Learn everything you need to know about key performance indicators (KPIs) in logistics. This article provides a list of essential KPIs by category, with formulas and example calculations. The step-by-step guide will help you build scorecards and dashboards so your business can realize the value of KPIs. Show
In this article:
What Is Logistics?Logistics is the process of procuring and bringing in goods, services and information. Logistics covers everything from purchasing to warehousing to fulfillment to transportation and delivery, and how resources are managed at each of those stages. Those resources may include people, raw materials, products and equipment a business counts on to keep its operations running smoothly. Learn how to streamline your logistics by reading this logistics primer. Stages to MeasureLogistic stages divide the procedures within this business funciton into sections and can help you optimize operations. For example, you can measure KPIs tied to order management, supply, inventory, distribution and transport management to find ways to improve performance. What Is Logistics Management?Logistics management controls the procurement, movement and storage of goods. The process starts at the product's origin and ends with the consumer. Logistic management also includes order fulfillment and integrates with other business functions. Why Are Logistics KPIs and Metrics Important?Logistics KPIs are a way for businesses to compare their own performance against industry benchmarks. By tracking KPIs, businesses have important data that enables them to improve operations. This data shows the mistakes and how to address them, reducing costs. For example, one useful KPI in the warehouse is on-time shipping. This metric shows the percentage of shipments that departed the warehouse on-time. All shipments are on tight timelines, and late shipments can damage the customer experience and potentially cost businesses money. If on-time shipping is below the benchmark, that points to problems in the warehouse. Measuring on-time shipping is one step in understanding customer satisfaction. How to Set Up Logistics KPIsSet up KPIs for logistics by first defining your company's logistics goals. Ensure that the plans are SMART: specific, measurable, achievable, relevant and timely. Determine goals for both leading and lagging indicators. Use the goals to identify the information you need from the KPIs. These answers help you adjust business processes and identify opportunities for improvement. For logistics, start with KPIs that answer the following questions:
Decide on a few key metrics that address these issues and make sense for your business model. New businesses should focus on facilitating a unique customer experience and getting feedback from buyers. Companies in mid-stage should pay attention to customer satisfaction, business recognition and monthly revenue. Established organizations should concentrate on churn rate and cost per acquisition. What Are the KPIs in Logistics?Businesses use logistics KPIs to identify stages in the flow of goods that need improvement. The relative importance of logistics KPIs vary by industry. Determine your business's standing in its sector and choose KPIs that are representative of it. Break KPIs out by their stage within the supply chain. Pick a few KPIs in each stage that target your company’s position in the industry and potential for improvement. For example, the graphic below highlights some best-practice metrics for each stage in the logistics chain. This graphic shows each of the five stages for logistics for key performance indicators (KPI).List of KPI LogisticsWhen organizing your logistics KPIs by stage, the stages may overlap a bit, but their activities and KPIs do not. The logistics metrics below are distinctive and reveal how well the business is functioning in each area. Order Management KPIsOrder management KPIs focus on orders and returns processing, which are crucial for reverse logistics. These metrics start when customers place an order.
Supply KPIsSupply KPIs are metrics that focus on how well final goods are moving through the supply chain. Use these measurements to help improve the efficiency of your operations and grow your business. They are also useful for developing acceptable practices and relationships with other supply chain partners. Learn more about supply chain management.
Inventory KPIsInventory KPIs can help measure the effectiveness of inventory purchasing and production processes, and may also focus on cash flow and productivity. Read the guide to inventory KPIs and metrics to learn more.
Distribution KPIsDistribution KPIs focus on the system that manages product flow—moving a product to customers directly or from from distributors.
Transport Management KPIsTransport management KPIs govern the trucking of goods and can help improve operations. These metrics differ based on what entity needs the information. Because they affect the economy, federal agencies may also request these numbers.
18 Essential Logistics KPIs and MetricsThese 18 logistics metrics can help your business manage costs and improve customer satisfaction. These costs relate to shipping, distribution, transportation, warehousing and logistics performance. Use these KPIs to identify problems and optimize your processes. Formulas for Transportation KPIs
Formulas for Supply KPIs
Examples of Distribution KPIs
Formulas for Warehouse and Order Management KPIs
Formulas for Logistics Performance Metrics
KPI Do's and Don'tsChoose KPIs based on goals and objectives. Start with what executive leadership is looking for and map out priorities from the broad to the granular level. Apply metrics to each priority. Then, go back and reprioritize what to measure and remove extraneous measures. Ten to 20 KPIs are an ideal number for an entire company. More do's and don'ts for choosing KPIs and measuring them include:KPI Do's
KPI Don'ts
Logistics Metrics ScorecardsA logistics metrics scorecard is a report that shows metrics by category. Then, the scorecard rates each prospective company's numbers against a benchmark. Each company should fix any failures on the scorecard before the next review. Examples of Logistics ScorecardsScorecards are a proxy for performance. Logistics scorecards that compare prospective companies are good examples to follow. They compare organizations to each other and industry standards. Choose metrics and displays that target what your company needs in partners. For example, a scorecard could include receiving, storage, shipping, putaway, and pick and pack. Each category is a scorecard itself, and set the industry benchmark as the standard. Then show how close the company comes to that standard with a percentage. For these categories, the specific KPIs are: Receiving Scorecard
Shipping Scorecard
Pick & Pack Scorecard
Putaway Scorecard
Other scorecard examples focus on areas like safety and customer service. Safety Scorecard
Customer Service Scorecard
Logistics DashboardsA logistics dashboard offers a comprehensive view of a company's metrics. For efficiency, organize the dashboard by topic, division or workgroup. Another way to manage dashboards is by whether they are operational, strategic or analytical. Logistics Dashboard ExamplesA well-organized and cohesive logistics dashboard uses visuals that are clean and enable your staff to find what they need quickly. They should also be able to see progress and goals for various metrics. Dashboards often have more than just KPIs on them. They also feature links to navigate to outstanding worklists, reminders and line lists. They should have everything the staff needs to help conduct their work. For example, the following warehouse management dashboard organizes the KPIs, tracks progress and includes the information that leads to those KPIs. It’s well-organized and visually cohesive. Warehouse Management DashboardThis graphic shows Warehouse Management Dashboard that shows all of the company’s metrics. The business intelligence analytical dashboard below is another good example. The design presents the most critical information front and center, in bold colors. The metrics are all related. Analytical DashboardThis analytical dashboard image shows KPIs and monthly performance metrics. The following strategic finance dashboard also has cohesive metrics, colors and themes. Users can find detailed information as well as high-level indicators that executives can pull out quickly. Strategic Finance DashboardThis image of a strategic financial dashboard shows subsidiaries’ performance and KPIs like payables and expenses. This dashboard shows its KPIs and makes a point to highlight progress over the period. A simple view places the most important links, reminders and metrics front and center. Overall Company Metrics DashboardThis graphic shows a comprehensive metrics dashboard for the company. 8 Simple Steps for Developing Your Own Logistics Scorecard or DashboardThe steps for creating scorecards and dashboards start with a deep understanding of your company's priorities. Dashboards record what a business is doing, while scorecards illustrate how well a business is doing. Follow these steps to create your own:
Measure, Visualize, and Track Logistics KPIs with NetSuite SoftwareCompanies can measure, track and visualize logistics KPIs with software. The right systems also give you the flexibility to develop and update your KPIs. Develop your metrics into cohesive and helpful scorecards and dashboards so you can pinpoint areas for improvement at-a-glance. NetSuite’s cloud ERP software provides all the necessary tools to capture, analyze and display logistics metrics throughout the organization with role-based and industry-specific dashboards and prepopulated KPIs. NetSuite offers software for transportation and logistics companies as well as outbound logistics functionality that provides simplified pick, pack and ship, cross-subsidiary fulfillment and carrier integration. Its inbound logistics functionality allows businesses to track KPIs easily with purchase order receiving workflows, automatic quality assurance processes and container tracking through inbound shipping management features. To stay competitive today, businesses need to measure various logistics-related KPIs so they know what needs to be improved. This ability to identify and resolve specific issues that are leading to unecessary expenses or impairing the customer experience will put companies in a position to succeed, regardless of the specific market they serve. When orders are shipped directly to the customer it is called?True. When orders are shipped directly to a customer, it is called. drop shipping. A storage location that can store imports without duties for up to five years is called. bonded warehouse.
Is when large incoming shipments are received and then broken down into smaller outgoing shipments to demand points in a geographic area?A form of warehousing in which large incoming shipments are received and then broken down into smaller outgoing shipments to demand points in a geographic area. Cross-docking combines the economies of large incoming shipments with the flexibility of smaller local shipments.
Is an agent that serves as an intermediary between the organization shipping the product and the actual carrier?A customs broker:
is an agent that serves as an intermediary between the organization shipping the product and the actual carrier. works for the federal government to ensure that goods are legally shipped.
Is an approach used in consolidation warehouses where incoming shipments are broken down into small shipments for local delivery in an area?Warehouse DesignCross-dockingis an approach used in these consolidation warehouses, where, rather thanmaking larger shipments, large shipments are broken down into small shipments for localdelivery in an area.
|