3 Important Metrics Within Freight Brokerage

Intro

The most vital and story-telling key performance indicators (KPI) within power-only freight brokerage are margin percentage/dollars, percent-to-market, and service percentage. The combination of each of these three KPIs provide insights into the current market state, as well as the performance of the business in comparison to the rest of the industry. They help to measure financial health, customer satisfaction, on-time service, and our competitive position against others within the space.

Margin

Margin is a critical KPI that shows the profitability of the business unit, as well as the health of the freight market. Margin dollars are calculated by subtracting the cost to power a load from the rate that is given to us by the customer. For example, we will negotiate a rate on a lane with customer A, ensuring that we will be able to take their shipment from point A to point B. As a broker, it is my responsibility to procure a responsible carrier to complete the load for the lowest cost possible.

Margin analysis allows us to find out a few things about what we may be doing right or wrong. We can do profit analysis, and based on the margin percentage we are able to see if brokers are effectively negotiating for the best rates, as well as if our customers are paying us enough for certain lanes. Analyzing margin dollars allows us to find differences that may depend on the level of volume, as well as the length of haul and rate per mile.

Percent to Market

Percent to market is an important KPI that tracks how well we are buying compared to the rest of the market. The market rate in our system represents the market-wide price for the lane, and it is in our best interest to keep our buying below the market for two reasons: to raise margins and to lower the market rate by buying under market price in large amounts.

Percent to market enables us to measure our buying power in the market. If we are able to procure coverage on loads under market, it shows that we are in a good position of control in the market, and we have an influence on the price of lanes. Market trends are also able to be traced from percent to market. A higher than usual percent to market may mean that there is a lack of capacity, and we must pay carriers more to cover our freight, and a lower than typical percent to market may mean that there is excess capacity.

Service

Our service figure represents the amount of freight that we cover, as well as if it is picked up and delivered on time. If we win 100 loads in a contract with a customer and are able to procure carriers that can successfully complete 95 of those within the terms of the contract, our service is 95% with that particular customer.

Service is a vital figure that represents our reliability and upholds our reputation. It is difficult within JB Hunt truckload to 100% ensure that service failures do not happen since we have a smaller scope of control over the carriers and drivers that handle our customer’s freight, but service is constantly pushed on employees within truckload, as it is such an important thing to manage in the overcrowded space that is the transportation industry at the moment.

With a high service percentage, customers feel much more confident awarding us their freight, because they know that their freight will be protected and on time with a high degree of certainty.

Conclusion

Although there are many KPIs that tell a story, margin, percent to market, and service are three of the most vital and most telling within freight brokerage. Margin and percent to market are keys in the financial performance of the division and tell us a lot about the market. A high service rating allows us to beat out competitors bidding for freight, as we are able to ensure reliable coverage.