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Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy

Logistics KPIs — What You Should Know?

Key takeaways
  • Logistics KPIs have elements like selected measurement, current value, target value, and method of measurement.
  • Do not create KPIs without informing your team and gaining their support.
  • Achievable and measurable KPIs lead to better, more specific results.

Logistics KPIs play an important role in logistics as they provide measurable benchmarks to evaluate the performance of the logistics operations of a company. However, what are these KPIs?

In this article, we will discuss what logistics KPIs are. Additionally, we will tackle how you can set up your logistics KPIs and the various KPIs that you need to track to effectively assess the performance of your logistics. We are also going to discuss the do’s and don’ts for your logistics KPIs.

After reading this article, you will know a lot of KPIs that you can use to evaluate your logistics operation. Thus, allowing you to improve the overall logistics performance of your company. So, let’s start!

Whatare Logistics KPIs?

Logistics KPIs, or Key Performance Indicators, are measurable benchmarks that help evaluate how well different tasks and activities are being performed within a company’s logistics operations.

These Key Performance Indicators (KPIs) provide measurable signals about how effectively significant activities are managed within your group or organization. These activities encompass all the necessary tasks for maintaining smooth operations.

Each KPI includes these elements:

  1. Selected Measurement: You decide what to measure. Certain measurements are particularly important and become KPIs.
  2. Current Value: This represents the current number obtained when measuring the chosen factor. It changes over time.
  3. Target Value: This is the desired number you aim to achieve. It functions as a performance target
  4. Method of Measurement: This explains how the chosen factor is counted or measured. It aids in monitoring progress. Here are some types of measurement that you can use to illustrate KPIs:
        • Whole Numbers: These involve counting items, such as the tally of individuals who received their needs.
        • Percentages: This displays a portion of a whole, like the percentage of orders delivered on time compared to the total orders.
        • Rates: Rates compare two numbers, such as the amount of money earned per unit of stored items.

By utilizing KPIs, you decide which aspects of your work hold importance and utilize numerical data to gauge your performance. This process resembles assessing the health of a group or organization. KPIs provide insight into whether things are progressing well or if potential issues may arise.

Watching over logistics KPIs isn’t just a good idea – it’s really important for success. These KPIs help make things better, keep track of your performance, and save money by working smarter. KPIs are useful for customer satisfaction, making your operations effective, reducing expenses, and mitigating risks.

How to Set upLogistics KPIs?

The success of your company isn’t solely about blindly picking your logistics KPIs. To effectively choose the right logistics KPIs, follow these suggestions:

1. Identify your business goals

You need to ensure these goals match your company’s vision and mission. This helps in planning your strategy.

2. Compare with industry standards

Try to look at what other companies are doing to understand what performance levels you should be aiming for.

3. Study your current data

Analyze your current performance. For example, how many orders you’re managing, how long deliveries take, available space, delivery rates, and transport expenses.

4. Gather customer opinion

You should analyze or ask for feedback from customers to see how satisfied they are with your performance.

5. Seek input from employees

Try to ask for ideas or insights from your workers and managers about ways to make logistics operations better.

KPIs in LogisticsYou Need to Evaluate

Logistics consists of multiple processes with different areas that require you to make wise decisions in order to manage it efficiently. Logistics can be divided into five different stages with each having different KPIs that you can use to measure performance on each stage. Here are the following stages:

1. Order Management KPIs

These KPIs focus on how orders are handled, including returns, which is important for reverse logistics. These measurements start when people place their orders. The following are some of the metrics you can use to evaluate order management:

  • Shipping time: Shipping time is how fast a company sends out orders, ideally on or before the date asked. This is really important for making customers happy. It’s often linked to the “on-time shipping” KPI.
  • Order Accuracy: This is about how often orders are correct. If orders are often wrong, it can slow down making things or selling, which costs time and money.
  • Perfect Orders: A perfect order is one that ships without any problems like damage, delays, or mistakes. This also helps keep customers happy.
  • On-Time and Complete: This tells us how many shipments are delivered just the way they were ordered, in terms of both quantity and timing. It’s like a measure of how often customers get exactly what they wanted when they wanted it.
  • Number of Shipments: This is how many shipments your company sends out in a certain time. Knowing this helps the company manage its resources well and meet its money goals.

2. Supply Chain Management KPIs

Supply chain management KPIs show how smoothly products are moving through the supply chain. You can use these metrics to make your work better and make your business bigger. They also help you make good rules and partnerships with other supply chain friends. Here are some of the metrics that you can use for supply chain management:

  • Lead time: This KPI measures the average time for a supplier to have goods ready for delivery. It is not easy to optimize this metric, because lead time depends on several factors including supplier location, shipping method, and available inventory levels. Optimizing the lead time requires a combination of continuously investing in the latest technology as well as maintaining a close collaboration with suppliers.
  • Stockouts rate: Stockouts rate show how often a product is not available in your inventory. When you watch this number, you can see patterns and do better with your stock by predicting how much you need and working well with your suppliers.
  • Productivity: Productivity measures the overall performance of the people and company machines in the overall operation of a company. Checking and grasping productivity helps businesses make sure they can keep their commitments and deliver what they promise.

3. Inventory Management KPIs

Inventory KPIs are useful for determining how well a company purchases and makes inventory. These KPIs can also look at money flow and how efficiently things are done. here are some metrics you can use to evaluate your inventory:

  • Inventory Turnover: This metric tells you how well you’re handling your inventory. A higher turnover means products are being sold quickly, which leads to more money coming in. Keeping an eye on this metric helps you work better, reduce waste, and make smart choices for your inventory.
  • Customer Backorder Rate (CCI): The CCI rate calculates all the money a business spends to keep inventory for a certain time. Keep an eye on your CCI, and you can speed up processes, make orders more accurate, and manage how much inventory you need. This way, you’ll spend less on inventory and keep customers satisfied.
  • Carrying Cost Inventory: This KPI shows how many orders can’t be filled right away because of no inventory or other inside reasons. If this rate is high, it means the company isn’t managing inventory well, and that can make customers unsatisfied.

4. Distribution KPIs

Distribution KPIs are about how products move – either directly to customers or through distributors. Here are some metrics you can use:

  • Warehouse costs: These costs cover things like equipment, energy, labor, and shipping expenses that are related to moving goods in and out of the warehouse. This KPI helps measure how well your warehouse works.
  • Wait time: Wait time, also called average dwell time, refers to how long a carrier sits before they handle pickup and delivery. This number shows how well a place works. If the wait time is low, it can be hard to get drivers and you might spend more to get their services.
  • Sales Lost: This KPI calculates the part of sales that was lost because things were out of stock. When you watch this KPI, you can use data or information to decide how to make inventory better and stop losing sales in the future.

5. Transportation KPIs

Transport management KPIs are about the delivery or movement of goods to customers using transportation vehicles. These numbers change depending on who wants to know them. Here are some metrics you can use for transportation KPIs:

  • On-time delivery: This measures how fast an order arrives, not just parts. It affects customer satisfaction and loyalty.
  • Truck turnaround rate: The truck turnaround rate checks how much time a delivery truck spends from entering a place to leaving after loading or unloading. The less time trucks spend there, the more they’re on the road. This shows how good a company is at loading and unloading.
  • Transportation costs: These numbers follow an order’s cost from start to finish. It includes things like order work, keeping things in stock, warehousing, and shipping. These costs help see if your delivery work is efficient.
  • Average days late: This counts how many days an order is late from when it was supposed to arrive. It shows how well deliveries are going and affects how satisfied customers are.

Do’s and Don’tsFor Logistics KPIs

The following are the do’s and don’ts for logistics KPIs:

Do’s
You must aim for simple and achievable KPIs because straightforward measures lead to specific improvements.
Concentrate on activities that boost your staff's performance.
Always keep in mind the performance aspects related to the metrics you select.
Don’ts
You should avoid creating new standards on your own. First, understand the established industry KPIs and focus on those.
Do not create KPIs without involving your staff. Get their agreement and support.
You should not just aim for the bare minimum with all KPIs. Instead, strive to exceed the minimum levels of performance that are acceptable.

Conclusion

KPIs in logistics are tools used to help companies evaluate the performance of their operation. These metrics are typically shown in numbers which makes it easier to determine whether the improvements or changes you are making increase the productivity of each stage within logistics.

Furthermore, KPIs in logistics allow you to gain new insights that you can use to drive growth in your company.

Frequentlyasked questions

What are Logistics KPIs?

Logistics KPIs are benchmarks that help evaluate how well different tasks and activities are being performed within a company’s logistics operations.

Why are logistics KPIs important?

Logistics KPIs are important because they give a clear picture of how well a company’s operations are running. They help identify areas for improvement, track performance, save costs by working smarter, and ensure that tasks are being completed effectively.

What benefits will I see from using logistics KPIs?

By using logistics KPIs, you can expect benefits like improved operations, enhanced customer satisfaction, reduced costs, better decision-making, increased efficiency, and overall business growth.

About the author

My name is Marijn Overvest, I’m the founder of Procurement Tactics. I have a deep passion for procurement, and I’ve upskilled over 200 procurement teams from all over the world. When I’m not working, I love running and cycling.

Marijn Overvest Procurement Tactics