Key Metrics in Logistics: How to Use KPIs

Logistics is a complex system that requires careful monitoring and analysis. Companies use logistics KPIs to identify stages in the process that need improvement. In this article, we will explore the main logistics metrics and how to use them to enhance business efficiency.

What Are Logistics KPIs?

Logistics KPIs are measurable indicators that help companies track and improve their operations. These metrics vary by industry and the specific nature of the business. Determine which logistics KPIs are important for your company. Use them to assess your position in the industry and identify areas for improvement.

Order Management Metrics

Order management metrics focus on processing orders and returns, which is crucial for reverse logistics.

• Shipping Time: This is the time it takes to ship an order according to the requested date. It is vital for customer satisfaction.
• Order Accuracy: This measures the alignment between actual inventory and order picking accuracy. Low accuracy can slow down production or sales.
• Perfect Order: This logistics KPI measures how many orders are shipped without issues, such as damage or delays. A high perfect order rate contributes to customer satisfaction.
• On-Time In-Full: This metric shows the percentage of shipments delivered according to the quantity and schedule specified at the time of ordering. It reflects how often a customer receives their order on time.

Supply Metrics

Supply metrics help assess how well finished goods move through the supply chain.

• Lead Time: This is the time from when a customer places an order to when they receive it. This metric is essential for identifying potential bottlenecks.
• Capacity Utilization: This measures how much of a resource a company uses, whether it be production capacity or service capacity.
• Productivity: This KPI measures how well a company’s machines, departments, or employees perform. Understanding productivity helps businesses fulfill their commitments.

Inventory Metrics

Inventory metrics allow companies to assess the effectiveness of their purchasing and production processes.

• Customer Backorder Rate: This indicates how often a company cannot fulfill an order. A high rate negatively affects customer satisfaction.
• Inventory Accuracy: This measures how closely inventory records match actual stock levels. It is crucial for inventory management and forecasting purchases.
• Inventory Turnover Ratio: This KPI measures how many times a company sells its entire stock of a product over a period. High turnover rates contribute to competitiveness.

Distribution Metrics

Distribution metrics focus on managing product flow.

• Trailer Utilization Rate: This measures how well companies load their trailers. It reflects load planning efficiency and cost minimization.
• Warehousing Costs: This group of metrics covers expenses related to warehouse operations. This includes equipment, energy, labor, and transportation costs. This KPI helps measure warehouse efficiency.
• Average Dwell Time: This indicates how long a carrier waits before processing for pickup and delivery. Low dwell times suggest efficient facility operations.

Transportation Management Metrics

Transportation management metrics help improve operations and track delivery efficiency.

• Delivery Time: This KPI measures how quickly an order is delivered in full. It impacts customer satisfaction.
• Average Days Late: This measures the days between the delivery due date and when the customer receives the order. This metric provides insights into the delivery process.
• Truck Turning: This measures the time from when a delivery truck enters a facility to when it exits. Lower truck turning rates indicate efficient loading and unloading management.
• Freight Payment Accuracy: This measures the number of error-free freight bills compared to the total number during a period. Errors in freight billing can be costly.

Conclusion

Logistics metrics are key tools for analyzing and optimizing processes. They help identify problems, improve customer service quality, and reduce costs. Regular monitoring and analysis of these indicators provide your business with a competitive advantage. Use logistics KPIs as a foundation for informed decisions and growth. By focusing on essential metrics, companies can enhance their logistics operations and achieve long-term success.