As an international transport company, we are always looking for new ways to improve our service and ensure that the products we transport are well cared for throughout the logistics process. That is, from the moment they are ordered right through to when they are delivered to the customer’s door.
One way to ensure that the service we offer is of the highest quality is to determine the most relevant management indicators, or Key Performance Indicators (KPIs). This article aims to underline the essential KPIs in logistics, discuss why are they important, and list some examples.
What are KPIs?
Key Performance Indicators, also known as KPIs, are metrics for measuring the performance of the main processes we carry out. In logistics, KPIs are extremely important for measuring and improving the effectiveness of our logistics management.
By tracking KPIs in logistics, we can ensure that we are delivering the best service possible. It also helps us to identify and address any issues in a faster, more efficient manner. Logistics KPI measurement also enables us to compare our performance to the industry’s benchmarks.
Why do we need to track our KPI in logistics?
Logistics KPIs illustrate the real performance of our company and provide important information, in an objective and truthful way, of all the processes that make up the logistics chain, such as procurement, purchasing management and transportation, amongst others.
At Paack, we know that the logistics process of a company is one of the most challenging to monitor, as there are plenty of different aspects to consider. However, defining essential KPIs in logistics and tracking their progress is very important for measuring production, costs, and quality.
How do we decide what our KPI logistics priorities are?
At Paack, we know that an exhaustive analysis of the logistics processes will offer an enlightening insight into the essential KPI priorities. The data obtained by these indicators will reflect directly on the effectiveness of our company’s logistics management, as they allow us to continuously monitor and evaluate all the metrics related to our supply chain.
Here are some KPI logistics examples:
KPIs related to order accuracy enable us to monitor the number of incidents and correct any errors, if necessary. From the placement of the order to the delivery of a shipment; these are highly important issues for any transport company.
Inventory management and forecasting
KPIs related to managing stock are also a priority: the way that inventories are managed can have a direct impact on customer waiting times. This aspect can also include warehouse management, stock rotation and warehouse costs.
On Time in Full (OTIF)
This logistics KPI measures the percentage of orders delivered correctly within the stipulated time.
KPIs related to this aspect may include: number of suppliers managed; supplier lead times and fulfilment; supplier proposal rejections and purchasing expenses.
Lead Time is a KPI that tracks how long our processes last, from start to finish. It enables us to find out how much time is spent in each stage of the supply chain and identify strategies for optimizing this process.
KPIs related to transport can involve measuring the average time spent by a vehicle from its exit for collect/delivery to its return to our facilities, as well as the cost of each logistics operation. Another KPI related to transport could be the average number of deliveries handled during a stipulated time (weekly/monthly/yearly).
It is important to monitor aspects related to customer service, including the number of new customers, customers lost, the number of orders handled daily, rate of returned/damaged products and payment methods.
As you can see, there is a wide range of logistics KPIs that we can use to monitor our operations, depending on our priorities. Tracking essential KPIs in logistics can provide us with a huge amount of information, data and examples that will be both useful and interesting for all the departments involved at each stage of the logistics process. We can then use the information they provide to improve operational issues, create strategies, and optimize our entire supply chain.