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Powerful Logistics KPIs for Small Businesses
Logistics KPIs are extremely essential performance measurement metrics used to visualize, track and optimize all logistics processes in business effectively. It helps logistics managers to determine their progress within their activities in order to meet their corporate goals.
For small businesses, KPIs relating to supply chain, warehouse and transportation can determine the success of their operations. Hence, here are the top 8 logistics KPIs that small businesses need to look out for:
1. Perfect Order Rate
This measures the ability of a business to deliver orders in a perfect manner in terms of delivery cost, time, product quality, error prevention and more. It essentially reflects how well a business is at carrying out their orders without any inaccuracies, losses, delays or any other issues and, in turn, denotes how well it can satisfy its customers.
2. Inventory Turnover
This KPI is all about the efficiency of inventory management, which represents the effectiveness of the buying practices as well as the supply chain of the business. Depending on the frequency of inventory sell-off within a certain period, a business can determine the demand of its products, manage storage expenditure and plan prices in case a stock clearance is in order.
3. On-time Delivery
A metric called Must-Arrive-By-Date (MABD) is often used for ensuring timely delivery of orders, especially in the case of retail vendors. Failing to adhere to on-time shipping may lead to extra fees and customer dissatisfaction. In order to maintain an efficient shipping system, businesses can measure the timeliness of delivery at different points in the supply chain separately.
4. Average Cost Per Order
Measuring the total cost associated with each order is important for businesses in order to understand the customer usage patterns as well as to resolve any hidden costs that may raise red flags.
5. Inventory Accuracy
This KPI ensures that the logistics practices of the business match the inventory management data. Without accurate inventory management, the business may have to deal with order-to-delivery disparity, higher costs, inefficiencies, and even angry customers.
6. Cash-to-Cash Cycle
Cash cycles measure the time difference between cash outflows from purchasing inventories and cash inflows from customer sales. It is essential for giving businesses an idea about the financial requirements for daily operations. It also helps them reduce supply chain costs and track any payment delays.
7. Lead Time
This KPI keeps track of the time spent on each of the logistics operations of a business starting from manufacturing all the way to delivery. Determining the amount of time invested in each of these stages can help a business to streamline their processes and ensure enhanced productivity.
8. Return Reason
Return reason is a necessary KPI for e-commerce organizations in order to gather customer insights on the supply chain quality, logistics weaknesses, and service factors to improve upon. Businesses can conduct short and simple surveys to analyze this KPI and ensure fewer returns and better profits.
What are your top Small Business Logistics KPIs?
To conclude, there are a huge number of KPIs that are meant for managing the logistics of a small business including the ones in this list. Nevertheless, the KPIs are only useful if they are crucial to the working order of the business. And this article should give you an idea about the KPIs that are of utmost importance to small businesses and, hence, enable you to regulate them.