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Logistics can be defined as the movement of goods, services and associated flows from point of origin to point of consumption for cost reduction and customer satisfaction. Logistics is the key element of supply chain management. In this paper we will discuss the performance indicators of logistics and the importance of performance metrics in business logistics.
Key Performance Indicators (KPI) of Logistics:
The key performance indicators may be identified and classified based on factors such as time, cost, quality, availability and logistics functions such as transportation and warehousing.
Indicators on Time:
Logistics performance indicators based on time factor are listed below:
- Customer order to delivery time
- Customer order pick to stock cycle time
- Variability in Transit time
- Time to trade associated formalities
- Time for document processing
Customer order to delivery time:
This is the time taken to deliver the product or service to the end customer. The customer order to delivery time should be less, because the customer satisfaction would not be met if this time is more. Usually this time is calculated in days. The lesser the time taken to deliver the product or service the better the customer satisfaction.
Variability in Transit time:
The variability in transit time points out reliability of transportation time. This time factor is calculated by (Maximum transit time – Minimum transit time) / Average Transit Time. The lesser transit time variability results in better efficiency.
Time to trade associated formalities:
This factor includes time taken for the internal transport, clearance time for customs and technical control and trade papers formalities time.
Warren H. Hausman, Hau L. Lee and Uma Subramanian. (2005) Global Logistics Indicators, Supply Chain Metrics, and Bilateral Trade Patterns [online]. Available from:
Indicators on Cost:
Logistics performance indicators based on cost factor are listed below:
- Cost to Trade associated formalities
- Unit cost to freight.
Cost to Trade associated Formalities:
This cost includes the cost for port related activities, trade paper formalities, cost due to security issues, internal transport cost, cost related to border control issues.
Unit cost to freight:
This t is the most important indicator; this value should not exceed the cost of the product, if it does the company is facing a huge loss.
Indicators on Quality:
Logistics performance indicators based on quality are given below:
Rahul (2005) provides these indicators on quality.
- Process Improvement
This indicator relates the capability of the service provider to issue reports to the manufacturing sector. The reports may contain all the relevant information.
The logistics firm and the manufacturing firm jointly developed the continuous process improvement.
Indicators on Availability:
Rahul (2005) provides the two indicators on availability and they are listed below:
- Customer Satisfaction
- Handling Routing
Customer satisfaction may be tracked by conducting surveys for the customers serviced. The customer satisfaction is the important performance indicator.
The inventories in the warehousing sector should be at the correct level. If the inventories are in excess or shortage, it indicates improper warehousing.
Indicators related to Transportation:
There are three main indicators related to transportation and they are
- Punctual delivery.
- Punctual Shipment.
- Transportation cost per mile.
Punctual Delivery: This is the proportion of shipments that arrive at the end customer destination on the correct time to the total number of shipments.
Punctual Shipment: This is related to the number of shipments that leave on correct time against the total number of deliveries.
Transportation cost per mile: This is the comparison of cost to ship a single unit to the earlier internal process.
Indicators related to Warehousing:
The important indicators related to the warehousing are given below:
- Proportion of orders that the firm sends in accurate measure against the original order.
- The warehousing cost involved for a single unit of the product.
- The total overhead costs such as taxes, insurance etc. Involved in warehousing cost.
- The completion of all orders received on correct time.
- The percentage of accuracy in the inventories related to the warehousing.
- The capability of shifting the commodities from one port to another within a short span of period.
- The loss and damage on the process of warehousing should be minimized.
Other Performance Indicators:
In addition to the above mentioned performance indicators, there are some other indicators and they are given below:
Strategic Indicators: This is the percentage of travel time with full load with respect to entire fleet.
Operational Indicators: This is the percentage of travel time with full load with respect to a single truck.
On-Time departure of the delivery trucks is another important metric, which improves the efficiency.
Truck consumption and reliability: The utilization of truck should be maximized.
Indicator on Production: The total number of units that canââ‚¬â„¢t be refurbished must be fragmented as it reduces the production rate.
Percentage of demand met: This metric is the number of orders fulfilled against the total number of orders. This particular metric indicates the operational capability of the company.
Maintenance Metric: This is the average active maintenance time to carry out remedial maintenance.
Important of measuring Performance Metrics of Logistics:
The importance of measuring Performance Indicators of Logistics are summarised and given below:
- Used to measure the efficiency of the logistic systems used by the company. Efficiency refers to the proficient delivery of services to the end customers.
- ÂÂ Used for the attainment of long-term goal of the business and also the immediate goals.
- The metrics are useful for performance measurement and general activity progresses in logistics systems.
- It erases the drawbacks and delays during the whole logistics process.
- It guarantees the productivity and achievement of the company.
- It helps in the cutback of production expenditure. It helps to spot areas of enhanced asset management.
- By measuring the performance metrics, the company can keep its customers for a long time.
- The marketplace significance of the firm are related to the evaluation of performance metrics.