HOW TO MEASURE THE PERFORMANCE OF THE LOGISTICS FUNCTION ?

No strategy would be efficient without a good mastery of the tools for measuring the performance of the logistics function. Key indicators, logistics KPIs will allow you to analyze the actions put in place to improve, if necessary, your logistics processes. But which KPIs to choose to measure the performance of the supply chain ? What are the tools for measuring the performance of a business ? Here are the different KPIs and their tools to optimize the logistics function !

Definition of the modern logistics function

Today, the logistics function of the supply chain is no longer satisfied with managing physical flows. It now encompasses physical flows, financial flows and data flows and thus fulfills a transversal function that goes from suppliers to customers.

It is therefore essential to measure its performance in order to manage and optimize the logistics organization of a company and thus compensate for unforeseen events, reduce costs and improve the customer experience.

What KPIs to measure the performance of the logistics function?

The efficiency and profitability of the supply chain require a holistic view of its performance. For this, it is essential to master the various key indicators according to each sector of the supply chain.

Purchasing KPIs

Purchasing or procurement KPIs encompass all purchasing procedures as well as negotiations with suppliers. Here are a few examples :

• Compliance and non-compliance of supplier orders ;
• The lead time of the order, which corresponds to the time between taking the order and receiving it…

Stock KPIs

They will allow you to make forecasts to manage the supply and stock volume of the supply chain. They are a central element of the performance measurement of the logistics function since they will determine the purchases according to the needs of the commercial sector. Among the stock KPIs, you have:

• Inventory turnover ;
• Out of stock ;
• The contraction of stocks…

Storage KPIs

It is important to differentiate storage from stock. Here it is about determining storage costs and optimizing warehousing, such as location management and handling. Here are examples of logistics warehouse KPIs:

• The order processing time ;
• The cost of storage ;
• The rate of handling charges ;
• The average transhipment time…

Transport KPIs

Transport is the pillar of the logistics chain, it brings together many logistics performance indicators, such as :

• Just-in-time delivery ;
• The cost of transporting goods on sales ;
• The fill rate of the fleet ;
• The empty filling rate ;
• Fuel consumption…

Certain logistics transport KPIs are decisive, they will allow you to control your deadlines in order to transmit accurate information to your customers. Especially since last mile control is a major issue for optimizing your delivery process.

Social and environmental KPIs

A company’s performance is also measured by its quality at work and its actions in favor of environmental protection. These last KPIs therefore correspond to the implementation of your CSR strategy (Corporate Social – or Societal – Responsibility).

• Social KPIs include the frequency rate of work accidents, their severity rate, turnover, hardship at work, absenteeism rate…
• Environmental KPIs focus on energy consumption, the rate of alternative transport, recyclable packaging, the rate of empty transport, etc.

What are the tools for measuring the performance of a business?

A measurement tool is essential to analyze and interpret your KPIs with precision. You will thus be able to identify your weaknesses to improve and your strengths to consolidate.

There are many management software that allows you to measure your logistics performance, here are two :

• ERP (Enterprise Resource Planning): specializing in warehouse management, it is a comprehensive tool that encompasses the entire supply chain.
• The WMS (Warehouse Management System): it has many features including inventory management, information and merchandise flows…

However, you can also create your own performance measurement system using an Excel spreadsheet and thus build your logistics dashboard.