Logistics KPIs: Get to Know The 9 Main Ones and How to Use Them in Management

2024-10-02Last Updated: 2024-10-02

Data-driven management, known worldwide as data driven , is one of the pillars of growth for companies of any size and segment. This is because KPIs in logistics and other sectors show the results of actions and strategies used, in addition to guiding what needs to be changed in operational processes.These indicators are essential for making decisions based on reality and not on guesswork . They serve as a guide for organizing the work routine, reducing costs, setting goals, making budget projections and optimizing production and sales.

That’s why today we’ve brought you a complete article on what Key Performance Indicators are, the main logistics KPIs, and tips on how to monitor operational performance to maintain competitiveness and business growth. Let’s go!

What is KPI?

It is considered a management tool for calculating and analyzing the performance of an operation, a sector or a business . For example, logistics indicators contribute to the correct management of the area.

Evaluating operational results is the best way to understand what needs to be changed and what is working well and can be replicated in other sectors. Based on these results, it is possible to create or review strategies to increase productivity , reduce costs, optimize vehicle use, improve inventory control, etc.

KPIs have formulas that combine two or more performance indicators to enable better decision-making. Stay with us to understand the importance of monitoring these indicators and see practical examples.

How important are logistics KPIs?

Measuring and evaluating KPIs in the logistics sector is the right way to optimize resources used and increase business revenues . After all, each metric provides results for the entire sector, from deliveries, inventory, revenue, expenses, team performance and operations performed.

This means that you have valuable data at your fingertips to understand the sector’s performance, identify problems and improve the company’s financial health .

For example, you can see if hiring a transport company is becoming too expensive based on the demands being met, so it’s time to look for new partnerships. Or, you can identify how productivity is and whether drivers need training.

In general, constant analysis of logistics metrics contributes to:

identify bottlenecks in processes;
monitor team performance and productivity;
increase the efficiency of the sector and the company;
reduce operating costs ;
analyze investment possibilities;
improve customer satisfaction.

What are the 9 relevant indicators for logistics?

The indicators that hold utmost importance in terms of application in the market and pertain to logistics are: On Time Delivery; On Time Shipping; Order Cycle Time; On Time in Full; Perfect Order Rate; Average delivery time; Average stock; Average stock loss; Fuel efficiency, Stock turnover and more.

One should also remember that every process and analysis has its KPI. Let’s clarify what they are for and how to calculate them.

Of course, some of them apply to all segments and sectors of the company like return on investment (ROI) and profitability rate. Indicators for the logistics sector include evaluations of results aimed directly at this area.

Check out which ones are most used by managers in the market!

1. On Time Delivery (OTD)

This KPI measures the percentage of orders delivered on time that is without delay and regardless of whether they were correct or not. Calculation can be done as follows:

divide the number of deliveries made on time by the total number of deliveries made in a given period;
Multiply by 100 to calculate in percent.

Example: If the company made 300 deliveries in a week and 250 of them arrived on time, then the OTD KPI is 83.3%. That’s actually fantastic, but it may be improved!

2. On Time Shipping (OTS)

This indicator is similar to OTD, but the difference is that it measures whether the order was shipped at the specified time (and date), that is, whether it left the company on the day and time stipulated to reach the customer. This, in turn, does not assess whether the delivery arrived on time.

Its calculation is done like this:

Divide the number of the orders shipped at a given time by the total orders scheduled for the day over a specific period like a day, week, month etc.
multiply by 100 to get the percentage.

If, of the 60 deliveries of the day, only 40 were sent at the agreed time, the On Time Shipping rate is 66.6%, which is reasonable and can improve much more.

3. Order Cycle Time (OCT)

This KPI is widely used by carriers and e-commerce companies that receive products ready to ship to the end customer. It calculates the time it takes for the delivery to reach the consumer after the company receives the goods.

To find the OCT, you need to consider the time for each delivery, add it up and divide it by the number of deliveries made in a given period.

4. On Time in Full (OTIF)

The logistics indicator analyzes deliveries made within the deadline agreed by the company.

The formula is: OTIF = P x E x C

Whereas:

Q: Orders fulfilled on time;
E: Orders delivered without errors;
C: orders that met the specifications required by the customer.

5. Perfect Order Rate (POR)

Now, it’s time to improve your monitoring of operational performance, measuring the efficiency of the entire process.

This indicator measures the percentage of orders shipped without delays, errors or damage.

The number of perfect deliveries is measured by the number of orders shipped versus the number of goods that were delayed, faulty, or damaged.

For example:

you had 1,500 orders shipped in the week;
100 of them had some delay or failure during delivery;
the number of perfect deliveries is therefore 1,400;
The POR formula is: number of orders shipped / number of perfect deliveries x 100.

6. Average delivery time (ADT)

The average delivery time is based on a simple calculation: just find the time of each delivery (from the order to its arrival at the customer), add it up and divide the result by the total number of deliveries in a given period.

7. Average stock

One of the KPIs that measures the average volume of stock stored over a certain period is the Average Stock indicator. It is calculated using the formula:

Average inventory = (beginning inventory + ending inventory) / 2

8. Average stock loss

Inventory control also includes this indicator to assess what is lost or becomes obsolete during storage, in a given period.

This logistics KPI is essential for identifying the reasons for loss and finding ways to reduce or eliminate them with a focus on avoiding costs and waste. The causes can be, for example, poor storage conditions, employee efficiency, theft, poor management, etc.

The formula is:

Stock loss = (quantity not supplied / quantity ordered) x 100

9. Fuel efficiency

There are several KPIs to carry out adequate fleet control , including the fuel efficiency index to understand consumption and check:

cost-cutting possibilities;
partnerships with gas stations;
vehicle maintenance to correct faults that tend to use more gasoline, ethanol and diesel.

Its calculation is done by dividing the average fuel consumption per kilometer driven by the number of hours of use. Based on the results obtained, you should analyze and compare the consumption of vehicles in the fleet in various situations and determine which are more and less efficient.

Bonus: Other Logistics KPIs

Reverse logistics : expenses with returns.
Demurrages : costs related to drivers’ stays.
Order management : identify how much the order process costs.
Stock turnover : measures how stock is being used and which products are selling the most and least.
Loss and theft rate : essential for understanding expenses generated by unforeseen events.
Damaged goods : monitors the performance of the operation, measuring how many goods were delivered with errors and returned by customers. This indicator allows you to find out at which stage of the process there was a problem that caused the damage to the product.

Always remember to rely on good logistics management systems to monitor metrics and indicators in real time, speeding up the optimization of processes and the creation of strategies to reduce errors and damages and reduce unnecessary expenses and losses, in addition to increasing customer satisfaction and the sector’s performance index.

Set a time frame to calculate and evaluate logistics KPIs and make more accurate decisions, identifying, for example, whether you need to increase or renew your fleet. If so, know that the consortium of light, commercial and heavy vehicles is ideal for planning high-value purchases in the medium and long term.