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The Necessity Of Logistic KPI

May 15, 2008
The management of logistical approaches is measured through logistic KPI. KPI stands for key performance indicator and this is how every company measures its profitability-and other performance metrics-in units that are essential and relevant to each department. Everyone knows that one cannot manage what one cannot measure. Thus, it is just but necessary that numbers are the key indicators of how well a company is performing. It is not wise to base strategies through assumptions since these can never be validated.

The most common measurement used is in terms of personal measurement for every employee. Each employee has a job description to fulfill and targets to meet to ensure that the goals of the organization are also met. For example, a fast food chain employee manning the grill is expected to cook one hundred hamburgers per hour. Failure to do this is going to result to breakdown in the availability of the product. If there are no hamburgers available, customers will either go away or wait a long time just to get their orders. In effect, the same employee's failure results to bad customer service experience. And of the many employees in one company with the same goal, all these numbers are translated into the general performance of the organization.

In outsourced contact centers, the main driver of performance is average handling time. The shorter the duration of a call, the more efficient the service is. If the call is ended short, the next caller waiting in line is going to be served faster. Thus, the lesser time it took the call, the higher the service level is. And if the service level is higher, it means more customers are being served. These numbers, in turn, show a manager how profitable a business can be, especially if the company is paid by the call.

A logistic KPI strategy involves balance. In the example given above, it is not wise to employ more customer service representatives than what is needed just to be able to answer the calls from customers right away. It is essential to find out how many calls are routed to the outsourced company and find out how many customer service representatives are needed to answer these calls at any given time and schedule. This is measured through a mathematical formula that translates statistics into action plans.

In the former example about hamburgers, it is also not right to stuff hamburgers. What if there are no more customers to buy them? The key here is to measure the KPI before coming up with an approach. A KPI that may be applicable is sales per hour. If the number of hamburgers sold per hours is 100, then it is only right to produce 100 hamburgers per hour and a little more so there is buffer available.

Overstaffing and overproducing do not necessarily mean profitability. In effect, this actually means lost revenue for the company. A logistical strategy, then, will only be plausible if all things that affect the company are measured through a logistic KPI.
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