7 Essential Key Performance Indicators (KPI) for Monitoring Logistics Performance

Published in

Ritase

6 min readApr 8, 2021

Untuk artikel dalam Bahasa Indonesia, klik di sini.

The importance of data as the foundation of wisdom.

Logistics management is a challenging activity to carry out. Besides the assurance of the efficiency of the business process and the logistics cost, companies have to implement improvement plans in order to reach the level of effectiveness and efficiency. This requires an in-depth analysis of the current process.

The analysis, certainly, needs data that represents an indicator of the company's performance. This performance indicator is known as the Key Performance Indicator (KPI). KPI is significant to assess and monitor the current performance of the business process to ensure alignment to the company’s strategic plan.

The existence of KPI boosts the companies improvement plan as this could indicate what went wrong in the process. Therefore, companies are able to employ the right solution and implement preventive actions. Ultimately, this would increase the effectiveness and efficiency of the overall company’s performance. Moreover, KPIs are also able to monitor whether or not the plan has achieved the target.

What are those 7 KPIs?

There are seven crucial performance indicators that the logistics team should take a look at:

1.Truck utilization

This indicator provides a visualization of the load plan effectiveness from the operational warehouse team. This indicator is important as the underutilized trucks are costly to the company. Data related to this, on the other hand, is extracted from the comparison of a good’s volume/dimension/weight to the maximum capacity of the truck. The greater the truck utilization, the better load planning performance is. In other words, the cost of the underutilized truck would be reduced.

In general, this KPI benefits the company:

To know the performance of truck utilization in each site
To know the performance of truck utilization per destination
To know the frequency of shipment under the Minimum of Quantity (MOQ) shipment

2.Dispatch time

This indicator is closely related to the on-time delivery and the document expiration. The shipper (owner of the goods) has formed the delivery planning as well as the plan regarding when the goods must be received by customers. If the delivery is late, then this might result in the expiration of the purchase order (PO) document. Consequently, the delivery can be canceled. Besides the document issue, the delay in dispatching the goods would disrupt the overall plan. Therefore, monitoring this indicator is important to ensure the delivery process can run according to the plan.

3.On-time delivery

Customer satisfaction is significant for maintaining a good relationship with the customer in order to ensure the sustainability of the business. In the area of logistics, customer satisfaction is greatly influenced by on-time delivery. If there is a delay in delivery, the company needs to carry out an analysis and deliver the right solution. Therefore, the issue can be eliminated.

Several factors cause late shipment:

On-time dispatch in the loading area
The issue on the transporter’s side
Force Majeure

4.Transportation Monthly cost

Another indicator to look at is the logistics cost itself. The cost allocation needs to be evaluated and analyzed regularly so that companies are able to know or not the logistics cost is efficient. There are several cost components that need to be considered, especially the variable costs as follows base trip cost, loading, and unloading workers cost, overnight cost, damage cost, etc.

5.Transporter Acceptance

The next indicator is related to the proportion of the shipment accepted by transporters (fleet providers). By using this indicator, companies are able to analyze the percentage of shipments that are accepted and rejected by the transporter. Analyzing the indicators helps shipper to evaluate their business process. In addition, this might also show the responsiveness of the shipment confirmation by transporters.

6.Transporter Performance

Customer satisfaction also must be maintained by ensuring the transporter's performance as this would affect the delivery of goods directly. The indicators allow companies to monitor whether or not transporters meet the requirement.

There are several factors that determine the transporter’s performance:

Service level rating
Issue monitoring
Rejection rate
On-time delivery

7.Cloud stock

Generally, in the logistics field, there are three statuses defined after the goods issued as follows GIT (Goods in Transit), GR (Goods Received), and Cloud Stock. Let’s take a look at the definition of each status:

Goods in Transit (GIT)

This status refers to the goods on the way or it has not arrived at the destination or has not met the ETA (Estimated Time Arrival) shipment.

Goods Received (GR)

Goods received are goods that have arrived at the destination point (consignee). The shipment that has reached this shipment status can next be classified into two types as follows late or on-time shipment.

Cloud-stock

On the other hand, cloud stock refers to a shipment that has not received by the customer, yet has passed the ETA. The higher the cloud-stock value is, the more delivery cannot be billed to the recipient. In other words, late invoicing would occur. Therefore, monitoring the cloud-stock indicator is essential as it brings a direct impact on the company’s cash flow. Our previous article about cash flow management can be read here.

How can the KPI be monitored in real-time easily?

In the previous section, we know that those seven KPIs are significant for monitoring the company’s logistic performance. However, the question is how the KPI can be easily monitored at any time?

Ritase as a digital logistics platform can facilitate this digital transformation. This transformation would undeniably bring the availability of reliable data so that company can perform the analysis and monitoring easily. Without digitization, the process would be difficult to conduct. In addition, the data gathering process would also be a pain point every time the company performs this process. As a consequence, the process would be time-consuming to produce the report.

According to Richard Breitmeyer from Sharp Corporation of New Zealand, at least there are 7 downsides that a company would face by not employing a digital platform:

Inconsistency in entering data
High training cost for report creation purpose
High dependency on the user who creates the report
Information reduction during the transferring process
High time consumption and high number of the resource in creating a report
Data redundancy occurrence

By employing the Ritase Enterprise system, data gathering and visualization could be delivered through the dashboard. Therefore, it can be easily accessed and monitored. Below is the example of visualization of each KPI on Ritase’s dashboard:

Truck Utilization