Key Performance Indicators (KPI’s) are utilized to measure success. Without a benchmark, performance tracking can be very challenging. Metrics for your supply chain should be established through internal objectives and industry benchmarks. KPI’s are an important tool in measuring success of your partners (3PL’s, trucking companies, warehouse providers). These data points will allow your company to improve operations and make informed business decisions on the state of your supply chain.
There will be three divisions of your supply chain that will be discussed in this article: Transportation, Warehouse, and Customer Service.
- Tender Acceptance: This metric is measured in percentage form. It captures the amount of freight the primary carrier accepts. If a trucking company is tendered 10 loads and accept 8, their tender acceptance would be 80%.
- Tender Acceptance is relevant because it shows how much capacity your primary carriers are providing.
- Benchmark: The industry average is currently sitting in the low to mid 80’s.
- On-Time Delivery: This metric is measured in percentage form. It captures the amount of freight delivered in a timely fashion by the carrier. If a trucking company delivers 10 loads and make delivery on-time for 9, their on-time delivery percentage would be 90%.
- On-Time Delivery is relevant because it shows how efficient the carrier is operating.
- Benchmark: The industry average traditionally sits in the low to mid 90’s.
- Solutions Engineering: This metric is not as quantifiable as some but is extremely relevant. Logistics companies are high-level problem solvers. There should be adaptability and efficiencies always being brought to your company.
- Claims Ratio: This metric is measured in percentage form. It captures the amount of loads that you would consider damaged and file grievance with the carrier. If you filed 1 out of every 100 loads as having damage, the claims ratio would be 1%.
- Claims Ratio is relevant because your freight is useless when it is damaged.
- Benchmark: The industry average typically sits around 1.5%.
- SKU Optimization: This metric measures the profitability of your specific SKU’s. This is an inventory tracking technique that allows you to determine which product to continue producing.
- SKU Optimization, or SKU Rationalization, should be performed by your warehouse; both on the tracking side and the providing of suggestions on how to best navigate tracking and decision-making.
- Space Utilization: This metric is measured in percentage form. It determines the amount of space occupied by inventory and compares it to the total space available for storage.
- Space Utilization is relevant because it shows the efficiency of how much space is being utilized.
- Benchmark: Most warehouses try to cap out at about 90%. If they are too close to 100%, they do not have enough room to maneuver product and load trucks.
- Picking Accuracy: This metric is measured in percentage form. It captures the number of orders picked correctly. If they pick 100 loads and 3 of them are incorrectly picked, there would be a 97% accuracy.
- Picking Accuracy is relevant because it displays the errors in your warehouse team, and the inefficiencies of the labor force.
- Benchmark: The industry average sits between 98% to 99.9% depending on the process (non-bar coded is lower than bar-coded).
Customer Service KPI’s
- Average Handle Time: This metric is measured in either minutes or hours. It captures how quickly an issue is resolved. If you introduce a problem, then you get a response within 1 hour, then it is resolved 3 hours later; your handle time would be 4 hours.
- Average Handle Time is relevant because issues need to be addressed and managed head on. The supply chain industry is always facing issues, but how your provider handles them with efficiency and timeliness is crucial.
- Benchmark: This will differ depending on the issue. It would be wise to bucket different issues into categories and state the expected resolve time. A billing issue should have a shorter time frame than a shortage of a particular input from a top-tier supplier.
- Response Time: This metric is measured in either minutes or hours. It captures how quickly your provider responds to your inquiry. In the example above in Average Handle Time, the response time would be 1 hour.
- Response Time is relevant because you require a high level of engagement. This can be shown by a quick acknowledgement, even if they are just providing a timeline.
- Benchmark: Your expectation should be to measure this in minutes, not hours.
- Adaptability: This metric is tough to quantify. It captures how flexible and nimble your provider can be. In an ever-changing supply chain, this is a top characteristic that should be sought out.
- Adaptability is relevant because no two problems are the same in the supply chain world. Complex issues require companies to seek programs that can change on a dime.
By: Alec Porco, MBA
Associate Director of Strategy, Transportation Solutions