Editor’s Note: Earlier in 2013, David Lee contributed a blog post for TMC. We’re sharing his original post here because transportation management discussions are always relevant topics. Please share your thoughts and read the blog post, 11 Reasons Why Creating a Joint Scorecard Can Improve an Outsourced Relationship.
You’ve partnered with a third party for freight management services and over time have started to wonder whether the provider is continuing to deliver value. The benefits of the relationship are no longer clear cut, so now what?
There are a number of reasons why such relationships appear to lose their purpose, and they often have little to do with the competencies of the participants.
Maybe your network has changed and the original deliverables are now out of date, unrealistic, or both. Perhaps you’ve instituted new processes or strategies which caused outcomes you did not expect, making it more difficult to work with the provider.
New faces can also disrupt an outsource arrangement. If there have been quite a few staff changes, the reshuffled logistics team is probably less familiar with the capabilities of the third party provider, and this can be a source of friction.
In some cases, the fog that has descended can be chalked up to experience. Even the most meticulous implementation plan is no substitute for operational experience. There are network nuances that only come to light when the relationship goes live. It is almost inevitable that systems and processes will have to be re-tuned at some point to take account of these unanticipated demands.
So, how do you lift the fog and rejuvenate the third party relationship? One way is to create a joint scorecard between your organization and the provider. Here are 11 reasons why:
- By definition, a joint scorecard includes metrics that both the service provider and shipper want and understand. As such, it provides a clear, continuous measure of how the relationship is performing.
- The document categorizes the value proposition provided by the third-party provider, and holds them accountable to it.
- Inevitably your business will change, and the provider needs to be agile enough to keep pace. Since the scorecard metrics evolve in line with business changes, it will flag a provider that’s lagging behind.
- The scorecard also clarifies the key components that a shipper needs to bring to the table to make the relationship successful. For example, if a shipper is providing inaccurate shipment data ,it’s difficult for the third party to accurately pay carrier invoices.
- The scorecard is tailored to the nuances of the business. A beverage company might be very interested in cost per case, for example, whereas this metric is of little importance to a paper manufacturer. Analyzing these key metrics – and the root causes of why they change from week to week – can yield the biggest cost savings and service improvements.
- Since the joint scorecard is a living document that is tweaked in line with changes in the network, it keeps everyone up to date. And it provides a running review of the network’s stress points.
- The analyses and graphics that come with the scorecard can be used to present the data to higher-ups and to drive management meetings.
- Scorecard analytics are becoming more sophisticated as advanced business intelligence tools come into play.
- The scorecard can be used to set up management routines such as monthly conference calls.
- Discussions with other service providers such as carriers can be based on scorecard data. Information gleaned from the scorecard, the optimum size of shipments for instance, is useful for internal stakeholders such as customer service managers.
- As a record of performance, a scorecard can be used to highlight successes and failures. Going forward, you can leverage this information to build on the practices that work well and fix the ones that don’t.
There can be some resistance to the idea of a joint scorecard, even when it is obvious that such a measure is sorely needed. Creating one is not trivial; both teams need to devote time and resources to the effort. Also, certain legacy-minded individuals may not welcome the departure from accepted practice.
In our experience, however, shippers that are looking to raise their freight networks to the next level of efficiency generally support joint scorecards. And once implemented, these devices rapidly gain acceptance.