Your customers are more data-driven than ever, and your success or failure in the eyes of those customers is partly determined through logistics metrics that measure your performance. It is therefore important that you have a firm handle on your customers’ key performance indicators (KPIs) as well as your ability – or that of your 3PL – to meet or exceed those KPIs.
While there is no shortage of metrics to track, in this article we’ll identify some of the most commonly used KPIs in the industry. If you’re buttoned up on these, you’ll likely be in very good standing with the companies that rely on your performance.
“The Numbers Don’t Lie”: 7 Essential Logistics KPIs
- On-Time Final Delivery – This metric shows a carrier’s ability to deliver successfully on time to their scheduled required arrival date and/or to the appointment time. Missing an appointment is not only financially costly (in the form of retailer chargebacks), it also adds time to the delivery as you’ll likely need to schedule a new appointment, which could be several days out. If your carrier is performing below 98% with this metric, then an operations review should look for process improvement and efficiencies.
- Cost Per Pound – This metric measures gross net with total weight moved each month/quarter to show the buying and usage patterns of your customers. The trends revealed in cost-per-pound performance can help you and your customers to buy smarter and save money by not over- or under-buying product.
- Inventory accuracy – This warehousing metric measures the accuracy of orders pulled from the warehouse. High accuracy scores show that the correct products in the correct quantities are going to the correct customers. Low inventory accuracy can create angry customers and result in additional costs to fix orders.
- Dock to Stock – While much attention is paid to outbound order cycle time, inbound cycle time is just as important to your supply chain. The dock-to-stock KPI measures the time between receipt of an order and the time that it is put away. Fast dock-to-stock times boost the efficiency of inbound activities and ensure that product is ready for resale as quickly as possible.
- On-Time Shipping – Shipping speed is vital in both the B2C and B2B worlds, and this metric shows the percentage of shipments that left the warehouse on time. Of course, “on time” can vary between those two worlds. B2C orders generally need to ship the same day (up to a cutoff time), while B2B orders have more of a set cadence with retailers (e.g., retailer may give advance notice of 48 hours, 72 hours, or even a week). Failure to ship on time can result in disappointed customers and can decrease the likelihood that B2B shipments make it to store shelves prior to a holiday surge or big promotion weekend (e.g., Valentine’s Day and “Back to School” season)
- Order Accuracy – Customers – both B2C and B2B – not only expect orders to ship in a timely manner, they expect to receive exactly what they ordered. This metric shows accuracy (%) in terms of the number of orders filled correctly. When orders are filled incorrectly, chargebacks and delays are the likely result (e.g., Walmart’s On-Time-In-Full [OTIF] policy made a splash years ago by announcing significant penalties for both late and incorrect orders).
- Fill Rate – Fill rate measures the ability of a warehouse to fill orders from a specific distribution center, without having to ship from multiple locations. For a 3PL, high fill rates result from good systems integration that ensures the warehouse inventory count for each SKU matches the figure in the customer’s internal system. When these numbers don’t match up, retailers can accept more orders than they can fill with current inventory, – resulting in backorders, delays and potential chargebacks. The solution here is to perform an adequate number of syncs between warehouse and customer systems and to do cycle counting to ensure inventory accuracy.
Using logistics metrics with a 3PL partner
When you’re working with a 3PL partner, expensive systems and advanced automation don’t always equate to exceptional operational performance. Make sure that your 3PL is capturing, managing, and continually improving the KPIs that matter to you – and your customers’ – business.
When partnering with a 3PL, discuss the metrics that your company needs to master. This discussion should also cover the steps your 3PL will take when operations are falling short of the mark, as well as any continuous improvement program that your 3PL has implemented to bolster operations.
Weber Logistics specializes in matching its integrated supply chain capabilities to the metrics that matter most to your business. To learn more about Weber’s logistics solutions, contact us today.