Logistics KPIs and the importance of analyzing them

In many professional fields, especially in business, it is of utmost importance to collect data and organize it into performance measures, better known as KPIs. Because you can analyze performance with numbers, either a quantitative or qualitative value, you have clearer information about the progress of your objectives.

It is very important to establish logistics KPIs because they have one of the highest costs along with manufacturing and marketing expenses. This would result in huge losses if they are not properly monitored. This is when we ask ourselves, what are the essential KPIs to accurately measure your logistics objectives?

If you want to learn more about the different areas of logistics where the logistics KPIs cannot be missing in the dashboard, take a look!

Storage

It should be noted that warehousing should not be confused with inventory or stock because these indicators do not indicate the stock itself. KPIs are about analyzing the internal processes that take place in warehouses, such as picking and order preparation.

An example of logistics KPIs used in warehousing is the unit cost of warehousing which calculates their respective expenses. Apart from that, to analyze warehouse performance and productivity there are the KPIs of on-time complete delivery rate and internal cycle time that serve to calculate the time elapsed between the order request and the dispatch of the order itself.

Inventory

This is, of course, one of the most important sections of logistics because it deals with the products themselves and the stock that circulates through the supply chain. In addition to the fact that classifying and sorting the different types of stock is paramount to its proper functioning, so is assigning objectives and their respective logistics KPIs.

For that, the KPIs to be commonly taken into account are the following: Stock Breakage to analyze how many times the inventory has been emptied and what can be improved, Stock Turnover to estimate how many times the inventory needs to be renewed and, of course, inventory costs. It is worth mentioning that a high Inventory Turnover means that profits are being made on sales.

Suppliers

In almost all sectors it is essential to have a rigorous control over the supply and negotiation with suppliers. This is because it is one of the areas that cannot be taken care of directly and will depend on the relationships you have with them and their performance.

Its KPIs include procurement costs and purchasing lead times to ensure that the necessary money and time are invested in good suppliers. On the other hand, they highlight the level of supplier compliance and missed deliveries, which are responsible for calculating the number of orders delivered late and rejected, respectively, in order to estimate their performance.

Transport

It is known that transportation costs within logistics operations can represent more than 50% of total logistics costs, especially if they are last mile. That is why it is recommended to analyze that these budgets and their performance meet the objectives established in the logistics section.

One of the logistics KPIs that best calculates logistics costs is the cost of transportation over sales. Also to analyze the efficiency of transportation are On-Time Deliveries to see how many orders have been delayed and what actions need to be taken.

But if we are talking about saving resources and being more sustainable, logistics KPIs such as the level of fleet utilization help a great deal to know whether the full capacity of the interior of the trucks is being used, whether in kilograms or cubic meters. For this purpose, solutions such as the route optimizer indicate the available volume of each vehicle in order to optimize the loading of these vehicles.

Conclusion

There are many logistics KPIs pertaining to each section of the supply chain that help in analyzing and observing all quantitative and qualitative aspects of the processes in order to make decisions on how to improve them and achieve the objectives. However, it is not advisable to assign all possible KPIs because an overload of information is difficult to interpret and only the most relevant KPIs related to the established goals should be chosen.

At Hedyla, apart from optimizing logistics processes, we take care of supply chain consulting and show with analytics and business intelligence to improve the critical processes of your logistics.