The key performance indicators (KPI) are valuable parameters for logistics companies to evaluate their performance against common industry standards. In fact, by monitoring the kpi metrics, businesses get a clear picture of the pain points and make an earnest effort to improve their functions. The data from KPI elucidates the errors and gives the ways to address them successfully for improving operational efficiency and customer experience.
The logistics kpi metrics is essentially a measurement of performance implemented by logistics companies to monitor, predict and optimise the entire processes involved in a very productive manner. Most importantly, the metric measures the efficiency of movement of goods, supply chain and warehousing.
The supply chain scenario is continuously changing ever since the last decade, and it is evolving at a fast pace due to the pandemic. We have witnessed the eCommerce explosion and the surge in online buying for the last one and half years. Impacted by the lack of infrastructural facilities from the rising number of deliveries each day, shipping and transportation services need to meet the additional requirements with minimal resources. A scalable solution has become an essential service in logistics, not a luxury, unlike in the past. Considering the heavy demand today, more and more logistics service providers focus on offering scalable solutions following the increase in orders. What facilitates them to keep tabs on is the key performance metrics. Therefore, shipping companies should make ideal choices for improving the current operations to attain operational efficiency.
How and why do logistics kpi metrics become significant?
As explained above, logistics KPIs help shipping services to measure and compare their performance against the standards. It helps them improve their operations and address any deviations from the accepted standards while reducing costs.
The following shows a list of a few of the most significant logistics KPIs. Let us explore each one of them in detail:
1. Timely shipping
To ship products on time is one of the key performance indicators that logistics companies use to pinpoint the challenges in supply chains. It affects the timely transfer of goods at the specified location while identifying the efficiency levels that satisfy customer wants. If the on-time shipping rating is low, logistics companies need to address this immediately because it can lead to customer churn, causing severe damage to the business. One of the most significant kpi indicators that measure the supply chain performance, on-time shipping checks for any issues concerning the shipment process to avoid unnecessary delivery delays.
2. Delivery Time
Also known as on-time delivery (OTD), it measures the number of orders delivered at the specified location on time against the total number of shipments. Like timely shipping, OTD also influences customer satisfaction levels and repeat purchases. The delivery kpi tracking help companies adopt the same day or next day delivery service. Similar to other KPIs and metrics in logistics, measuring OTD is an ongoing process. The logistics companies have to watch for the changes and the methods to use them properly. Also, the shipping services should give an expected delivery period ranging from two to three hours instead of five to ten hours to ensure convenience in picking up orders by recipients.
3. Order Accuracy
To measure the efficiency of operations, logistics managers have to consider order accuracy. Order accuracy deals with the number of orders processed, transported and delivered. Also, this specific kpi monitoring accounts for both shipping and delivery time, the accuracy of the order while checking the condition of goods that they are intact. Further, it identifies the efficiency of the delivery service. A higher rate indicates the highest levels of customer satisfaction with the assurance of repeat business. It ensures that no loss arising out of damaged goods or slow shipping, or delayed order delivery. Without this KPI, it is impossible to monitor slow shipping and delivery and the unnecessary expenses arising out of delays.
4. Inventory Accuracy
Inventory accuracy forms the basis for easy order management and warehousing. What is the purpose of inventory management when the electronic inventory entered in the system does not reconcile with the physical stock? It accounts for a detrimental situation where backorders become the order of the day, with several unsatisfied customers. Besides, it can further lead to higher costs and makes expenses out of control. Therefore, inventory accuracy kpi metrics check if the physical inventory is the same as the inventory record in the database while ensuring that everything is in order. Some differences between the actual physical stock in the facility and those in the database may occur. Nevertheless, it should never fall short of the desired level to trigger backorders.
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