For many organizations, logistics are absolutely vital to their operations – but also a significant source of costs, which can become hard to control due to fluctuations in global supply lines and fuel costs. To prevent logistics costs from becoming a drag on profitability, better logistic management solutions are needed. New solutions center on overseeing your entire operation and delivering Key Performance Indicators that point towards actionable cost-reduction strategies.
Due to the complexity of modern logistics systems, the number of KPIs to track can be vast, but still much easier than trying to track the system at a granular level. In this two-part series, we’ll be looking at common goals and the KPIs which are most useful in achieving those goals.
I. The Importance of Logistics Scorecards
Logistics scorecards are documents that record your KPIs over time and, whenever possible, compare them against public data from similar companies to judge your progress. We strongly recommend starting a logistics scorecard as you begin optimization and keeping it updated with fresh numbers over time.
Comparing your data against similar operations gives you a better benchmark, as well as helping you see how your efficiency initiatives are putting you ahead of the competition.
II. Reducing Your Shipping Costs
Probably the most common goal when implementing new logistic management solutions is reducing overall shipping costs. Since this is a direct drain on profits, any optimizations which can be achieved boost overall business performance. Tracking these KPIs help you identify problem areas, as well as point towards the best solutions.
- Per-unit freight costs
- Inbound freight costs as a percentage of total purchase costs
- Outbound freight costs weighed against total sales
- Per-unit TMS costs
- Shipping cost increases/decreases, year over year
- Average costs per order
III. Managing Your Freight Rates
Freight rates are one of the biggest determinants of overall logistics costs, making it a vital area to drill down into. Depending on the issues you find, solutions can range from investing in more fuel-efficient vehicles to investigating alternative methods of transportation that trade speed for lower costs.
The KPIs to focus on here include:
- Costs from detentions and delays (which are usually avoidable)
- Fuel efficiency vs number of shipments or gross weight
- Average per-mile transportation costs
- Percentage of perfect orders with no errors or unexpected costs
The goal, of course, should be focusing on what those perfect orders are doing right and seeking solutions to boost the overall percentage.
US Logistics Is Your All-Purpose US Logistics Company
We are leaders in customized logistics management solutions that optimize supply chains. From data-tracking and comparison to implementing new methods of shipping and purchasing, companies across America turn to us when their logistics costs are getting out of hand.