A good metric program is an indispensable tool for evaluating existing distribution and transportation processes, introducing industry best practices and creating opportunities for overall logistical improvement.
One of the major challenges for logistics and distribution management is maintaining the necessary level of flexibility and capacity. Dynamic changes in the consumer world quickly change distribution requirements, resulting in an increased role for inventory control and supply chain visibility. Effective supply chain management can be achieved by implementing a comprehensive measurement program based on clear and accurate distribution and transportation metrics data.
Inventory and transportation are two major components of the company's logistics activity. The interaction between inventory, transportation and distribution management affects the total cost of logistics operations. Unfortunately, the goals of one function, such as inventory management, are often achieved at the expense of another function, such as inbound transportation. Recently, due to the overemphasis on inventory reduction it is often the case that transportation efficiency has deteriorated to unacceptable levels.
Developing distribution and transportation metrics and key performance indicators is a challenge for any organization. The company's distribution and logistics management has to realize that the unit of measure for each metric may differ across various departments and operations. The suitable metrics and key performance indicators must be picked out in order to match the exact process at hand. Many things can be reported, for example the total dollar value picked, the total units picked, the total inner packs picked, the total cartons picked, or the total pallets picked. Distribution and transportation metrics may be classified in the following major categories: Quality Metrics (Frequency of damage, Number of back orders or stock-outs), Process management (Orders picked per hour, Units processed per hour, etc.), Asset management (Equipment downtime, Inventory turns), Warehouse Utilization (Storage utilization, Fill rate, Rate of stock-outs) as well as Financial perspective measurements (Cost per order, Ret urn
on investment, Distribution cost efficiency, etc.) and Customer perspective measurements (Rate of customer returns, Rate of on-time delivery). Distribution and transportation metrics should be based on accurate, critical data to enable the management to convert it into meaningful information - forecasts, trends, diagnostics towards visibility of future requirements, and visibility to inventory.
Collected measurement data is required for creating operational and historical reports, which can in turn be used for evaluating the current process efficiency, removing steps that don't add value for the customer, and identifying areas for improvement. Another important study predicated on metrics is a capacity study. With the analysis of existing rates and volumes, the company management can identify changes that have taken place in the company's logistics operations over a certain period of time and predict overall maximum capacity into the future based on the growth forecasts or historical trends. This data clearly illustrates how the capital budget should be directed.
Comprehensive metrics programs can be used by the company's logistics and distribution management to identify the current trends within the distribution operation. Accurate measurements help identify opportunities for improvement, allow the company to prioritize and justify process and capital improvements, and provide the latest data for making day-to-day decisions. This is the best tool for ensuring that you have a healthy company and will continue to be successful as your business evolves.
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