Introduction
As consumerism expands into new geographic areas, companies find more convenient and safer ways to transport goods and services there. This trend further enhances the role of logistics, covering every step from product purchasing to its delivery and involving workers and equipment as primary resources. Companies refer to Key Performance Indicators (KPIs) to assess their logistics. The driving forces of KPI in logistics are the company’s increasing focus on customer satisfaction and the elimination of business losses.
Driving Forces of Key Performance Indicators in Logistics
Improving Customer Satisfaction
Although KPIs are primarily used to measure performance in every step of logistics companies, they also focus on increasing the target market’s satisfaction. The fact that logistics cover extended areas and multiple operations drives the importance of KPIs to improve them. It is justified by the dominance of shipping error and fill rate in the KPIs list for logistics (Gözaçan & Lafci, 2020).
While the former describes the frequency of mistakes appearing during product transportation, the latter considers the orders shipped without lost sales. As a customer, I demand that companies deliver goods without any mistakes to transport my product safely. Therefore, if the company aims to increase customer satisfaction by improving operations and finding ways to deal with mistakes, it establishes such KPIs to measure its progress.
Reducing Business Losses
The second driving force of KPI in logistics connects to the company’s orientation on eliminating any possible losses. The essential KPI in logistics is on-time shipment and delivery since late shipments cause useless expenditures (Gözaçan & Lafci, 2020). If the company does not ship the products on time, it points to the possible regulation flows in the warehouses. Moreover, it results in customer disappointment, destroying customers’ trust. When the product was shipped to me with delay, I received compensation from the business. However, I have never ordered from this company as its delay did not build retention on the brand. Thus, companies need KPIs to avoid money losses and frustrated clients.
Conclusion
To conclude, logistics companies create KPIs to regulate their operations better and eliminate mistakes. Every company establishes its control periods for every stage: order management, supply, inventory, distribution, and transportation. Therefore, attempts to improve operations and calculate better KPIs facilitate long-term success based on customer satisfaction and better revenues. My question to address further discussion: What are the most pivotal KPIs for logistics, and why?
Reference
Gözaçan, N., & Lafci, Ç. (2020). Evaluation of key performance indicators of logistics firms. Logistics, Supply Chain, Sustainability and Global Challenges, 11(1), 24–32. Web.