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Logistics KPIs: what they are and what they can be

kpi logistic

Logistics KPIs: what they are and what they can be

In modern company organization, essential parameters for performance monitoring are the so-called KPIs. This applies as much in production as in related areas such as logistics. In this article, therefore, we will go into more detail about the so-called KPIs of logistics, i.e. the parameters that can help in the strategic evaluation of a logistics company.

Logistics KPIs: what they are and which need to be monitored

Before going into logistics KPIs, it is necessary to take a step back for those unfamiliar with the concept of Key Performance Indicators. KPI, as we have just seen, is an acronym derived from English which stands for Key Performance Indicators. They are numerical values, each of which indicates the performance of a particular business process. In total, there are four types of KPIs: general indicators, which measure the volume of the process; quality indicators, which instead assess the quality of the process, for example, through customer satisfaction; cost indicators, which clearly assess the cost of the process; and time indicators, which instead measure the response time from the beginning to the end of the process.

In the case of logistics KPIs, it being understood that the evaluation must be performed by an analyst, there are several indicators that can be taken into account. They tend to reflect the logistical phases. Let’s look at them in detail.

The KPIs of logistics for the monitoring of procurement

The first phase of a logistic process obviously regards the supply of the supplies. This can regard indifferently the raw materials, semi-finished products or finished products. In this case, therefore, useful parameters of appraisal can be:

  • rate of not received/refused deliveries: this value indicates in percentage the not received or refused deliveries due to the missed respect, from part of the supplier, of the supply agreements; it is useful, for example, in order to appraise the quality of the supplier;
  • supply conformity rate: this is the percentage value of supplies refused due to delays by the supplier; also in this case, it indicates the quality of the supplier;
  • time of purchase: this indicator serves instead to estimate the time of delivery, beginning from the emission of the order and until the moment in which the goods comes received in warehouse.

The KPIs of logistics for the monitoring of transports

The second phase of a logistics process, within the supply chain, concerns the movement and storage of goods. Also in this case, regardless of whether it is raw materials, semi-finished or finished products, it is possible to consider indicators such as:

  • transport cost per sale: an interesting indicator, for the evaluation of the process, is the ratio between the total transport costs and the sales made; this value allows to verify the economic viability of the company;
  • punctuality rate: the ratio between punctual deliveries and total deliveries is a qualitative indicator of transport efficiency, which allows to verify the need to increase transport;
  • rate of usage of the fleet: it is an indicator of volume, obtained with the ratio between volume of transported goods and total capacity of the fleet, useful to understand how much this is saturated.

The KPIs of logistics for the warehouse

A logistic process, almost always, also includes the presence of a warehouse. This means that the KPIs of logistics must necessarily also cover this aspect. In particular, the specific indicators can be:

  • cost of warehousing: it is an indicator that puts in relationship the costs of warehousing with the total capacity of the warehouse, multiplied for the occupation rate of the same one;
  • internal evasion time: it is the measure of the time that employs an order from the moment in which it enters in warehouse to the moment in which it abandons it;
  • rate of punctual delivery: it is the percentage of punctual deliveries regarding the total of the received orders.

Obviously, the KPIs of logistics can be many others. They depend, essentially, on the needs of the logistics company, the objectives it pursues and the contingencies of the moment. Obviously, the analysis of KPIs that do not correspond to reality can in fact give rise to erroneous considerations about the logistics process. So let’s see why these indicators are useful.

Why logistics KPIs are useful

As mentioned above, the evaluation of logistical KPIs is the task of an expert in the field. Why take this burden? There are countless reasons, and each of them, even on its own, is sufficient. In particular, through logistics performance indicators it is possible:

  • Planning: as in any other sector, the possibility of planning activities, material and human resources and workloads on the basis of objective data enables a more precise evaluation;
  • control: the performance evaluation data allow to control at any time the trend of the logistic processes and, eventually, to intervene in time taking the necessary corrective measures;
  • Improvement: data acquisition also supports the necessary analysis of logistics processes in order to improve the overall organization;
  • involvement: the possibility of accompanying the results of a certain process with performance indicators allows operators to be involved in the evaluation process.