A logistics KPI or metric is a performance measurement that is used by logistics managers to track, visualise and optimise all relevant logistic processes in an efficient way. Among others, these measurements refer to transportation, warehouse and supply chain aspects.
The logistics industry produces huge amounts of data on a daily basis coming from warehousing processes, orders transportation, picking and packing, among others. That said, companies who benefit from logistics analytics solutions to improve their performance are the ones that will thrive in the long run. To help you accomplish this type of success, we put together a list of professional logistics metrics that will not only ensure that your business operational processes are running smoothly, but will help you optimise costs while still maintaining a quality service. If you want to extract deeper insights from these metrics, put them together in a logistics dashboard with the help of a professional dashboard tool and take advantage of powerful data visualisations.
Here is the complete list of the most important logistics KPIs and metrics, that we will discuss in this article in every detail:
Shipping Time: Spot potential issues in your order fulfilment process
Order Accuracy: Monitor the degree of incidents
Picking Accuracy: How many orders are picked without errors?
Delivery Time: Track your average delivery time in detail
Pick & Pack Cycle Time: Track the time it takes to pick and pack your orders
Equipment Utilisation Rate: Is your equipment enough for your workforce?
Transportation Costs: Analyse all costs from the order placement to delivery
Warehousing Costs: Optimise the expenses of your warehouse
Pick & Pack Costs: Monitor all costs related to your pick & pack process
Use of Packing Material: Optimise your materials usage
Number of Shipments: Understand how many orders are shipped
Inventory Accuracy: Avoid problems because of inaccurate inventory
Inventory Turnover: Track how many times your entire inventory is sold
Inventory to Sales Ratio: Identify a potential overstock
The On-Time Shipping performance refers to the ratio of orders that have been shipped on or before the requested ship date divided by the total number of orders. This is a first logistics KPI to help you measure your supply chain performance. Indeed, if the amount of time between the moment the customer placed his order and the moment that order is prepared to be shipped is too long, that can show some trouble in the process that need to be fixed. Whether it is outdated planning processes or disconnected execution systems too slow to face an increasing demand, the issues need to be addressed to quickly answer unexpected events.Performance Indicators
After realising a benchmark of the average time you need to ship a certain type of order, you can set a target shipping time relative to each product to achieve.Relevant Showcase Dashboard
The Perfect Order Rate is another highly important logistics metric when it comes to your supply chain efficiency. It measures the amount of orders that are processed, shipped and delivered without any incidents on its way. The shipping time as well as the delivery time are both respected, the order is not a wrong one and the goods are not damaged. It is important as it shows the efficiency of your supply chain and delivery services, and that leads of course to more satisfied clients that are willing to come back or recommend your services.Performance Indicators
The higher is this rate, the better it is for your business. You will lose less money with returns of inaccurate or damaged goods, and increase the level of satisfaction of your customer base.Relevant Showcase Dashboard
The picking accuracy is another warehouse KPI related to the quality of your pick & pack process. The aim of this metric is to track the percentage of orders picked without errors from your total number of orders, and it is calculated with this simple formula: (Total orders – Returns due Wrong Item) / (Total orders). This metric directly affects customer satisfaction levels since it ensures customers will receive the correct item from their order. Additionally, a higher picking accuracy will save significant costs on relocating wrong shipped items, therefore companies should make sure to monitor it constantly.Performance Indicators
Measure the picking accuracy based on your returned products but also do random checks of picks to ensure no mistakes are made.Relevant Showcase Dashboard
The Average Time Delivery is measured from the moment the order is placed to be shipped and the moment it is delivered to the customer/post office. After benchmarking and having an idea of the average delivery time from your warehouse to anywhere, the goal would be to decrease it when possible - offering special delivery services for instance - but more importantly, to precise it. Saying that an order will arrive in 4-5 business days is better than saying it will arrive in 1-to-5 business days. Additionally, if you can precise the delivery hours (between 13h and 15h rather than between 8h and 18h), it is even better. That way, your customer knows when he should be home to pick the package up, increasing your order picking accuracy rate and avoiding returns.Performance Indicators
This is a typical logistics KPI example to narrow down and precise as much as possible for a better service.Relevant Showcase Dashboard
The pick & pack cycle time is a logistic KPI that tracks the amount of time it takes an employee to pick an item from a shelf to the time the packing process is done. This metric is calculated by dividing the total amount of time with the total number of items picked and packed in a set period. In the example, we see that the performance of each line is being tracked based on a target, and that line A is a bit above it. This is valuable information as it allows you to take a deeper look into the process of that line and find out what could be delaying the pick and pack. Measuring each line of work separately also enables you to try different strategies for each of them and see which one is the most effective.Performance Indicators
Set realistic targets to track your pick and pack cycle time based on your total number of orders and the workforce available.Relevant Showcase Dashboard
Next in our list of logistics metrics examples comes the equipment utilisation rate. Although employees are the ones doing the heavy work, technology and equipment are a fundamental aspect for the efficiency of any warehouse process. The image above displays a percentage of the equipment usage in each line of work based on a target of last month’s performance. In this case we can see that lines A, and B are over the target and that C is at the limit, this could mean that an investment in more equipment might be needed to improve performance in this area.Performance Indicators
A healthy equipment utilisation rate should be between 70-90% as this ensures that your employees are not waiting in line to use the equipment.Relevant Showcase Dashboard
The Average Transportation Costs calculates an overall of the expenses involved in processing an order from the beginning to the end. It will break down all the costs related to this logistics KPI according to distinct categories: the order processing, the administrative, the inventory carrying, the warehousing and finally the actual transportation costs. After calculating all these, you can evaluate the percentage each stage of the process represents and see if that is excessive or in the norms. You can also calculate the transportation costs relatively to a product and see how much one item costs compared to how much revenue it brings you.Performance Indicators
The goal is to decrease the transportation costs while maintaining a high quality of delivery.Relevant Showcase Dashboard
Warehousing is the management of space and time. The Warehousing Costs refer to the money allocated to the goods moved into or outside the warehouse. These expenses cover equipment and energy costs like ordering, storing and loading the goods, as well as more human costs like labour, shipment, or delivery. The warehousing costs are a component of another logistics KPI, the total transportation costs. Measuring them is not an easy task, but once it is done it will facilitate your overall management and add a lot of value, something that senior management or investors will appreciate.Performance Indicators
Warehouse being the main area of your business, it is important to measure and review the costs on a regular basis, so as to improve your operations and evaluate such improvement.Relevant Showcase Dashboard
Our next logistic KPI example is the pick & pack costs. This metric aims to measure all cost aspects related to the picking and packing of your orders. For example, the workforce, the packaging materials, or equipment. Your final goal here should be to always keep the costs as low as possible. Therefore, monitoring this KPI will be useful to understand if you are spending more resources than needed in the entire process. The pick & pack costs can also be analysed deeper by dividing it into products or product categories, this way you can see exactly where your costs are going up and find productive solutions for it.Performance Indicators
An effective way to optimise your pick & pack costs is to test different picking and packing methods and techniques on each line of work and see which one is more cost and time efficient for your business.Relevant Showcase Dashboard
The use of packaging material is a warehouse KPI that aims to track the amount of materials used for packaging in each line of work in your pick & pack process. This is an important metric to track since using more materials than needed can not only lead to higher costs but also negatively impact the image of your business for not adopting basic sustainable practices on your packaging. In the image above we see that line B and C are over the target of 300g of materials usage, this could mean they are packing small items in big boxes leading to a waste of resources.Performance Indicators
In order to avoid waste of materials, set mandatory package dimensions related to the size of the item being packed this way you will save resources and keep your environmental impact to the minimum.Relevant Showcase Dashboard
Shipping is not only a matter of dispatching goods and packages in trucks or boats. Shipments are the showcase of your warehouse; their quality and the accuracy to primary order will demonstrate the quality of your service as well. The same way you measure the number of orders placed ready on time to be shipped (On-Time Shipping KPI), you can measure the number of orders shipped out of your warehouse. Analysing the trends over time will provide great insights on rush hours or rush seasons (such as Christmas time), and enable you to anticipate and allocate more resources accordingly.Performance Indicators
Breaking down this figure into several categories (countries, regions, types of products) will provide you greater information that you can use to optimise other logistics metrics, like the ones related to delivery.Relevant Showcase Dashboard
Inventory Accuracy is one of those logistics metrics that can make or break your warehouse. Indeed, having a certain record of all your goods in your database that doesn’t match the actual physical inventory can harm your business considerably. If your inventory is inaccurate, that can lead to unexpected backorders but also unsatisfied customers and more generally, higher overall costs. A regular inventory checking the existing discrepancies with your electronic inventory record ensures that bookkeeping practices are in order and that your business is reliable, avoiding phantom inventory nightmares. This ratio will also help you spot issues related to receiving, shipping, or accounting.Performance Indicators
On a more realistic level, it is also normal to have some disparities between the record and the warehouse, but the idea is to maintain that ratio over 92% as much as possible.Relevant Showcase Dashboard
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This logistics KPI measures the number of times your inventory entirely has been sold over a certain period of time. It is a great indicator of efficient production planning, process, as well as marketing and sales management. In general, the higher your turnover rate, the better. A low turnover may translate difficulties in turning your stock into revenue, and that can come from any stage of your supply chain process. There is not one general rate to achieve, as it depends on the industry your company is evolving: a car dealership will have a lower turnover than a common groceries store. The idea would be to benchmark your industry average rate and try to reach and exceed that target.Performance Indicators
After calculating yours, compare it to the average rate of your industry and surpass it.Relevant Showcase Dashboard
This logistics metric is good at evaluating the overstock. It measures the ratio between the available inventory for sale, versus the actual quantity that is sold. This is a great performance indicator that will also tell you if your company is able to face unexpected situations. It is an even greater indicator if you measure and use it with other KPIs such as Inventory turnover, or the Carrying cost of inventory. That will let you know about the financial stability of your business, but also the direction you want to take - selling your inventory as quickly as possible or not.Performance Indicators
Like described above it really depends on your business what your target ratio should be. Usually you try to keep it not too high to avoid low inventory turnover rates.Relevant Showcase Dashboard
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