KPI logistics or key performance indicator logistics involves certain metrics that are typical in the logistics industry. These metrics include cost and time, as well as the risks. There are complexities involved in the transactions made with different parties.
Cost and time are two elements typical in logistics operation. For a logistics business to be competitive, it must have the knowledge of the time of transit in certain locations. Time is of the essence in logistics business. Delay in delivery translates to inefficiency in the operation. The delay can also be costly.
The indicators that can come with logistics in relation to time include: the average time to complete a typical shipping transaction; the time to finish filing documents; the time to deal with customs; the average time to process a shipping transaction; the total tine for shipping procedures and trade-related processes; and the percentage of on-time delivery.
The longer the time of the delivery, the more costly the transaction and operation would be. Cost is inherent in many businesses. For a logistics business to be competitive, it must minimize cost as much as possible. It must create shipping procedures that are quantifiable and that must be within the level of budget.
Indicators to measure the performance of the logistics business in relation to cost include: cost per case, transportation cost, fuel cost, warehousing cost, total cost for sipping-related procedures, inland freight cost, and average cost in processing typical shipping transactions.
Cost against risks can be an indicator. Because of the ever-existence of risks in shipping products, it is reasonable for a logistics company to integrate insurance cost in its shipping price offer.
There are certain risks that come in shipping goods by sea or on air. Risks, such as calamities, temporary shutdowns of ports, delay in transit time, and cancelled transit can be seen as challenges of the logistics management. To make the operation of shipping efficient and effective as much as possible, the management must come up with performance dynamics and develop strategies to resolve or counter problems and expected circumstances in shipping. Effective procedures in shipping must be drawn while contingency cost may have to be allocated to prepare for the risks, either God-will or manmade forces.
KPI's in logistics can help management identify and sort out problems during its normal operation. These measurements can be seen as factors for the improvement of the operation in the supply chain. Upon seeing unfavourable results in the metrics, logistics can find the aspects that need improvement and can identify the areas where the business is strong. Using the metrics, logistics management can draw up solutions or plan to enhance its performance and to make the management more effective in carrying out the objectives of the organization.
KPI logistics is a crucial tool in assessing the progress of logistics business. It can also be a means to indicate the efficiency and effectiveness of the different levels of management. Logistics management that provides effectiveness in the operation leads the organization to its success. Mismanagement at one point of the supply chain can lead to costly transactions that can eat up profits, thereby jeopardizing the position of the logistics business in the supply chain.
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