Your Logistics KPI - Internal Logistic Indicators in Your Supply Chain (For Shippers)

Aug 13, 2018 Michael Ruffus Michael Ruffus

Logistics as a science has an empirical nature and a relatively short history. Because of this, specific laws of logistics - the necessary, substantial, stable, repetitive relationship between buyers and sellers, shippers and carriers. The "six rules" of logistics, largely formulated as follows

 

The logistics operator should provide:

  1. desired product

  2. required quantity

  3. appropriate quality

  4. at the right time

  5. by the deadline

  6. for an agreed price

 

Note that the "six rules" of logistics represent a necessary and sufficient condition for the economic and mathematical modeling of formalized logistical processes. The appearance in the literature of the "seventh" and subsequent rules from this point of view is redundant, but permissible under certain conditions. 

 


 

We draw attention to the applicability of these rules not only to raw materials, semi-finished products (revolving funds), but also to fixed assets and labor resources. These problems are solved within the framework of outsourcing and outstaffing.

Delivery indicators (producer goods delivery indexes) characterize the volume, structure, rhythm of deliveries. The fulfillment of obligations on the physical volume of deliveries is calculated by comparing the volume of goods actually delivered to the account of contractual obligations with its volume stipulated in supply contracts. The fulfillment of obligations on the assortment of delivered products is determined by comparing the actual volume of products delivered and the assortment stipulated in the contracts.

The indicators of rhythmicity is the ratio of the amount of actually produced output within the planned target for each period of the period under study to the total volume of the task for the whole period.

 

Have you heard about global LPI?  Learn about SeaRates LPI-12 ® to check if your logistics company/department responds to the industry standards.

 

Warehouse indexes are technical and economic indicators used for a comprehensive analysis of various areas of work of warehouses.

The system of these indicators can be represented by three enlarged groups:

  1. indicators the warehouses performance (freight turnover, specific turnover, load unevenness factor, total warehouse operation, cargo transit intensity);

  2. indicators of the efficiency of the use of warehouse space (capacity, usable area, utilization factor, warehouse load);

  3. indicators of the level of safety of goods and financial indicators (the number of cases of non-preservation of goods, storage costs, cost of packaging, labor productivity of warehouse workers).

 


 

Key indicators of logistics efficiency (KPI for logistics)

Key performance indicators, or KPI in logistics, are key indicators that show how efficiently the resources in a company are used for logistics processes.

Logistics is developing, and today we have a certain system of indicators, which comprehensively assesses its effectiveness with the help of:

  • general logistics costs;

  • the quality of the services provided;

  • duration of logistic cycles;

  • overall performance;

  • the level of return of funds for further investment in this area.

 

All of them are considered key indicators that show the efficiency of logistics inside the enterprise. Let's talk about them a little more.

 

General logistics costs

These are the so-called total costs, which include:

  • costs for performing various logistics tasks;

  • damage as a result of problems encountered;

  • costs for managing the logistics process.

 

Most logistic reports that describe how well the plan is implemented contain ordered indicators of these costs. Foreign companies in this area, as a rule, control and analyze the costs of transportation of goods, their location in warehouses, distribution of stocks, management of orders, information service, etc. By the way, using SeaRates TMS System you can easily generate, view and print all your logistics reports.

 

Quality of services provided

Logistic service is also a strong indicator of the productivity of the system. Its level is determined by the extent to which customers' expectations differ from the satisfaction of the provided logistics services. It is important that the department/company evokes the trust of customers, be considered competent and reliable, and managers to be sociable, polite and ready to help.

The main components that measure the quality of service are:

  • external appearance (availability of the office and its comfort, modern equipment, the appearance of staff, etc.);

  • guaranteed performance of specified work;

  • responsible approach;

  • competence of the firm's employees;

  • convenience of interaction between the customer and the logistics enterprise;

  • minimum number of risks in the process of cooperation or their absence;

  • courteous treatment of employees with customers, accessible presentation of information;

  • understanding customers, the ability to meet their requirements.

 

Therefore, those companies that are as close as possible to the described level deservedly have higher estimates of logistics service, and accordingly the evaluation of efficiency. By the way,  SeaRates developed a distinct system for evaluating the effectiveness of the logistics company SeaRates LPI-12 ®, take a look.


 

 

Duration of logistic cycles

This is the lead time for the order. Time is an important and, at times, scarce resource in the present time. Therefore, the longer the work is done in the supply chain, the lower the logistics performance indicator at the enterprise.

 

Overall Performance

It determines the extent to which work is done; how much equipment, appliances and people were involved in the provision of services; costs of other resources. Many overseas companies maintain special reporting documentation on logistics efficiency, in which these and other indicators are displayed more broadly.

 

Level of return of funds (ROI):

Shows how effective investments are in the logistics system. It is determined by availability and status:

  • warehouses;

  • transport;

  • communications;

  • units for repair and maintenance of vehicles and warehouses;

  • telecommunication systems;

  • computer equipment.

 

To complete the understanding of the internal enterprise logistics performance (either your enterprise is Shipper, Exporter/Importer or International Trader) here is the full gathered list of the parameters, which you can use for improving of your supply chain:

  1. ratio of the orders number for the selected period of time;

  2. need for materials, referred to a period of time;

  3. personnel costs per period;

  4. number of employees;

  5. number of sick leave;

  6. share of stocks in relation to turnover;

  7. cost of orders per period;

  8. average availability in the warehouse;

  9. difference in inventory indicators to the number of inventories;

  10. number of absentees at work;

  11. value of availability in warehouses, related to the invested capital;

  12. number of warehouse items;

  13. duration of the turnover of the warehouse;

  14. average time to restore the stock;

  15. number (frequency) of revolutions;

  16. cost expression of differences in inventory to the number of inventories;

  17. level of readiness for deliveries;

  18. share of stocks in circulation;

  19. share of the materials cost , attributed to the cost of production (material intensity);

  20. number of order items for the period;

  21. average duration of snoring in the warehouse;

  22. ratio of storage costs to warehouse area;

  23. share of third-party organizations in turnover.

 

Outcomes

We examined the main indicators of logistics efficiency. On their basis, the accounting and control of the logistics system is compiled, and a further action plan is drawn up in this area. If you need advice from a specialist in logistics, contact support@searates.com.

 

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