The 7 Best Logistics Agency KPI Metrics

Introduction

Logistics is an industry that has become increasingly complex. With the growth of e-commerce, retailers need to be able to accurately track their shipments and ensure customers receive their orders quickly and efficiently. With this in mind, Key Performance Indicators (KPIs) have been created to measure the success of logistics companies. These KPIs can tell businesses how they are performing in terms of on-time delivery, order accuracy, operational efficiency, cost, customer satisfaction, transit time, and productivity. In this blog post, we will identify the top seven logistics agency KPI metrics and explain how to track and calculate them.

On time delivery

Definition

On-Time Delivery (OTD) is a Key Performance Indicator (KPI) that measures the percentage of shipments that arrive at the designated destination on the contained date or earlier. It is used to assess the performance of a logistics agency regarding order fulfillment and customer satisfaction.

Benefits of Tracking

Tracking OTDs helps logistics agencies identify issues and potential issues with their supply chain operations. It also allows them to respond quickly to customer inquiries and resolve issues in a timely manner. Additionally, OTD tracking can help logistics agencies understand their performance and make adjustments to ensure orders are delivered on time.

Industry Benchmarks

The industry benchmark for OTD is usually set at 95%. This means that 95% of orders should be delivered to the customer within the expected time. Achieving an OTD of 95% or higher indicates that the logistics agency is performing well in terms of order fulfillment and customer satisfaction.

How to calculate

The OTD can be calculated by dividing the number of deliveries that arrive on time by the total number of shipments. This calculation should be done over a period of time, such as a month or a quarter. The formula is:

Calculation example

For example, if there were 100 shipments in a month and 90 of them arrived on time, the OTD would be 90%.

Tips and tricks

• Make sure delivery dates are clearly communicated to the customer.
• Create a system to track order progress and identify potential delays.
• Invest in technology to monitor shipments and provide real-time updates.
• Partner with reliable carriers to ensure timely delivery.
• Provide customers with a flexible shipping option.

Order accuracy

Definition

Order accuracy is a key performance indicator (KPI) used by logistics and distribution companies to measure the accuracy of orders fulfilled. The metric is calculated by dividing the number of orders that were accurately filled over the total number of orders filled.

Benefits of Tracking

Tracking order accuracy allows logistics companies to identify areas of operation that are costing them time and money. It also allows them to measure the efficiency of their processes and make necessary changes to increase overall efficiency.

Industry Benchmarks

Industry benchmarks suggest that order accuracy should be over 95% for efficient logistics operations. It is important to note that different industries have different standards, as accuracy requirements may vary from industry to industry.

How to calculate

Order accuracy can be calculated using the following formula:

Calculation example

For example, if a logistics company completed 10 orders, but only 9 of them were fulfilled accurately, the order accuracy would be calculated as follows:

Tips and tricks

• Track order accuracy regularly to identify potential issues.
• Analyze the data to identify the root cause of any inaccuracies.
• Make changes as needed to improve accuracy.
• Set realistic and achievable goals for order accuracy.

Operational efficiency

Definition

Operational efficiency is a logistics agency KPI metric that measures the efficiency of the resources used to complete a task. This includes direct and indirect resources such as labor, materials, equipment, and even time. It is a measure of how efficiently a company is able to use its resources to accomplish a task and is an important indicator of the overall performance of a logistics agency.

Benefits of Tracking

Tracking operational efficiency can help a logistics agency in many ways. It allows them to identify areas of inefficiency and develop strategies to improve them. Additionally, it can help a logistics agency better understand the cost of operations and optimize its resources. It can also provide insight into how a logistics agency is able to manage their supply chain and ensure that they are able to meet the needs of their customers. Finally, tracking operational efficiency can help a logistics agency better plan future operations and increase their competitive advantage.

Industry Benchmarks

Industry benchmarks for operational efficiency vary depending on the type of logistics agency and the specific operations that are being evaluated. Generally, a logistics agency should aim for a minimum efficiency rate of 95% or higher in order to be considered competitive in the industry. This means that for every 100 resources used to perform a task, at least 95 of them must be used effectively.

How to calculate

Operational efficiency is calculated by dividing the total resources used to perform a task by the total resources needed to perform the task. The resulting number is then multiplied by 100 to calculate the percentage efficiency rate. The formula is:

Calculation example

For example, if a logistics agency requires 10 resources to complete a task and they use 8 of those resources, their operational efficiency rate would be 80%. This can be calculated using the following formula:

Tips and Tricks for KPIs

• Be sure to measure the efficiency of direct and indirect resources when calculating operational efficiency.
• Track operational efficiency over time to identify areas for improvement.
• Compare operational efficiency rates to industry benchmarks to ensure the logistics agency is competitive.
• Develop strategies to improve operational efficiency and track their effectiveness.

Average cost per shipment

Definition

Average cost per shipment is a logistics KPI metric used to measure the cost of a single shipment. It is calculated by dividing the total shipping costs by the total number of deliveries.

Benefits of Tracking

Tracking the average cost per shipment is beneficial for logistics agencies as it helps them better understand their cost structure and identify areas of cost savings. It is also useful for comparing the cost of shipments between different carriers or locations.

Industry Benchmarks

The average cost per shipment varies depending on the type of product being shipped and the distance of the shipment. According to Statista, the average cost per shipment to the United States was .70 in 2020.

How to calculate

The formula to calculate the average cost per shipment is:

Calculation example

For example, if an agency shipped 100 shipments and the total shipping cost was ,970, the average cost per shipment would be:

Tips and tricks

• Monitor industry benchmarks for average cost per shipment to ensure your costs remain competitive.
• Keep track of cost saving initiatives to ensure they are effective and producing the desired results.
• Compare the cost of shipping between different carriers or locations to identify any potential cost savings.
• Analyze the average cost per shipment over time to identify trends or changes.

Client satisfaction

Definition

Customer satisfaction is a measure of how well an organization meets and exceeds customer expectations. This is a key indicator of customer loyalty, as satisfied customers are more likely to stay loyal, buy more, and recommend the business to others.

Benefits of Tracking

• Helps identify areas for improvement.
• Provides an understanding of customer needs and expectations.
• Helps ensure customer loyalty.
• Improves customer loyalty.
• Provides an overview of customer feedback.

Industry Benchmarks

The average customer satisfaction score across all industries is 85%. This score is calculated by taking the average of customer satisfaction surveys completed by customers. Companies should strive to maintain or exceed this benchmark.

How to calculate

Customer satisfaction can be calculated by taking the average of customer satisfaction surveys completed by customers. The formula for calculating customer satisfaction is:

Calculation example

For example, if a company received 200 customer satisfaction surveys, of which 150 were positive, the customer satisfaction score would be 75%. This can be calculated using the following formula:

Tips and tricks

• Make sure you ask the right questions. Ask relevant questions for the customer experience and provide meaningful insights.
• Use a simple survey format. Customers are more likely to complete a survey that is easy to understand and not too long.
• Provide follow-up support. If a customer has a negative experience, be sure to provide follow-up support to address their concerns.
• Analyze the results. Once you’ve collected the survey results, analyze them to identify areas for improvement.
• Act on the results. Once you identify areas for improvement, take action to address them and improve customer satisfaction.

Time of transport

Definition

Transit time is a logistics agency KPI metric that is used to measure the time it takes for a shipment to reach its destination. This metric is an important performance measure for any logistics agency, as it can help them identify potential issues with their supply chain, as well as areas for improvement.

Benefits of Tracking

Tracking transit time is a valuable tool for logistics agencies, as it can help them better manage their supply chain and ensure their shipments reach their destinations on time. Tracking transit time can also help identify potential issues that may affect shipment delivery, such as delays or routing issues, and can help inform decisions on how to resolve them.

Industry Benchmarks

The industry benchmark for transit time varies depending on the type of goods being shipped and the distance of the shipment. Generally speaking, the transit time for domestic shipment will be much shorter than for international shipment. Additionally, transit time may be affected by various factors, such as weather, traffic, and transportation availability.

How to calculate

Transit time can be calculated by subtracting the time the shipment was sent from the time it was received. The formula for calculating transit time is:

Calculation example

For example, if a shipment was sent Monday at 9:00 a.m. and received Wednesday at 10:00 a.m., the transit time would be calculated as follows:

Tips and Tricks for Tracking Transit Time

• Track transit time for each shipment to better identify areas for improvement.
• Monitor industry benchmarks to compare performance with the industry standard.
• Analyze data to identify any potential bottlenecks in the supply chain that may affect transit time.
• Stay informed of all external factors, such as weather and traffic, which may affect transit times.
• Engage with customers to better understand their transit expectations and needs.

Productivity

Definition

Productivity is a key performance indicator (KPI) that measures the efficiency of a logistics agency in terms of resources used to produce a given output. It is calculated as the ratio of output to input, and is usually expressed as a percentage.

Benefits of Tracking

Productivity tracking allows logistics agencies to assess their performance in terms of the resources used to achieve a given output. This helps them identify areas for improvement and make adjustments to their operations to become more efficient. Productivity tracking also provides a benchmark for comparing performance against industry standards, allowing agencies to gauge their competitive position.

Industry Benchmarks

Productivity benchmarks for logistics agencies vary depending on the type of operation and the specific industry. Generally, the higher the productivity rate, the better the performance of the agency. A well-run logistics agency should aim for a productivity rate of at least 90%.

How to calculate

Productivity is calculated by dividing total output by total input. The formula is:

Calculation example

For example, if a logistics agency has a production of 200 shipments and an input of 500 man-hours, the productivity rate would be calculated as follows:

Tips and tricks

• Monitor productivity regularly to identify areas for improvement.
• Set achievable goals for productivity and track progress toward those goals.
• Compare productivity rates to industry standards to gauge performance.
• Implement operations changes to improve efficiency and boost productivity.

Conclusion

Companies in the logistics industry need to understand their performance with respect to customer service, efficiency, and costs. By understanding the seven key logistics KPI metrics and tracking and calculating them, companies can gain valuable insight into how well they are performing in these areas. This information can then be used to improve operational efficiency, reduce costs and ensure the highest levels of customer satisfaction.

Although most performance metrics can seem daunting, there are plenty of resources available to help companies understand and track their KPIs. By leveraging the data collected from these metrics, companies can find new ways to optimize their logistics operations, furthering their competitive advantage in the industry.