KPI Examples for the Logistics Industry
Logistics Key Performance Indicators and Metrics
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A logistics KPI or metric is a performance measurement that is used by logistics managers to track, visualize and optimize all relevant logistic processes in an efficient and transparent way. Among others, these measurements refer to transportation, warehouse and supply chain aspects.
Here is the complete list of the most important logistics KPIs and metrics, that we will discuss in this article in every detail:
- Shipping Time: Spot potential issues in your order fulfilment process
- Order Accuracy: Monitor the degree of incidents
- Delivery Time: Track your average delivery time in detail
- Transportation Costs: Analyze all costs from the order placement to delivery
- Warehousing Costs: Optimize the expenses of your warehouse
- Number of Shipments: Understand how many orders are shipped
- Inventory Accuracy: Avoid problems because of inaccurate inventory
- Inventory Turnover: Track how many times your entire inventory is sold
- Inventory to Sales Ratio: Identify a potential overstock
Shipping Time
Spot potential issues in your order fulfilment processThe On-Time Shipping performance refers to the ratio of orders that have been shipped on or before the requested ship date divided by the total number of orders. This is a first logistics KPI to help you measure your supply chain performance. Indeed, if the amount of time between the moment the customer placed his order and the moment that order is prepared to be shipped is too long, that can show some trouble in the process that need to be fixed. Whether it is outdated planning processes or disconnected execution systems too slow to face an increasing demand, the issues need to be addressed to quickly answer unexpected events.
Performance IndicatorsAfter realizing a benchmark of the average time you need to ship a certain type of order, you can set a target shipping time relative to each product to achieve.
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Order Accuracy
Monitor the degree of incidents from the placement to the delivery of an orderThe Perfect Order Rate is another highly important logistics metric when it comes to your supply chain efficiency. It measures the amount of orders that are processed, shipped and delivered without any incidents on its way. The shipping time as well as the delivery time are both respected, the order is not a wrong one and the goods are not damaged. It is important as it shows the efficiency of your supply chain and delivery services, and that leads of course to more satisfied clients that are willing to come back or recommend your services.
Performance IndicatorsThe higher is this rate, the better it is for your business. You will lose less money with returns of inaccurate or damaged goods, and increase the level of satisfaction of your customer base.
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Delivery Time
Track the time it needs for an order correctly prepared to arrive at destinationThe Average Time Delivery is measured from the moment the order is placed to be shipped and the moment it is delivered to the customer/post office. After benchmarking and having an idea of the average delivery time from your warehouse to anywhere, the goal would be to decrease it when possible - offering special delivery services for instance - but more importantly, to precise it. Saying that an order will arrive in 4-5 business days is better than saying it will arrive in 1-to-5 business days. Additionally, if you can precise the delivery hours (between 13h and 15h rather than between 8h and 18h), it is even better. That way, your customer knows when he should be home to pick the package up, increasing your order picking accuracy rate and avoiding returns.
Performance IndicatorsThis is a typical logistics KPI example to narrow down and precise as much as possible for a better service.
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Transportation Costs
Track all costs from the order placement to its deliveryThe Average Transportation Costs calculates an overall of the expenses involved in processing an order from the beginning to the end. It will break down all the costs related to this logistics KPI according to distinct categories: the order processing, the administrative, the inventory carrying, the warehousing and finally the actual transportation costs. After calculating all these, you can evaluate the percentage each stage of the process represents and see if that is excessive or in the norms. You can also calculate the transportation costs relatively to a product and see how much one item costs compared to how much revenue it brings you.
Performance IndicatorsThe goal is to decrease the transportation costs while maintaining a high quality of delivery.
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Warehousing Costs
Monitor the expenses involved in the management of your warehouseWarehousing is the management of space and time. The Warehousing Costs refer to the money allocated to the goods moved into or outside the warehouse. These expenses cover equipment and energy costs like ordering, storing and loading the goods, as well as more human costs like labor, shipment, or delivery. The warehousing costs are a component of another logistics KPI, the total transportation costs. Measuring them is not an easy task, but once it is done it will facilitate your overall management and add a lot of value, something that senior management or investors will appreciate.
Performance IndicatorsWarehouse being the main area of your business, it is important to measure and review the costs on a regular basis, so as to improve your operations and evaluate such improvement.
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Number of Shipments
Evaluate how many orders are shipped out of our warehouseShipping is not only a matter of dispatching goods and packages in trucks or boats. Shipments are the showcase of your warehouse; their quality and the accuracy to primary order will demonstrate the quality of your service as well. The same way you measure the number of orders placed ready on time to be shipped (On-Time Shipping KPI), you can measure the number of orders shipped out of your warehouse. Analyzing the trends over time will provide great insights on rush hours or rush seasons (such as Christmas time), and enable you to anticipate and allocate more resources accordingly.
Performance IndicatorsBreaking down this figure into several categories (countries, regions, types of products) will provide you greater information that you can use to optimize other logistics metrics, like the ones related to delivery.
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Inventory Accuracy
Avoid problems because of inaccurate inventoryInventory Accuracy is one of those logistics metrics that can make or break your warehouse. Indeed, having a certain record of all your goods in your database that doesn’t match the actual physical inventory can harm your business considerably. If your inventory is inaccurate, that can lead to unexpected backorders but also unsatisfied customers and more generally, higher overall costs. A regular inventory checking the existing discrepancies with your electronic inventory record ensures that bookkeeping practices are in order and that your business is reliable, avoiding phantom inventory nightmares. This ratio will also help you spot issues related to receiving, shipping, or accounting.
Performance IndicatorsOn a more realistic level, it is also normal to have some disparities between the record and the warehouse, but the idea is to maintain that ratio over 92% as much as possible.
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INVENTORY TURNOVER
Track how many times your entire inventory is soldThis logistics KPI measures the number of times your inventory entirely has been sold over a certain period of time. It is a great indicator of efficient production planning, process, as well as marketing and sales management. In general, the higher your turnover rate, the better. A low turnover may translate difficulties in turning your stock into revenue, and that can come from any stage of your supply chain process. There is not one general rate to achieve, as it depends on the industry your company is evolving: a car dealership will have a lower turnover than a common groceries store. The idea would be to benchmark your industry average rate and try to reach and exceed that target.
Performance IndicatorsAfter calculating yours, compare it to the average rate of your industry and surpass it.
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INVENTORY TO SALES RATIO
Evaluate how much inventory you carry in comparison to the number of sales performedThis logistics metric is good at evaluating the overstock. It measures the ratio between the available inventory for sale, versus the actual quantity that is sold. This is a great performance indicator that will also tell you if your company is able to face unexpected situations. It is an even greater indicator if you measure and use it with other KPIs such as Inventory turnover, or the Carrying cost of inventory. That will let you know about the financial stability of your business, but also the direction you want to take - selling your inventory as quickly as possible or not.
Performance IndicatorsLike described above it really depends on your business what your target ratio should be. Usually you try to keep it not too high to avoid low inventory turnover rates.
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