Successful logistics means that your company makes full use of its transportation and warehouse resources.
The under-utilization of assets is like flushing money down the drain. The more effectively you can deploy your assets, the higher the return you will receive on your investment.
Logistics metrics monitor the effectiveness of your logistics resources. In some cases, these resources are completely within your company's control. In other cases, efficiency may partially depend on outside factors such as supplier schedules, shipping costs, etc.
Either way, it's important to gauge the utilization of your resources and relationships. If metrics indicate that a supplier or transportation provider is failing to perform, you'll have a solid basis for severing your relationship and you'll be equipped with accurate information when you enter the marketplace. With that in mind, here are some of the metrics small businesses frequently use to measure logistics.
- Order cycle time. The time period between the placement of an order and its delivery is the order cycle. Metrics that target order cycles help ensure that orders are fulfilled in a timely manner. The goal is to minimize variations between the actual order cycle and the intended order cycle.
- Inventory. Overhead inventory has costs. Inventory metrics evaluate the costs of storage, handling, damage, administration and other expenses with the goal of minimizing the amount of inventory the company needs to maintain to stay current on customer orders.
- On time shipments. An on time shipment metric gauges the number of on time orders against the total number of orders. From a management perspective, a high number indicates that your logistics processes are operating efficiently; a low number indicates that resources aren't being used effectively.
- Freight per unit. Freight cost-per-unit metrics are vital for logistics management. The calculation divides shipment costs by the number of shipped units. Many companies go granular with this metric to track freight costs by transportation mode (truck/train/air) and transportation provider.
- Load capacity. The goal in logistics is to achieve maximum load capacity for every shipment that leaves the plant. In practice, it isn't possible to achieve total efficiency. However, low load capacity metrics may warrant the use of LTL (less than truckload) carriers or other cost-saving strategies.
- Loss and damage. Damage is an unavoidable part of logistics. Loss metrics allow managers to monitor loss percentages, enabling them to intervene when the numbers cross into unacceptable loss territory.
Want to learn more about this topic? If so, you will enjoy these articles:
Purpose of Business Metrics
Types of Business Metrics
Individual Employee Metrics Versus Company Metrics
Client Retention Metrics
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