To build a successful performance management program, you have to start from the ground up, basing the program on a sound framework and taking care not to rush the process.
Editor's Note: No two successful performance management programs are the same, but all successful performance management programs share common principles. To shed some light on what separates a good company from a great company with regard to performance management, DC VELOCITY has published a series of columns on the 12 Commandments of Successful Performance Management. This month we wind up the series with the 12th commandment: Be Patient.
The 12th Commandment Be patient: You build a house one nail at a time
A good carpenter will tell you that a house is no stronger than its foundation and frame—and that building a strong foundation and frame takes skill and patience. The same can be said of a successful performance management program. You have to start the building process from the ground up, basing the program on a sound framework and taking care not to rush the process.
But what should that framework look like? The accompanying diagram, which shows the framework for what we call the "House of Performance Management," may help you visualize the underpinnings of a successful performance management program. As the illustration shows, the foundation is a set of metrics that are aligned with the company's strategic goals and objectives. [For more on alignment, see Commandments #1 (Focus: Know your goals), #7 (Integrate: Make sure everybody's working toward the same goals), and #8 (Listen: Find out what your customer wants—not what you think it wants).] The companies that report the greatest success with performance management programs are the ones that track their progress toward what senior management identifies as strategic targets. (Of course, strategies can and do change, so make it a point to review your metrics programs at the start of each business cycle and revise them if necessary.)
Once a company has settled on a strategy and laid the foundation for a performance measurement program, it can focus on the program's major components—the three major pillars, if you will:
Process metrics. To ensure that the company measures strategic outcomes, its metrics must be process oriented, not function oriented. That's because strategic vision focuses on outcomes of the total process irrespective of individual functional contributions to the process. [See Commandment #5 (Beware: Know the point of your metrics and be careful not to get sidetracked).]
Balanced metrics that include both financial and non-financial measurements. Study after study has shown that companies that use a balanced set of financial and non-financial strategic measures outperform their less-disciplined rivals in both performance and management. [See Commandment #2 (Balance: Use a balanced approach to selecting your measures).]
A metrics-oriented culture. You can't motivate employees to improve performance simply by putting well-defined performance measures in place. You must integrate measurement into the corporate culture itself. That means taking the measurements out of the realm of the abstract and translating them into something that's meaningful to the people on the shop floor. It also means measuring performance against goals. And it means using what you learn to drive improvement. [See Commandments #3 (Involve: Engage your employees) and #4 (Apply: Put the metrics data you're collecting to good use).]
The 12 Commandments of
Performance Management
1Focus: Know your goals 2Balance: Use a balanced approach 3Involve: Get employees engaged 4Apply: Be metrics "users," not just "collectors" or "posters" 5Beware: Know the point of your metrics 6Anticipate: Use metrics as your headlights 7Integrate: Layer your metrics like an onion 8Listen: Pay attention to what your customer is saying 9Benchmark: 10Be flexible: There's no such thing as the holy grail of metrics 11Lead: Practice what you preach 12Be Patient: Crawl before you walk (or run!)
Adding the nice-to-haves
Anyone who has built a house knows that part of the process is choosing from a wide array of options that make the house more livable and increase its value, but also drive up the cost. In the performance management house, there are also options and nice-to-have elements that can enhance the value to the company once the culture is established and the program is well under way.
Successfully integrating these enhancements into the protocol without undermining the entire program requires a certain amount of experience and sophistication; thus, it's often best to wait until you've achieved some success before attempting to build on your program. But when the time is right, carefully considered additions can pay off handsomely.
One option, for example, is to establish a program that links employee incentives to the key metrics. Such incentives will, of course, vary depending upon the employee's level and influence on the organization's processes. A good incentive program will motivate the employee to achieve the desired result and will use the appropriate type and level of compensation as a reward.
As for other "nice-to-have" features, once your company has established a solid internal metrics program, it may want to consider extending the measurement program to include trading partners. [See Commandment #11 (Lead: Practice what you preach).] Your customers don't distinguish between your company's performance and your suppliers' performance, which means your company's success depends heavily on the effective management of your extended supply network. True, these processes are outside of your direct control, which makes implementation difficult, but the potential rewards make the effort worthwhile.
Finally, technology and automation can do much to enhance a well-designed and -executed performance improvement program. The key is remembering that the program should dictate the type of technology used, not the other way around. Rare is the company that builds a successful metrics program by purchasing technology first. But that shouldn't be taken as a vote against technology. Once they have a successful program in place, companies can gain tremendous efficiency through automation.
Built to last
Choosing which metrics to use is just the beginning of the journey to world-class performance. The next phase is to implement a performance management program that converts those metrics from an abstract concept to an active management tool for boosting performance. Like any tool, metrics must be properly applied. Anybody can go to the hardware store and pick up the tools. It takes a master craftsman (or woman)—someone with vision, technical skills and patience—to take those tools and build a house that will last.
The way that shippers and carriers classify loads of less than truckload (LTL) freight to determine delivery rates is set to change in 2025 for the first time in decades, introducing a new approach that is designed to support more standardized practices.
But the transition may take some time. Businesses throughout the logistics sector will be affected by the transition, since the NMFC is a critical tool for setting prices that is used daily by transportation providers, trucking fleets, third party logistics providers (3PLs), and freight brokers.
For example, the current system creates 18 classes of freight that are identified by numbers from 50 to 500, according to a blog post by Nolan Transportation Group (NTG). Lower classed freight costs less to ship, ranging from basic goods that fit on a standard shrink-wrapped 4X4 pallet (class 50) up to highly valuable or delicate items such as bags of gold dust or boxes of ping pong balls (class 500).
In the future, that system will be streamlined by four new features, NMFTA said:
standardized density scale for LTL freight with no handling, stowability, and liability issues,
unique identifiers for freight with special handling, stowability, or liability needs,
condensed and modernized commodity listings, and
improved usability of the ClassIT classification tool.
The new changes look to simplify the classification by grouping similar articles together and assigning most classes based solely on density – the most measurable of the four characteristics, he said. Exceptions will be handled separately, adding one or more of the three remaining characteristics in cases where density alone is not adequate to determine an accurate class.
When the updates roll out in 2025, many shippers will see shifts in the LTL prices they pay to move loads, because the way their freight is classified – and subsequently billed – might change. To cope with those changes, he said it’s important for shippers to review their pricing agreements and be prepared for these adjustments, while carriers should prepare to manage customer relationships through the transition.
“This shift is a big deal for the LTL industry, and it’s going to require a lot of work upfront,” Davis said. “But ultimately, simplifying the classification system should help reduce friction between shippers and carriers. We want to make the process as straightforward as possible, eliminate unnecessary disputes, and make the system more intuitive for everyone. It’s a change that’s long overdue, and while there might be challenges in the short term, I believe it will benefit the industry in the long run.
Business leaders in the manufacturing and transportation sectors will increasingly turn to technology in 2025 to adapt to developments in a tricky economic environment, according to a report from Forrester.
That approach is needed because companies in asset-intensive industries like manufacturing and transportation quickly feel the pain when energy prices rise, raw materials are harder to access, or borrowing money for capital projects becomes more expensive, according to researcher Paul Miller, vice president and principal analyst at Forrester.
And all of those conditions arose in 2024, forcing leaders to focus even more than usual on managing costs and improving efficiency. Forrester’s latest forecast doesn’t anticipate any dramatic improvement in the global macroeconomic situation in 2025, but it does anticipate several ways that companies will adapt.
For 2025, Forrester predicts that:
over 25% of big last-mile service and delivery fleets in Europe will be electric. Across the continent, parcel delivery firms, utility companies, and local governments operating large fleets of small vans over relatively short distances see electrification as an opportunity to manage costs while lowering carbon emissions.
less than 5% of the robots entering factories and warehouses will walk. While industry coverage often focuses on two-legged robots, Forrester says the compelling use cases for those legs are less common — or obvious — than supporters suggest. The report says that those robots have a wow factor, but they may not have the best form factor for addressing industry’s dull, dirty, and dangerous tasks.
carmakers will make significant cuts to their digital divisions, admitting defeat after the industry invested billions of dollars in recent years to build the capability to design the connected and digital features installed in modern vehicles. Instead, the future of mobility will be underpinned by ecosystems of various technology providers, not necessarily reliant on the same large automaker that made the car itself.
Regular online readers of DC Velocity and Supply Chain Xchange have probably noticed something new during the past few weeks. Our team has been working for months to produce shiny new websites that allow you to find the supply chain news and stories you need more easily.
It is always good for a media brand to undergo a refresh every once in a while. We certainly are not alone in retooling our websites; most of you likely go through that rather complex process every few years. But this was more than just your average refresh. We did it to take advantage of the most recent developments in artificial intelligence (AI).
Most of the AI work will take place behind the scenes. We will not, for instance, use AI to generate our stories. Those will still be written by our award-winning editorial team (I realize I’m biased, but I believe them to be the best in the business). Instead, we will be applying AI to things like graphics, search functions, and prioritizing relevant stories to make it easier for you to find the information you need along with related content.
We have also redesigned the websites’ layouts to make it quick and easy to find articles on specific topics. For example, content on DC Velocity’s new site is divided into five categories: material handling, robotics, transportation, technology, and supply chain services. We also offer a robust video section, including case histories, webcasts, and executive interviews, plus our weekly podcasts.
Over on the Supply Chain Xchange site, we have organized articles into categories that align with the traditional five phases of supply chain management: plan, procure, produce, move, and store. Plus, we added a “tech” category just to round it off. You can also find links to our videos, newsletters, podcasts, webcasts, blogs, and much more on the site.
Our mobile-app users will also notice some enhancements. An increasing number of you are receiving your daily supply chain news on your phones and tablets, so we have revamped our sites for optimal performance on those devices. For instance, you’ll find that related stories will appear right after the article you’re reading in case you want to delve further into the topic.
However you view us, you will find snappier headlines, more graphics and illustrations, and sites that are easier to navigate.
I would personally like to thank our management, IT department, and editors for their work in making this transition a reality. In our more than 20 years as a media company, this is our largest expansion into digital yet.
We hope you enjoy the experience.
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In this chart, the red and green bars represent Trucking Conditions Index for 2024. The blue line represents the Trucking Conditions Index for 2023. The index shows that while business conditions for trucking companies improved in August of 2024 versus July of 2024, they are still overall negative.
FTR’s Trucking Conditions Index improved in August to -1.39 from the reading of -5.59 in July. The Bloomington, Indiana-based firm forecasts that its TCI readings will remain mostly negative-to-neutral through the beginning of 2025.
“Trucking is en route to more favorable conditions next year, but the road remains bumpy as both freight volume and capacity utilization are still soft, keeping rates weak. Our forecasts continue to show the truck freight market starting to favor carriers modestly before the second quarter of next year,” Avery Vise, FTR’s vice president of trucking, said in a release.
The TCI tracks the changes representing five major conditions in the U.S. truck market: freight volumes, freight rates, fleet capacity, fuel prices, and financing costs. Combined into a single index, a positive score represents good, optimistic conditions, and a negative score shows the opposite.
A coalition of truckers is applauding the latest round of $30 million in federal funding to address what they call a “national truck parking crisis,” created when drivers face an imperative to pull over and stop when they cap out their hours of service, yet can seldom find a safe spot for their vehicle.
According to the White House, a total of 44 projects were selected in this round of funding, including projects that improve safety, mobility, and economic competitiveness, constructing major bridges, expanding port capacity, and redesigning interchanges. The money is the latest in a series of large infrastructure investments that have included nearly $12.8 billion in funding through the INFRA and Mega programs for 140 projects across 42 states, Washington D.C., and Puerto Rico. The money funds: 35 bridge projects, 18 port projects, 20 rail projects, and 85 highway improvement projects.
In a statement, the Owner-Operator Independent Drivers Association (OOIDA) said the federal funds would make a big difference in driver safety and transportation networks.
"Lack of safe truck parking has been a top concern of truckers for decades and as a truck driver, I can tell you firsthand that when truckers don’t have a safe place to park, we are put in a no-win situation. We must either continue to drive while fatigued or out of legal driving time, or park in an undesignated and unsafe location like the side of the road or abandoned lot,” OOIDA President Todd Spencer said in a release. “It forces truck drivers to make a choice between safety and following federal Hours-of-Service rules. OOIDA and the 150,000 small business truckers we represent thank Secretary Buttigieg and the Department for their increased focus on resolving an issue that has plagued our industry for decades.”