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Logistics KPI: Everything You Need to Know

Posted by [email protected] on Dec. 7, 2022  /  Subscribe 0

Opportunity in logistics is plentiful these days, but for warehousing services to be successful, they need to look at their logistics KPI closely. That is because the answers you seek to boost efficiency are found by crunching your current numbers.

The world is becoming more connected as digital technology is taking off. Everyone has a smartphone in hand, big-name brick-and-mortar stores are closing some locations, and people prefer to shop online. Today's economy relies on customers' ability to ship goods directly to their homes versus shopping in person.

According to recent statistics, most logistics carriers are smaller providers, with fewer than 20 trucks operating. Moreover, road freight dominates the ground transportation industry, controlling almost a third of worldwide logistics spending.

Whether your logistics company is big or small or traveling by land or sea, improving warehouse management, optimizing operations, and maximizing profits are easier than you may realize. Keep reading to better understand why.

The Role of Logistics KPIs

As much as you have to gain an understanding of logistics KPIs, many organizations still need to understand why KPIs are so important. Logistics KPIs are what will make you competitive in a market that’s already saturated with competition.

KPIs, or key performance indicators, are metrics for how a company can compare the performance of its business against industry benchmarks.

Logistics KPIs track and carry critical data to unveil ways to improve operations. They show mistakes in your operations, which is good because you can address these mistakes, thus reducing costs.

There are different logistics KPIs you can measure for making improvements, but some are better for improving efficiency than others. Here are the logistics KPIs you should focus on to achieve the best warehouse results.

Order Accuracy

This is how you reduce incidents and make orders safer, as this KPI monitors incidents. They can occur at any point between placing an order from a customer to the time the shipment delivers. The idea is to find common errors or patterns, so you can correct them.

On-Time in Full

A good freight forwarder must have a commitment to punctuality and safe deliveries, as it extends a superior customer experience. When checking your on-time in full, you may also see its acronym, which is OTIF. This measures how many orders you send during the timeframe given to the customers, without issues.

Lead Time

Here lies the potential to better optimize your current strategy and achieve peak performance.

 Do you know how long it takes your operations to complete an order, start to finish? Logistics and warehouses must know how much time you average in each stage of the supply chain.

Cost of Warehousing

This logistics KPI measures expenses that come along with managing the warehouse facilities. Ideally, you want to ensure that you are maximizing profits and identify areas where you could be burning through revenue.

Transportation Costs

This measures everything in relation to the costs of your logistics operation, from placing an order to its last delivery. This is beneficial to understand the average time it takes each shipment because you can then send customers and partners accurate quotes.

Capacity Utilization

If your freight forwarder offers such a service, you need to know what your load capacity is per vehicle. This can be for a container during sea freight or during road transportation.

Productivity

This is ideal for any logistics company that wishes to optimize its overall business performance. It measures the production rate of your employees, which includes labor hours, workforce, and productivity.

Number of Shipments

Whether you are looking at your weekly, monthly, or annual performance, this will tell you the average cargo your logistics company handles during such a time frame. This helps to make consistent financial balances. You can analyze your profit margins for income and outcomes.

Truck Turning

This is ideal for organizations that have road transportation as a service. It measures the typical time it takes for a truck to collect, deliver, and return the vehicle back to your organization.

Stock Rotation

Do you have enough stock or too much stock? To determine if you have a good stock balance, use this KPI. It measures what outflows from the warehouse against the balance of stock.

Customer Satisfaction

Without customers, who will you work for? How will you make money? You must satisfy your customers and their expectations of your business.

It is critical to measure how happy your customers are and what they are happy about. If there is a common complaint about your service, that is an excellent area to seek improvements in your service.

Employee Satisfaction

This is a lot like customer satisfaction, in that without employees, there is no one to help your customers get their orders. There is much more to employee satisfaction than offering benefits and cutting paychecks.

Recruiting and onboarding are key parts of retention. The cost of hiring an employee is expensive. Once you find good workers, you do not want them to leave, which means treating them right.

You want to gauge employee experience with your logistics KPI. If there is a common grievance among workers, you must find ways to improve it. By the same token, whatever makes them happy, you want to expand upon, making them a loyal brand advocate for your logistics company.

Learn More About Logistics KPI

Now that you understand what you can discover from a logistics KPI, the next step is understanding how you gather the metrics. The Association for Supply Chain Management in Houston (ASCM Houston) can help.

If you are a professional in logistics and warehousing services, you can grow your business (and your career) with their APICS certification classes and professional development meetings. Start learning, networking, collaborating, and sharing right now.

Contact ASCM Houston today for more details.

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