With performance targets continuing to be missed, shippers are re-evaluating processes to keep tabs on carrier service delivery and accountability, reports Drewry.
The need for monitoring
Terminal congestion is pushing vessel ‘on time performance’ to all-time lows, compromising international supply chains and goods flow. The impact of the chaos on lead times in some sectors has been so severe it has had a direct bearing on operations, product availability and competitiveness. While the gradual process of rebalancing and normalisation continues, the acute disruption has concentrated minds and a more fundamental change is occurring to the relationship dynamic between BCOs and their ocean freight service providers.
When it comes to the provision of high stakes services, companies buy expectations rather than tangible things; and if expectations are repeatedly missed, stringent performance monitoring becomes mandatory.
Latest key indicators highlight ongoing performance challenges
In today’s chaotic market, circumstances, needs and expectations have come together and reset the focus for BCOs in their dealings with carriers, with primacy shifting decidedly from the conventional mandate of securing the most competitive freight costs to strict adherence to service levels, delivery and performance. Even after the current, serious port and shipping bottlenecks are resolved, reliability of service will be valued and scrutinised more, because international transport and its serious problems have attracted top corporate management attention and focus.
But to successfully achieve and maintain this transition, how can shippers/BCOs develop robust ways of measuring carrier performance and end-to-end lead times?
Appropriate metrics to monitor, measure and review service providers are essential
Of course, the changes in the transport environment caused by the disruptions have heaped pressure on supply chain teams in shippers/BCOs across all functions, forcing them into new ways of collaborating and keeping tabs on carrier service. With liner capacity largely restored on a port-to-port basis, it is now clear, end-to-end performance visibility is needed.
From working with clients, we have found that vessel delays may account for more than 70% of total shipment delays and that the worse providers on a route could incur average delays of more than 7 days longer than the best performers. The need to fully understand the true cost of poor service conformance across your vendor allocations is no longer optional.
You can’t improve what you don’t measure
Any situation where providers are not meeting the basic service levels they are being paid for is clearly unsustainable, and not in the interests of either party. We believe it is mutually desirable to be open and pro-active, establishing realistic and robust performance frameworks; but also planning for below-95% vendor performance, when 95-100% is not available, from the contracting phase through all stages of the engagement.
Drewry defines and uses detailed shipment milestone metrics and data to help BCOs adapt to the more service-orientated paradigm and have developed an innovative suite of advisory services to help shape the right service delivery programme based on network profile and industry achievable service levels.
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Source: Drewry
