English acronym meaning Key Performance Indicator, KPI (Key Performance Indicator) is a metric that assesses the efficiency of companies.
As we know, efficiency is the result of the correct use of resources with team productivity. And it depends on the agility with which the processes are carried out.
Logistics KPIs are the indicators created to monitor the performance of the company’s logistics processes.
With them, you can analyze activities and track business performance, whether during a sale, a service, customer service or specific sectors.
Errors or imperfections can be detected. It is possible to analyze the average service time, idleness of machines, production capacity, etc.
That is, they allow monitoring the process performances in an objective way, through clear and easy to analyze indexes
Thus, this celebrated tool shows what is working and what is not within the company, so that you can make modifications and eliminate failures, in the same way as making investments in processes that are already well aligned.
Therefore, the goal of logistics KPIs is to bring a more analytical vision to the business, providing valid support for decision making
What is KPI in logistics?
This is series of indices used to measure and evauate several steps of a process. The acronym has been used for years in different sectors of the industry and helps reveal where the company’s main problems are.
With this, you can develop strategies to optimize your processes, eliminating costs and providing a better service to the customer.
KPIs are evaluated quantitatively, corresponding to numerical or percentage data.
How KPIs work
The indicator is a metric that measures the performance of the company, either quantitatively or qualitatively. Thus, it works as a thermometer, indicating the process´ degree of efficiency – such as workflow, level of storage, exchanges, discards, etc. – teams and resources used.
In addition, the KPI monitors whether the path carried out by the strategy will lead to the expected results.
Therefore, finding KPIs relevant to the type of business and applying them to the company´s daily routine is fundamental to achieving the success of the operation, considering that several daily processes present problems that are not perceived.
In practice, the application of logistics KPIs can be done in four steps:
1) Decide what to measure
2) Collect KPIs
3) Track the numbers
4) Analyze the data
Types of Indicators
Logistics KPIs are extremely important to monitor processes to indicate whether the company is on the right track.
They can be:
- Productivity: describes the relationship between the amount of deliveries and the resources employed during a given period of time.
- Quality: describes the relationship between the number of deliveries within the standard and the total deliveries, indicating the quality perception by the end customers.
- Strategic: are based on previous analysis of the organization, internal and external, of the company to monitor the strategy and, thus, assess the achievement of the goals.
- Tactical: responsible for creating goals and conditions, defines how each sector should work to meet the objectives.
- Operational: are related to the processes and the operation of the company as a whole.
- Capacity: The amount of deliveries a process can make with certain resources in a certain period of time.
What are the logistics KPIs?
The company should seek the KPIs that are most used in its segment or create its own indicators to measure and evaluate its services, according to their characteristics and needs.
Meet some widely used logistics KPIs:
1 – Time to Market: KPI widely used in consumer goods companies, measures how long it takes to get the idea of a product, develop it, test it, manufacture the first batches and put it on the market.
2 – OTD (On Time Delivery): indicates the percentage of orders delivered within the given period, without delays. With OTD the company can measure how long it takes from picking, shipping and receiving the order.
3 – On-Time Shipping: This KPI measures whether orders were shipped on the promised date.
4 – OCT (Order Cycle Time): widely used by e-commerce companies, measures the time it takes for an order to reach the customer after being received by the company.
5 – OTIF (On Time In Full): considered the most important indicator for the logistics sector, reveals the performance of the process from the customer’s vision.
That is, it represents the level of consumer satisfaction in relation to the services provided by the company.
6 – Perfect Order Rate: measures the percentage of orders that are shipped without delay, error or damage to the goods.
7 – ROI (Return Over Investment): analyzes whether the gains obtained by the company are being enough to cover all investments made.
8 – SWOT: identifies what needs to be improved to increase performance.
9 – Transportation costs: measures the company´s transportation costs, in order to analyze how costly the transportation of items is, compared to the profits obtained by the company.
KPIs in e-commerce
In e-commerce, it is essential to have a modern platform, offer attractive prices, count on various payment methods and ensure punctual deliveries.
However, none of this is enough to achieve good results if the items are delayed, damaged or delivered to the wrong address.
To ensure that the whole process is well executed, the logistics KPIs in e-commerce make the biggest difference. After all, they indicate whether the right products are being delivered, whether deadlines are being met or if the good are damaged.. Finally, it is a way to measure the efficiency of the logistics operation and, consequently, retain customers.
In the case of logistics in e-commerce, there are some important indexes that can be obtained through KPIs:
- Perfect orders
- damaged goods
- on-time delivery
- time between order and delivery
- operating costs
- inventory accuracy
- Internal processing time
- Customer satisfaction rate
Sequoia stands out for its continuous improvement in logistics and transportation services, with the application of customized, complete and integrated technological solutions, for companies of all segments.