Logistics KPI Tips – Key Performance Indicators

Logistics KPIs: Simplifying the Essentials

As we gear up, it’s the perfect time to dive into one of the most frequently discussed topics in logistics: performance metrics. Many get caught up in the specifics, asking what to measure in their warehouse, transport operation, or inventory management. Let’s shift the focus from specific logistics performance metrics to common mistakes and how to simplify your approach.

The Pitfall of Too Many KPIs

One major trap is having too many KPIs. Aim for three or four KPIs per level in your organization. For instance, if you’re managing a warehouse, three or four key performance indicators should suffice. For a large warehouse, each specific function might have its own set of KPIs. Step back, and as a distribution manager, your KPIs should encompass warehousing, transport, and other relevant areas. Senior leaders, such as MDs or CEOs, need high-level KPIs like warehouse cost as a percentage of sales or transport cost per drop. Tailor logistics KPIs to the management level and keep them concise.

Measure What Matters

Another common issue is not measuring the right things. Remember, “what gets measured gets managed.” Focus on outcomes you want to influence. For increased productivity in a warehouse, measure picking rates, cost per order dispatched, etc. Evaluate your current KPIs: Are they driving the right behaviors to achieve your goals? For example, an organization measuring cartons processed through distribution centers found it led to counterproductive behaviors, like routing products unnecessarily through warehouses to boost carton counts. Ensure your logistics KPIs drive the behaviors you want.

What’s the best logistics KPI you’ve encountered? What KPI mistakes have you seen? Got questions? Drop them below.