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The Essence Behind Logistics KPI

Apr 21, 2008
Supply chain metrics are very essential when you want to manage everything that goes through the supply chain from top to bottom. More importantly, supply chain metrics are very, very important when it comes to logistics management. By understanding the intertwined roles of both supply chain metrics and logistics KPI, any business's logistics operations would then be successful.

For the most part, supply chain metrics actually include fill rate, cycle time, inventory turns, and DPMO. These forms of measures are actually used to monitor the supply chain's very performance. Furthermore, these measures can also assist you in fully understanding the operations of your company for a certain period of time.

There are also other supply chain metrics that are worth mentioning, and these include customer service, inventory, production, procurement, distribution, warehousing, and transportation. All of these aspects comprise what is known as logistics operations. To ensure success in this aspect, you have to understand that companies should go beyond being successful in just one particular area of the whole supply chain. The nature of supply chain in logistics can be very volatile. Thus, for the logistics supply chain to be sustainable, each and every key area has to be measured accurately.

It is also very important to keep track of your metrics so that you can efficiently monitor company performance during a certain time period. The benefits of doing such can give you apt guidance for the purpose of supply chain optimization. When you track these metrics, you can then spot any sort of problem, especially in the management area. You can even do this before the problem manifests itself. What's more, your performance can then be compared with that of other companies via industry benchmarking.

Supply chain metrics and logistics KPI may be the ideal solutions when you want to determine the weak points that your company should improve on. However, these are not final steps in the process for you would still need to implement the appropriate corrective actions to deal with these weak points. With the adoption and implementation of these corrective actions, the logistics measures of your company will indeed enjoy significant improvement.

Another important thing you have to remember about logistics KPI and supply chain metrics is the fact that they can vary from one company to another. These forms of measures are developed in accordance with the company's goals and objectives. And there virtually are no two companies that have the same sets of goals and objectives. Thus, the logistics KPI and supply chain metrics that they have implemented in their system would understandably differ as well. So, what can you do to effectively choose relevant metrics to use for your company? First of all, you should understand the logic behind metrics. Understand the very essence of their existence. Secondly, you should also understand just how all of these metrics work. Determine the factors that keep these metrics in motion so that you can understand where your results are coming from. Thirdly, identify the weak points in all the processes your company undergoes. From these weak areas, you can then incorporate goals and objectives to effectively handle these areas that need improvement. The corrective actions can then be implemented, and the results can be duly monitored.
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