Key performance indicators are metrics used by businesses to understand the overall effectiveness and sustainability of their processes. These numbers are crucial for taking a data-driven approach to your business. Not only do they give you an immediate snapshot of how things are going, when tracked and monitored over time, but they also help you identify emerging trends and take action accordingly.
Businesses today increasingly rely on analytics to monitor and refine their supply chain. However, without a nuanced understanding of your KPIs, it’s impossible to turn raw data into actionable intelligence. In this article, we look at some of the more important logistics KPIs and how they can improve the health of your supply chain.
On-Time Delivery (OTD)
On-time delivery is one of the most important KPIs for retailers, warehouses and suppliers. Ultimately, your ability to get your product where it needs to go on time speaks to your ability to fulfill your promises to your stakeholders. OTD is something businesses should monitor on an ongoing basis. A sharp drop-off in performance can indicate technological or communication failures or even deeper issues within your organization’s culture.
Perfect Order Fulfillment (POF)
Perfect order fulfillment is an important counterpart to OTD. Ultimately, on-time performance doesn’t mean much if orders are frequently incomplete, inaccurate or damaged. Identifying the source of POF issues can be challenging — particularly when multiple shipping and storage partners are involved. In these cases, switching to leaner delivery models, or taking steps to improve overall transparency, can be essential to improving this critical KPI.
Total Delivered Cost (TDC)
OTD and POF both speak to the effectiveness of your supply chain, but they don’t say much about the financial health of your business. Total delivered cost — also known as cost to serve — is an enterprise-level KPI that measures all the expenses required to bring your product to market. This includes manufacturing and raw materials as well as shipping and last-mile logistics.
Often, the most significant challenge in improving total delivered cost is measuring it accurately — doing so requires a big-picture perspective that can be difficult to gain from inside your organization. Working with a consultant or 3PL company is often the best way to begin.
Customer satisfaction is and will always be the most important KPI for any business. If your customers are happy with the way you treat them, and if they feel they are deriving value from your product or service, they will continue to patronize your business.
One tricky aspect of measuring customer satisfaction as a KPI is accounting for the intangible experience of good service. Often, a customer can’t or won’t articulate why they feel disappointed or will complain about other aspects of their experience without mentioning the root of the problem. As a KPI, customer satisfaction doesn’t exist in a vacuum. Scores should always be overlaid against OTD, POF and other metrics to identify correlations and pinpoint where improvement is needed.
Working With Rockfarm Supply Chain Solutions
Feeling overwhelmed by big data? Rockfarm Supply Chain Solutions provides a range of consulting services that help you translate key performance data into useful business intelligence. Get in touch with one of our team members to learn more about how we can help you.