In this video tutorial, accounting professors Jim and Kay Stice offer an overview of a case study to determine the four key performance indicators that would make up part of a trucking company's balanced scorecard. These KPIs are figures the CEO and team would review every morning to determine how the trucking business is doing.
- [Voiceover] We are going to do a case study of the impact of key performance indicators or KPIs in the trucking business. - [Voiceover] This little case for a hypothetical company, XYZ Trucking, is adapted from some information and measures of a real trucking company. - We thank our colleague Professor Don Livingstone for providing some of the information we have used in constructing this little case. - [Voiceover] So here's the case. XYZ Trucking is based in the United States. It focuses on short to medium length trips. The average length of a trip, about 540 miles.
- [Voiceover] XYZ targets service sensitive customers. It's not focused on price competition. The company accepts only full trailer loads. So it drives to a customer location, the customer loads whatever it wants into the trailer, and then the XYZ trailer takes that load to the designated location. - [Voiceover] No detours for picking up other loads, no splitting of the trips among several customers, very simple. The shipping fee is negotiated for each job and is stated in terms of the fee per mile. - Now as with most service focused businesses, the success of XYZ trucking is based on the strength of its relationship with its customers, especially its large customers.
- XYZ's largest 20 customers account for about half of total sales. So the company assigns an individual account manager for each of these large customers. The job of these account managers, to take care of any concerns that the customers have. - Now of course, XYZ is always seeking to expand its business. Company salespeople are constantly seeking to create and expand relationships with customers who have decided to stop operating their own in-house trucks and have instead decided to start outsource their shipping to trucking companies, such as XYZ.
- [Voiceover] XYZ's biggest operating cost by far is the compensation cost for the drivers. Total compensation costs about 50 percent of revenue. - [Voiceover] XYZ is constantly seeking, hiring, and training new drivers because of the large driver turnover that it typical in the trucking industry. - For new drivers, XYZ operates its own three week training school, followed by an additional two months of on the job training. - [Voiceover] Drivers are paid on a per mile basis with the rate per mile increasing the longer the driver stays with XYZ.
- XYZ also pays bonuses to drivers who reach certain length of service thresholds. This gives the drivers an added incentive to stay with XYZ rather than switch to a competing trucking company. - [Voiceover] Now XYZ's second largest operating cost is the cost of fuel. The fuel cost is the most volatile of XYZ's operating cost, fluctuating up and down with the worldwide price of oil. - XYZ attempts to reduce its fuel cost by operating its own fuel depots. XYZ can save 10 percent on its fuel cost if its drivers refuel at the company owned fuel depots rather than a commercial truck stop.
- [Voiceover] Here is what we are going to do with this mini case. We are going to determine which four numbers the CEO and her top staff will want to look at each morning at their eight AM planning meeting. - They meet every morning. What numbers should they look at? In other words, what are the daily key performance indicators for a trucking business? - In this module, we'll show you four trucking business KPIs and talk about how these numerical measures focus manager attention on important things.
In this course, accounting professors Jim and Kay Stice explain what KPIs your business should consider in a balanced scorecard, from financial goals to employee and customer satisfaction. They describe how to craft a clear mission statement that complements your KPIs, and how to tie performance to incentives. Plus, get a look at KPIs in action, as Jim and Kay break down a case study examining a trucking company's balanced scorecard.
- The importance of KPIs and measuring performance
- Financial goals and measure
- Customer needs and satisfaction
- Employee growth
- Creating an effective mission statement
- Linking measurements and rewards
- Examining a KPI case study