Key Performance Indicators for the Logistics Sector

Written by Palaniappan Kavitha, DLSM

by Palaniappan Kavitha, DLSM

In the logistics sector, KPIs are significant for estimating production, costs, and quality rates.  It includes certain measurements that are common in the logistics sector. It can help distinguish and sort out issues during its ordinary activity. These estimations can be viewed as elements for the improvement of the activity in the calculated.

Logistics involve the coordination of various functions, including procurement, warehousing, order management, and transportation, to ensure that goods flow efficiently from point-to-point to meet customer demand and focus on measuring the practicality, proficiency, quality, and precision of customer satisfaction.

By observing negative outcomes in the measurements, logistics can discover the perspectives that need improvement and can recognize the regions where the business is strong. Executing these measurements logistics area can draw up arrangements or plan to upgrade its exhibition and to make the administration progressively compelling in doing the targets of the association.

Logistics KPI
Diagram by Palaniappan Kavitha, DLSM (2019)

Order Accuracy KPI:

The Perfect Order Rate is another exceptionally significant logistic metric with regards to your inventory network effectiveness. It gauges the measure of requests that are handled, transported and delivered without any incidents on its way. The transportation time just as the delivered time is both regarded, the request is certainly not an off-base one and the products are not harmed.It is significant as it shows the effectiveness of your production network and delivery, and that leads obviously to progressively fulfilled customers that are eager to return or prescribe your administrations.

Warehouse Worker
Diagram taken from: https://www.newcastlesys.com/blog/5-ways-to-improve-warehouse-worker-retention

On-Time in Full Delivery KPI

On-Time in Full Delivery (OTIF) is a significant proportion of the logistics effectiveness metric that causes you to monitor how precise your delivery time. It is most important that packages should arrive on time if it as late deliveries negatively affect customer loyalty and can cause you to lose business.

Better performance of OTIF can lead to a streamlined supply chain and greater customer satisfaction. There’s a greater expense to not showing signs of Improvement OTIF execution be that as it may, and in case you’re not moving in the direction of it, you’re likely losing far an unexpected result. Missing the OTIF imprint can be unplanned and unnecessary expenses.

Inventory Accuracy KPI

Inventory is a major significant part of warehousing, and inventory accuracy is a critical KPI for warehouses because if your stock is incorrect, your costs will increase rapidly, and your consumer loyalty levels will plunge. If you are depending on Excel or manual processes, your stock exactness will below, and there’s a good possibility you’ll end up reordering or reproducing parts you already have due to the inaccuracy of stock. The expenses of transport cost an excessive amount of stock, or of rankling customers when you don’t have stock available that you showed is available, will hurt your main concern as well as your reputation. One solution for an inaccurate stock is picking a framework that utilizes standardized identifications to follow stock. Some warehouses find that barcoding, RFID systems integrate with their current Inventory management systems (IMS). These frameworks improve stock control by giving a system to overseeing stock, supplies, and other distribution center materials. Moreover, some IMS can have the ability for following shipments, overseeing buy requests, and checking stock and stock levels.

Inventory Management System
Diagram taken from: https://www.shopify.com/enterprise/inventory-management-system

Distribution KPI

Distribution center administration influences expenses and efficiency; subsequently, we should focus on these estimation parameters such as Units prepared per square foot. We figure out this proportion isolating the units we handled at a given period by the distribution center’s usable space.By knowing the volume of items moved in each working hour, you will have the option to know your representatives’ productivity. Percentage of utilized space. In addition to other things, it has to do with an absence of room where to put your crude materials or completed items; it is critical to think about the accessible space before putting in new requests.

Transport KPI:

Measures all costs identified with every logistic activity created by your organization, from request arrangement to definite transportation. This KPI can be useful for forwarders to realize the normal spent on every shipment and send precise citations to their clients/accomplices. It will separate all the costs identified with this logistic KPI as indicated by particular classifications: the request handling, the regulatory, the stock transporting, and the warehousing lastly the real transportation costs. 

In the wake of computing all these, you can assess the rate each phase of the procedure speaks to and check whether that is extreme or in the standards. You can likewise compute the transportation costs comparative with an item and perceive the amount one thing costs contrasted with how a lot of income it brings you.

Transportation modes
Diagram taken from https://www.logisticsmgmt.com/article/price_trends_pricing_across_the_transportation_modes

Five Significant Attributes of an Efficient KPI

1.    Simple:

A KPI ought to be simple, straightforward and direct to gauge. If an objective is clear, staff can settle on down to desired choices that lead to accomplishing the ideal result. 

2.    Relevant:

As important as not only the KPI to be simple and must also relevant to a specific group within an organization. It is most important the correct decision-makers are responsible for measuring specific KPIs — improvement likelihood of a successful outcome.

3.    Aligned:

It should be consistently streaming down from the general key objectives of an association. Thus, they should be adjusted and not inadvertently undermine one another

4.    Actionable:

The most realistic goal of a KPI is should be actionable. Instead of setting large, complex goals, an organization might want to start from a low level. By setting up the short-term goals that challenge employees but don’t overpower them, an organization can not only track the progress of a KPI but also adds support assurance. 

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5.    Measurable:

It may appear glaringly evident, however, a KPI should be nothing but difficult to quantify. A successful KPI maintains a strategic distance from summed up objectives like, “Improvement in the distribution center.” Instead, a powerful KPI should be founded on a strong, cantered objective that can deliver subjective and quantitative measures.

Conclusion

Choosing the right key performance indicators for the logistic industry it’s a process that requires companies to clearly identify goals and then develop the performance indicators that allow you to track your progress towards those goals. Regardless, the process of setting the right KPIs can’t be belittled. To encourage enhancements across the company, information needs to not exclusively be precise, yet helpful also. The accepted procedures of organizations with vital logistics will improve the effectiveness of tasks, guaranteeing consumer loyalty, and increment profitability.


References

Jeff Tan Ai Keong, DLSM. (2018). “Key Performance Indicators minimising Warehouse Risks”. Retrieved from https://sipmm.edu.sg/key-performance-indicators-minimising-warehouse-risks, accessed on 22/03/2020.

Phocas Software. (2019). “5 important characteristics of an effective KPI”. Retrieved from https://www.phocassoftware.com/business-intelligence-blog/five-characteristics-of-an-effective-kpi, accessed on 21/03/2020.

Premsai Sainathan. (2018). “Calculating Logistics Cost Reduction through OTIF (On-Time and In-Full) Delivery”. Retrieved from https://blog.roambee.com/supply-chain-technology/calculating-logistics-cost-reduction-through-otif-on-time-and-in-full-delivery, accessed on 21/03/2020.

Sam Leong Kim Foong, DLSM. (2019). “Key Performance Indicators (KPIs) for the Logistics Sector”. Retrieved from https://sipmm.edu.sg/key-performance-indicators-kpis-logistics-sector, accessed on 15/03/2020.

Solistica. (2018). “Logistics’ more important KPIs”. Retrieved from https://blog.solistica.com/en/logistics-more-important-kpis, accessed on 15/03/2020.

About the Author Palaniappan Kavitha, has substantive years of experiences in the specialized field of pre-order and inventory management. She is a member of the Singapore Institute of Purchasing and Materials Management (SIPMM). Kavitha completed the Diploma in Logistics and Supply Management (DLSM) on March 2020 at SIPMM Institute.

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