers
Many manufacturers, distributors and shippers have bought expensive “supply chain” software systems from vendors such as SAP and PeopleSoft. But these systems do not offer meaningful data for managing transportation costs, says Craig Cullinan, DistTech’s vice president of sales and marketing.
DistTech – a 400-truck provider of bulk logistics services based in Newbury, Ohio – is not a software provider for Fortune 500 companies, but it is certainly in the information business. In 2003, DistTech deployed ResultsNow by TMW Systems, a Web-based performance monitoring application. Soon after using this system for internal use to automate the measuring and monitoring of key performance indicators (KPIs), the company developed a Web application called E-Stat to extend the same benefits to its customers.
“One of the things we’re really good at is taking technologies we use to run our business and extending those capabilities to our customers,” Cullinan says. “Our system is the only source of meaningful information that they’ve got access to. What happens is they log onto our system and see what they are entitled to see.”
When DistTech has planning meetings with a new or prospective customer, the carrier begins by explaining the typical KPIs it offers. More DistTech customers are moving away from “scorecard systems” for on-time deliveries and are using the carrier’s KPIs. If the customer has anything unique or different they want to gauge, DistTech will develop a new report or metric.
“What we are trying to do is give people a better feel for the total cost of transportation in their supply chain,” Cullinan says.
One key metric DistTech provides for customers is delivery cost per gallon. Using this metric, customers can determine the cost ramifications of doing business with anyone else. “It forms a pretty good foundation for partnership,” Cullinan says. “We are now having many more fact-based discussions.”
Another useful report is an “outbound frequency distribution report” that shows a customer how loads were handled at each destination during a week. For example, DistTech may have hauled 50 loads for the customer in one week, but the loads may have been scheduled unevenly, such as 15 on Monday, 15 on Tuesday, and 20 Wednesday, with none on Thursday and Friday. If the customer changed to 10 loads a day in a five-day workweek, it might improve efficiency and decrease costs.
“I’m a big believer in empirical data,” Cullinan says. “Too many times they are making decisions based on anecdotal information. If you get people looking at the same data, they come to the same conclusion.”