Logistics KPIs: 5 Important Metrics to Monitor
Today we're looking at forward-thinking key performance indicators (also known as logistics KPIs). KPIs are paving the way to increased productivity, greater efficiency, and future success in the logistics industry. We're still at the forefront of a data-driven future. We're just beginning to understand the competitive advantage that logistics software and apps can give our business when we monitor the right KPIs.
Today we'll define KPIs, see how they're already affecting the game, and highlight the top five logistics KPIs you should monitor:
- On-time deliveries
- Driver performance
- Fuel efficiency
- Dwell time
- Sick leave and your risk profile
Every industry, every business, every department, and every individual has a multitude of KPIs worth monitoring. In general, KPIs quantify and qualify human effort in a way that allows decision makers to target best practices, make data-driven decisions, and promote continuous improvement.
KPIs Are Everywhere! First Example: Baseball
In professional baseball, KPIs have led teams to change how they manage their players—and change what skills they encourage those players to develop. For instance, KPIs have led to the mass adoption of defensive shifts, as teams learned to align themselves for highest percentage of outs against a given hitter. Meanwhile on offense, the study of KPIs led to the launch angle phenomenon because hitters learned an upward swing allowed them beat the shifts and hit more home runs. To counteract that, teams analyzed KPIs and subsequently developed more pitchers than ever who can throw 100-mile-per-hour fastballs.
You get the idea. The same trend is true across every industry. Why? Because KPIs allow us to use the data that technology constantly gathers today, in order to identify a competitive advantage tomorrow. We're all looking for higher performance and a competitive edge. That leads us here. Indeed, the problem with KPIs is figuring out which ones are best to track.
What's a Key Performance Indicator (KPI)?
A KPI, or key performance indicator, is a measurable factor that is critical to success. Businesses track KPIs because these key factors indicate or highlight how the business unit is performing overall. In other words, a KPI allows you to analyze performance in one specific area, and cull from it a general conclusion about the overall health of the business. It's all about supply chain visibility.
To form a more complete picture, businesses track several KPIs. In addition, every business has multiple areas of operation. Also keep in mind that we go to work and perform every day, which means performance is constantly changing. When someone groups many KPIs into time periods, that provides a business with a trend. Are you trending down, flat, or up?
There's a ton of data floating around. Indeed, with ever-evolving tech tools, data is trending up—and sharply. The search for good data can be a bit overwhelming, and it can feel like panning for gold or hunting for hidden treasure. As such, the idea behind this article is to introduce the five logistics KPIs that forward-looking companies and decision makers should be considering.
Five Logistics KPIs to Monitor for Success
Let's identify the top logistics KPIs that will give you greater supply chain visibility.
1. On-Time Deliveries
Let's start with the gold standard of metrics. On-time deliveries (and pickups) are a classic, obvious KPI. The idea is simple: if you're delivering on time, you're getting the job done. Say no more, and don't fix what ain't broken, right?
Well, to compare this to baseball, it's like monitoring your win-loss record. Wins and losses give you a feel for overall success. But that doesn't tell you anything specific about how your team can improve in future (or avoid getting worse).
This underscores an important point about logistics KPIs. At their best, KPIs provide an avenue for growth. It starts with knowing whether you're winning or losing.
2. Driver Performance
It's possible to monitor many aspects of a driver's performance with software that's integrated with your vehicles' telematics systems. For example, you can monitor a host of driving trend KPIs, such as vehicle speed, idle time, and hard-braking occurrences. Then you can combine these KPIs with vehicle inspection reports to build an accurate picture of driving and vehicle maintenance trends.
These KPIs align with the goals of every fleet manager—optimal driver safety and vehicle performance. To be clear, the goal driving these KPIs is to catch an unsafe trend when it's still possible to retrain the driver, not after a costly or tragic accident.
3. Fuel Efficiency
Yes, we obviously focus on the top line and revenue. But don't lose sight of the bottom line! Fuel efficiency is a great logistics KPI to monitor because it can help grow your margins.
Logistics isn't known for high-mileage vehicles. But it's all relative. In other words, any improvement to fuel efficiency whatsoever can add up when you consider the annual miles that drivers tally. This is a very easy KPI to measure, and the leading logistics apps, including Vector's, can help. Crunch the numbers and monitor the data. It may surprise you!
4. Dwell Time
Here's a big KPI that monitors an issue that most drivers chalk up as part of life. Dwell time is the time a driver spends waiting at a shipper or warehouse to load or unload. With hours of service a constant concern, dwell time is one way to gauge overall efficiency. Indeed, if driver dwell times are trending downward, that indicates the entire supply chain is performing more efficiently.
In essence, dwell times reflect the efficiency of the warehouse behind the dock doors. Lower dwell times also indicate the carrier has organized their drivers' schedules correctly. It suggests they're in the right place at the right time.
And lastly, dwell times reflect driver checkin and checkout processes. These are antiquated systems. As such, they're now getting replaced by electronic bill of lading (eBOL) software like Vector's. There's more on this below.
5. Sick Leave and Your Company's Risk Profile
This is a logistics KPI for the time of COVID-19. We all learned what it means to be socially distant. We realized how fragile our businesses are to the existential threat of disruption and shutdown. The new goal? Keeping our businesses running and making sure that our people (and their families back home) are staying safe and healthy. During the worst of the pandemic, drivers and shippers performed heroically in the face of an uncertain and unseen threat. Meanwhile, to curb the threat of disease, decision makers at carriers and shippers rapidly began to adopt eBOL apps like Vector's.
These simple tech tools have driven safety. How? By reducing (and simplifying) interactions between drivers, clerks, guards, and warehouse personnel. The question is simple. Why risk the health and safety of your entire organization for a signature when you can manage it electronically on Vector?
The idea behind this article is to offer practical logistics KPIs that are relevant and current. Beyond that, the goal is to encourage you to be forward thinking, get ahead of the curve, and monitor metrics in a way that sets up your business for success now and in the future.
Thus, the meta takeaway is that technology isn't going anywhere and it's already changing the game. If you're an old-school skeptic, fear not. (Or go ahead and fear it if you want to.) Either way, tech is proving to be a valuable, game-changing tool, so it makes sense to get on board. And to clarify, I'm not suggesting you flush your instincts and rely on data only. Instead, I'm saying integrate and create using the best tools tech has to offer.
Put another way, baseball has provided us with a clear example of how KPIs can lead to competitive advantage. But remember this as well: the best stay one step ahead of the rest. In other words, when the defenses shift and hundred-mile-an-hour fastballs are flying, it might be time to shorten your stride and swing for the fences.
This post was written by Brian Deines. Brian believes that every day is a referendum on a brand’s relevance, and he’s excited to bring that kind of thinking to the world of modern manufacturing and logistics. He deploys a full-stack of business development, sales, and marketing tools built through years of work in the logistics, packaging, and tier-1 part supply industries serving a customer base comprised of Fortune 1000 OEMs.