3 Easy Steps to Benchmark Logistics KPIs

Published : August 30, 2016

3 steps to benchmark logistics KPIs

Measurements — determining them, changing them, inferring from them — are a backbone of every industry. Whether the measure of success is something as simple as profit, or as complex as reducing the amount of time a product spends during its travels in the supply chain, having the right "ruler" is absolutely crucial. If you're using the wrong logistics KPIs, or endlessly tracking them for a future purpose that never manifests, you're not only wasting company resources — you're paying out an opportunity cost that could actually make a difference in your goal progression. In only three steps, you can clean up your approach to KPIs and maximize the value obtained from each one.

Step 1: A Journey of a Thousand Miles Begins With… a Map.

Make sure that your benchmarks and KPIs reflect the values, goals and needs of your individual business, not simply your industry at large.

A lot of good intentions in logistics and fulfillment start with the phrase, "Well, so-and-so uses this KPI and their numbers look great!" While keeping a close eye on your rivals’ operational planning is understandable, and even advisable, remember that this information is necessarily incomplete. Surface research and rumors can lead your team on a lot of wild goose chases if the data isn't substantiated. Blindly recording a certain metric or adhering to a logistics benchmark without personalizing the process is a fast lane to inefficiency. Determine what you need to measure and why before you set up any recording systems, be they manual or automated. How will your data ultimately be used? Are you merely tracking a data stream to measure against a static benchmark, or will your logistics KPIs be used periodically and actively to change workflows for the better? Both are valid routes to pursue, but tangling the goals and pathways will give your fulfillment center confusion, not results.

Metrics should reveal the success or failure of effective operational procedures as much as they do the information they're actually tracking. If you're only using your metrics as a gauge for numerical improvement, you may be missing out on a larger, and arguably more important, story. 

Step 2: Aspirations, Meet Reality.

If you're hoping to match a larger company's innovative strides, be sure to scale down accordingly to prevent overextending capability.

You'd be hard-pressed to find a company that doesn't have an unofficial board room motto of "becoming the next [insert big company in their industry here]. " Aiming for their scope, longevity and even market share is admirable on a longer timeline, but as a short-term, achievable benchmark it's set up to fail. While logistics benchmarks and warehouse KPIs should be challenging — even outright tough — they shouldn't make jaws drop and inspire hopelessness when they're announced.

The key to staying competitive in niches dominated by big names is to mimic not their specific numbers, but their overall behaviors. While you may not be able to match their pick/pack speed, you can certainly dig a little deeper into why they're able to keep that pace. Is it a specific measure of transparency that keeps their co-workers informed? Equipment that's custom or keyed to the company's needs and demands? A special floor layout that minimizes traffic backup in the warehouse aisles? These are the areas where even a small company without access to many resources can learn from companies many times larger than their own. Best practices are just as important as comparative performance numbers when doing your due diligence among competitors.

Throwing around big names can also intimidate your team members, many of whom are simply trying to do their best from a day-to-day standpoint. Constant, unrealistic comparisons that show your own fulfillment performance to be lacking can be demoralizing and lessen the impact of important discussions later on. Tie your expectations to a legitimate scale that can be dialed back, such as "X benefit per inventory dollar" to obtain realistic goals.  Ground your expectations in reality, and you're much more likely to win over support.

Step 3: Check Your Reporting for "Loose Wires."

Even data that seems interlinked may not be. Correlation, as the saying goes, is not causation. Double-check that your measurements matter.

The purpose of KPIs is generally to signal a need for a change — or to affirm that a prior change was the right choice. If you're steering your workflows in different directions based on what your numbers are showing, be absolutely sure those numbers reflect the whole picture. If your outgoing shipments dipped, talk to your warehouse staff to rule out extenuating circumstances, such as a new 3PL carrier missing pickup windows or a malfunctioning piece of packing equipment adding unnecessary line time. This is especially important if disciplinary consequences are on the line. Punishing valuable employees for circumstances that they have no control over will only alienate skilled team members and drive them away. 

Your data-gathering methods must also be dissected regularly to ensure that the various components they use are still relevant. Once a system is set up, inertia can cause otherwise conscientious employees to simply "work around" new information — like a supplier changing shipment terms or new automated data becoming available. Much like inventory audits are vital in the warehouse, it's bad business to trust without verifying. Set up a regular schedule — quarterly, annually, even monthly if your system tends to incorporate a lot of change — to determine if your data harvesting techniques are producing "clean" and actionable guidance for your fulfillment center. 

Treat your logistics KPIs and benchmarks as the multi-faceted tools that they are, and you'll ultimately earn a better relationship with your data, and a better intuition for the changes that your company needs to make. You wouldn't invest in a Swiss Army knife and use only the blade, so why pretend that the rich, fertile stores of data in your tracking efforts only have one true calling? Just as a seasoned fulfillment manager can make calls on a busy warehouse floor by listening to their "gut," the more time spent studying your KPI setup and recording, the more you'll understand the tides of business — and respect the fact that they can lift your company up as easily as they threaten, at times, to pull it under. Properly utilized, solid KPIs can perform like magic, and the C-Suite will definitely take notice.

Logistics Managers Guide

Topics: Supply Chain Logistics, Supply Chain Efficiency

Get the Guide Now to Build a Sound Warehouse Operations Strategy

Subscribe to Email Updates