KPI of the Day – Logistics: $ Cost per ton-mile
Definition
Measures the average amount of money spent per one mile of distance traveled, in order to ship to a customer a ton of purchased merchandise.
Purpose
To indicate the cost effectiveness of freight, with regards to the cost level for shipping the merchandise to the client.
Recommendations
Cost control and optimization is directly connected to the profitability level of the supply chain management. Transportation cost per ton mile is a highly used indicator within distribution and logistics, because it offers a wide range of comparison possibilities among vehicles used.
Freight expenditure is one of the main cost categories in logistics and distribution. Consequently, the regular monitoring of $ Cost per ton-mile is highly recommended. The KPI can be monitored together with other related KPIs such as % Transport capacity utilization or # Fuel consumption per distance ran.
Companies have to design shipping policies that fit their industry, the type of products they sell, the weight of the transported goods, as well as the customers’ needs. Most importantly, logistics and distribution companies need to focus on cost efficiency.
$ Cost per ton-mile for shipped products is a KPI which may greatly influence the shipping fee for the client on the one hand, and the profitability of the company on the other. For these reasons, low as possible $ Costs per ton-mile should be a top priority in the logistics and distribution sector. The first step for decreasing the $ Cost per ton-mile is to design a shipment plan and continuously optimize it.
Aspects to be considered in this regard include:
- Shipping on off-peak days and during the night when traffic is low;
- Optimize packaging in order to minimize dead space;
- Shipping in bulk which is both less costly and less time consuming;
Measurement thresholds vary widely according to the transportation freight and its capacity utilization. The lower are these costs, the higher is the distribution profitability.
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Tags: KPI, Logistics performance
