Measures used to evaluate an organization’s performance versus its strategic goals are known as Key Performance Indicators (KPIs). KPIs are used in a variety of ways by organizations to measure their progress toward their goals. For example, key performance indicators (KPIs) can be used to track several aspects of an organization, such as sales and marketing operations, as well as overall company performance as well as human resources.
In logistics and supply chain operations, measurements and KPIs are critical. Developing measurements and KPIs (Key Performance Indicators) in logistics and supply chain management is vital for any business improvement strategy to succeed.
Other important factors include:
Costs of traffic: Transportation costs are calculated as a percentage of the total cost for processing an order from start to finish. According to this logistics KPI, all costs associated to the order processing, the administrative, and the stock keeping and finally the transportation costs will be broken down into various categories (Langley, Novack, Gibson, & Coyle, 2020). In the end, one will know how much time each stage of the procedure takes and whether it’s excessive or within the norm. Additionally, it will be possible to compare the cost of a product’s transportation with the amount of revenue it generates.
The costs of storage: Space and time are the two variables that make up warehousing. Goods moving into or out of a warehouse are counted toward Warehousing Costs. Ordering, stocking and loading the goods as well as additional human expenditures like labor, shipping, or delivery are included in these expenses. Another logistics KPI, total transportation costs, includes warehousing expenses. It is not a simple task, but once it’s done, it will help you operate your company more effectively and add value to investors and senior management alike.
The number of shipments: Getting goods and packages from A to B is just one part of shipping. As a warehouse, the quality and accuracy of your shipments will be a reflection of the quality of your service. Tracking orders placed and ready to ship on time is easy, so is tracking how many orders have been shipped out from your warehouse (the On-Time Shipping KPI). Observing trends over time might help identify peak hours or peak seasons (such as Christmas) so that it becomes possible to better plan and allocate resources.
Accuracy in the order of things: In terms of supply chain efficiency, another critical logistics measure is the Perfect Order Rate. How many orders have been processed, dispatched, and delivered without a hitch is measured. No damage to the goods is caused during shipping or delivery, and the order is correct. Customers are more likely to return or promote business if supply chain and delivery services are efficient, therefore this is critical.
Shipment time: The percentage of orders that were sent a percentage of the total number of orders shipped on or ahead of schedule is known as the On-Time Shipping performance. Our supply chain performance can be measured using this first logistics KPI (Langley, Novack, Gibson, & Coyle, 2020). Orders that take an excessive amount of time from the time they are placed until they are ready to ship may indicate problems with the system that require attention. It is obsolete planning processes or disconnected execution systems that are too slow to keep up with an ever-increasing demand. It is important to explain what metrics mean and how they may be used to benefit a company
It is possible to assess performance and transmit that information to the decision-makers through metrics. Using metrics, an organization may identify its goals and take action to improve performance. It aids in keeping track of improvements in efficiency and those that need to be made. There are a number of ways in which metrics can support a company’s strategy and direction, as well as its decision-making, drive performance and provide important internal and external public relations. Software that generates a dashboard is used by a number of enterprises.
Langley, C. J., Novack, R. A., Gibson, B., & Coyle, J. J. (2020). Supply chain management: a logistics perspective. Cengage Learning.