Whether your logistics business sells eCommerce products, offers services, or both; having a clear picture of how you’re doing provides priceless insight. Data can help you measure how efficiently you’re fulfilling customer orders and managing transportation costs.
Even better, tracking key success metrics can help you develop better business strategies and scale your operations.
In the logistics industry, measuring success requires focusing on the strengths and weaknesses of your supply chain operations. Ultimately, you want to be able to measure if individual departments are meeting quotas or if they’re missing the mark. To gather the right data to do this successfully, you first have to identify the right key performance indicators (KPIs).
Understanding Logistics Key Performance Indicators
KPIs are metrics that businesses use to get a current snapshot of how a certain department or process is performing. These indicators measure data and give you a consistent view of changes over time, both positive and negative. This analysis allows your company to evaluate whether each department is missing, meeting, or exceeding predetermined goals. It’s a critical way to evaluate your effectiveness as a shipper.
KPIs vary a lot by industry. What is relevant to one type of business may be completely irrelevant to another. For example, a car dealership may measure:
- how many cars each rep sells in a predetermined time frame
- total goods sold each week, month, and year
- number of leased vehicles versus sold vehicles
To contrast, a logistics company may measure things like:
- overall customer satisfaction for the delivery
- order accuracy
- late deliveries
- inventory accuracy
- how many on time deliveries were made
- how long current inventory sits before being sold
Determining appropriate metrics to measure is a vital step to making effective operational changes. Some of the most important KPIs used in the logistics and supply chain industry include:
- Inventory Stock Turn: lets you track the amount of inventory available, and the number of days it will last based on the current sales rate. This is the perfect KPI for understanding inventory turnover.
- Selling Costs at Percentage of Sales Generated: an efficiency metric that allows you to evaluate how effectively money is being spent on inventory and operations.
- Delivery on Time: track whether shipments are consistently being delivered to end users on time. It also tracks the average time it takes to deliver your orders.
- Delivery in Full: evaluate whether or not customers are receiving their full product shipment upon final delivery.
Selecting Your Logistics KPIs
It’s a good rule of thumb to focus on effective KPIs that can realistically be measured and analyzed on an ongoing basis. Trying to analyze too many supply chain metrics can lead to analysis paralysis, as gathering excessive data that isn’t properly analyzed is not a useful way to measure success.
Optimize supply chain management by tracking the proper logistics metrics. Focus on selecting KPIs that best align with your business growth goals and use the data you track to make changes that ultimately help make your processes more efficient.