A key part of a successful logistics strategy involves the ability to measure logistics performance. After all, if you don't know how well what you're doing is working, then you could be unwittingly investing in a losing strategy in perpetuity. But the typical standards for success in normal times require a bit of adjustment during ongoing supply chain stress. So let's go over just what those logistics KPIs (key performance indicators) are, and how to view them today.
What do you measure in logistics?
As with other business components, one way to measure logistics success is with the use of key performance indicators. These KPIs or metrics should address a business's logistics priorities around elements like cost, reliability, service level, environmental impact and more. KPIs can cover more than one of these areas simultaneously, but regardless, they're useful in establishing standards not only to measure internally, but against others as well. We've gone into some detail on logistics KPIs in another recent article, but we'll include a high-level list of some key metrics again here:
- Freight Cost
- Freight Characteristics
- On-Time Percentage
- Claims
- Customer Experience & Satisfaction
- Vendor Compliance
- Carbon Footprint
- Pickup & Delivery Performance
- Carrier Compliance
Beyond showing what to measure, using KPIs properly involves tracking trends over time and analyzing them to determine areas that need improvement. And don't forget to compare against the market, not just internally when possible, especially on cost-related KPIs to ensure they're in line with others. The problem in an over-time comparison can arise when market conditions change drastically due to something unforeseen, like a pandemic. That doesn't mean throwing everything already established out completely, but it means adjusting priorities and expectations.
How to measure logistics success today
A primary way to measure logistics success involves establishing and comparing KPIs while taking into account market conditions. When extreme change occurs, like unprecedented supply chain stress, those indicators provide a baseline from which to adapt previous assumptions. So what expectation changes are needed today, in - at least for the time being - a new normal? Perhaps the greatest involve delivery time and freight costs.
While on time, in full loads should always be the goal, with so many factors beyond anyone's control arising along the supply chain, expecting the percentage - however you measure it - to be as high as pre-crisis is unrealistic. On top of that, some of the same factors that make delivery times harder to nail down - plus others - are also impacting freight costs. So how do you adjust expectations in the current normal? By considering a combination of price, capacity, and service relative to the market as a whole. Those who navigate the market with the best mix of all three factors make for the most effective, no matter how they handle logistics.
How do you handle logistics?
If your business handles logistics internally and is happy with how things are going, great! But if those KPIs are telling a different story, perhaps working with a third-party logistics provider is an option worth considering.
If you're ready to take the next step, at InTek Freight & Logistics, we can help. Just tell us what you need and we'll discuss how our expertise can help with the unique shipping challenges your business faces. Rather do a bit more research first? View our Freight Guides for comprehensive articles and eBooks on all things freight and logistics.
- Domestic Freight Services: Intermodal, Truckload, LTL
- Outsourced Managed Transportation Service Solutions
