Logistics Metrics

Logistics metrics allow the management to refine strategic initiatives to deliver maximum profitability and increase market competitiveness.

Effective logistics management requires focused attention on the strategy and performance dynamics behind the entire supply chain. Ensuring that day-to-day challenges are answered with enhanced strategic initiatives ultimately translates into greater profitability and increased market competitiveness. Since each company's supply chain demands are different, so are opportunities for improvement.

Customer-focused distributors are implementing balanced scorecard applications to better manage their logistics management processes and enhance overall performance. To develop an effective logistics scorecard, the logistics management must define the organization's vision as well as main goals and objectives. The balanced scorecard approach allows the logistics management to implement strategic assessment of four perspectives: financial; customer; internal; innovation and growth. It allows the company leadership to abandon the traditional management system that centered on financial indicators.

There are four key metrics for measuring the performance of global trade logistics services: the cost of processing a typical import or export transaction, the average time required to process a typical import or export transaction, the variation in time for completing an import or export transaction, and the complexity of transactions (including such indicators as the number of documents required, the percentage of containers inspected, and the criteria for inspection).

Logistics inefficiencies harm the competitiveness of an organization through their effects on both cost and time. The costs relate not only to the direct costs of transporting products, because goods in transit incur indirect costs such as inventory holding costs. The longer the transit time, the higher are the costs. For perishable products, spoilage or wastage may increase with transit time. Products with time-sensitive information, such as newspapers, decline sharply in value as that information becomes obsolete. Seasonal and fashion apparel has similar time sensitivity. Besides, indirect costs can also reflect lost opportunities, as when critical inputs cannot reach manufacturing plants in time or perishable commodities cannot reach markets in time. In many cases, production plants must hold higher-than-optimal levels of raw material inventories to cover for possible logistics delays.

The following typical global logistics indicators, based on time, cost, variability, complexity, and risk factors, should be considered by logistics and supply chain management: Total time for trade-related procedures; Total cost for trade-related procedures; Total time for document processing; Total number of documents per trade transaction; Number of signatures per trade transaction; Time to resolve customs appeals; Shutdown of port due to natural disaster and labor dispute; Vessel turnaround time; Percentage of containers inspected; Waiting time at border crossings; Inland freight cost; Harmonization of documents with transit country; Number of transit countries crossed; Number of borders crossed; Number of countries with free transit access for vehicles across borders, etc.

For distribution, retail, and manufacturing companies, effective logistics and supply chain management is one of the most critical aspects to ensuring a healthy bottom line, positively impacting cash flow and improving customer satisfaction. Mismanagement at a single point in a supply chain can translate into an empty space on the bank ledger for the duration of an entire sales cycle, as well as jeopardize relationships with valued customers who rely on a consistent influx of parts and products.

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