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KEY PERFORMANCE INDICATORS

(KPIs)

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Key Performance Indicators

• Key Performance Indicators (KPIs) are list of measures that acompany’s managers have identified as the most importantvariables reflecting operational or organisational performance

• The type of KPIs used will differ from one organisation toanother

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Key Performance Indicators

• KPIs are used to assess the current state of the business

• KPIs are used to assist in prescribing a course of action toimprove performance

• KPIs help an organisation measure progress being made towardsachieving certain goals

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Eam!"es of KPIs #sed in $are%o#se O!erations

• A company has a egional !istribution "entre which it uses as abase for storing and distributing its range of products

• The products are imported from various overseas factories and

shipped to the egional !istribution "entre

• The goods are then despatched to customers located in theregion

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Eam!"es of KPIs #sed in $are%o#se O!erations

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In&o#nd KPIs

• # Inbound documentation accuracy

$ %&port documents are sent from the supplier to the consignee'These documents have to be presented to customs officials before

the goods can be released

$ The KPI is used to measure the percentage of accurate documentsreceived from suppliers

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In&o#nd KPIs

• # Inbound documentation accuracy

Number of correctly completed shipping documents received per week

Number of shipping documents received per week

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In&o#nd KPIs

$ iely conse*uences of low performance

• !elays in clearing goods

• !emurrage charges

• iner detention charges

• ost sales

$ Possible cause

• +upplier not familiar with document re*uirements• +upplier fills in wrong *uantity, product description, value

• Problem with clearing agent at origin

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In&o#nd KPIs

• - Inbound documentation arrival time

$ The supplier should send the e&port documents to the consignee sothat they arrive ahead of the goods arriving at the port of

destination' This will enable the goods to be cleared promptly

$ The KPI is used to measure percentage of documents arriving ontime

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In&o#nd KPIs

• - Inbound documentation arrival time

Number of documents arrived on time per week

Number of shipping documents expected per week

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In&o#nd KPIs





• ost sales

$ Possible cause

• +upplier or clearing agent at origin not sending documents on time• "ourier company not delivering documents on time

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In&o#nd KPIs

• . Inbound "learance Time

$ A period of time is re*uired to clear the consignment at the portof destination

$ The KPI is used to measure the percentage of consignments clearedon time

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In&o#nd KPIs

• . Inbound "learance Time

Number of containers cleared on time per week

Number of containers arrived per week

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In&o#nd KPIs





• ost sales

$ Possible cause

• /ailure of internal or e&ternal clearing personnel

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In&o#nd KPIs

• 0 "ontainers sub1ect to demurrage

$ 2pon arrival at the port of origin the containers are allowed a shortperiod of free time in the port whilst they are being cleared by

customs

$ The KPI is used to measure the percentage of containers incurringdemurrage charges

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In&o#nd KPIs

• 0 "ontainers sub1ect to demurrage

Number of containers subject to demurrage per month

Number of containers arrived per month

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In&o#nd KPIs




• ost sales

$ Possible cause

• /ailure of internal or e&ternal clearing personnel to act promptly

• Inaccurate documents received from supplier• !ocuments received late from supplier

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In&o#nd KPIs

• 3 Inbound containers cleared

$ 4enerally a company dealing with a .P would have an agreement onhow many containers it e&pected to be cleared during a particularperiod (day 5 wee)

$ The KPI is used to measure the percentage of containers clearedversus e&pectations

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In&o#nd KPIs

• 3 Inbound containers cleared

Number of containers cleared per week

Number of containers scheduled to be cleared per week

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In&o#nd KPIs




• ost sales

$ Possible cause

• /ailure of internal or e&ternal clearing personnel to act promptly

• Inaccurate documents received from supplier• !ocuments received late from supplier

• Inefficiencies in unloading containers at warehouse

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In&o#nd KPIs

• 6 Inbound damaged goods

$ It is not unusual for some goods to arrive damaged when they areinspected upon receipt

$ The KPI is used to measure the percentage of damaged goodsreceived

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In&o#nd KPIs

• 6 Inbound damaged goods

Number of units received damaged per week

Number of units received per week

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In&o#nd KPIs


• 7ut of stoc items• Insurance claims• "ost of repacing or disposal

$ Possible cause

• If limited to a specific supplier, the problem may be the fault of thesupplier

• If across a wide range of suppliers the problem may relate to, fore&ample, customs inspection procedures

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$are%o#se KPIs

• 8 Inventory accuracy

$ 9aintaining accurate inventory records is important in order tomaintain customer service levels, safeguard against losses andminimise finance costs

$ The KPI is used to measure the accuracy of physical inventory incomparison to computer 5 boo records

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$are%o#se KPIs

• 8 Inventory accuracy

Number of units present in the warehouse at a specific time

Number of units specified on inventory records at a specific time

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$are%o#se KPIs


• 7ut of stoc items• :rite off costs

$ Possible cause

• Theft• %rrors in order picing• %rrors in data input

• IT issues

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$are%o#se KPIs

• ; +pace occupied

$ It is important to ensure warehouses are being utilised effectively

$ The KPI is used to measure the percentage of the warehouse being occupiedby goods

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$are%o#se KPIs

• ; +pace occupied

Number of locations in the warehouse occupied at a specific time

Total number of locations in the warehouse

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$are%o#se KPIs


•

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$are%o#se KPIs

• = !amages

$ In any high volume warehouse it is highly liely that a certain levelof damages will be e&perienced

$ The KPI is used to measure the level of damages in the warehouseas a percentage of the volume handled

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$are%o#se KPIs

• = !amages

Number of units damaged per week

Number of units throughput per week

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$are%o#se KPIs


• 7ut of stoc items• :rite off costs• !isposal costs

$ Possible cause

• Poor handling by order picers• Poor handling by for lift truc drivers

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$are%o#se KPIs

• #> "ases ordered versus cases piced

$ Ideally the number of cases piced to meet order received from customersshould be the same

$ The KPI is used to measure the percentage of cases piced versus thenumber of cases ordered

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$are%o#se KPIs

• #> "ases ordered versus cases piced

Number of cases picked for customers orders received during a specific period

Total number of cases ordered by customers during a specific period

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$are%o#se KPIs


• !ecline in customer satisfaction

• Increase in customer claims

• "ost of redeliveries

$ Possible cause

• Inventory records not accurate

• Insufficient stoc in warehouse• Inaccurate picing by warehouse operatives

• Possible case of theft

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$are%o#se KPIs

• ## 7rder eceipt 5 7rder Assembly Times

$ "ustomers are generally advised that their orders will be deliveredwithin a specific time of placing the order'

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$are%o#se KPIs

• ## 7rder eceipt 5 7rder Assembly Times

Number of orders assembled on time during a specific period

Number of orders received during a specific period

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$are%o#se KPIs


• ost sales due to delay in despatching goods

$ Possible cause

• Insufficient warehouse operatives

• ow productivity

• Inappropriate shift timings

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O#t&o#nd KPIs

• #- %&port documents prepared on time

$ %&port documents need to be prepared and made available to theconsignee in order that the goods can be customs cleared on receipt

$ The KPI is used to measure the percentage of e&port documentsprepared on time

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O#t&o#nd KPIs

• #- %&port documents prepared on time

Number of export documents prepared on time per week

Number of shipping documents to be prepared per week

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O#t&o#nd KPIs


• !ecline is customer satisfaction

• ost sales as customer receives goods late

$ Possible cause

• /ailure with internal or e&ternal clearing personnel

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O#t&o#nd KPIs

• #. 4oods despatched on time

$ 4oods need to be despatched on time to meet customers’ deliverye&pectations

$ The KPI measures the percentage of goods despatched on time

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O#t&o#nd KPIs

• #. 4oods despatched on time

Number of consignments despatched on time per week

Number of consignments due to be despatched per week

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O#t&o#nd KPIs




$ Possible cause

• 7rders not assembled on time

• "arrier not available on time

• %&port documentation not available on time (road transport)

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O#t&o#nd KPIs

• #0 4oods arrived at customer on time

$ "ustomers e&pect to receive their goods on a certain day in orderthat they can plan to receive them

$ The KPI is used to measure the percentage of consignmentsdelivered to the customer on time

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O#t&o#nd KPIs

• #0 4oods arrived at customer on time

Number of consignments delivered on time per week

Number of consignments due to be delivered per week

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O#t&o#nd KPIs




• 4oods may be returned

$ Possible cause

• 4oods despatched late

• Problem with carrier• Problem with customs clearance on e&port

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O#t&o#nd KPIs

• #3 +hortages 5 !amages on arrival at destination

$ "ustomers not only e&pect their goods to arrive on time but theye&pect them to be of the right *uantity and in good condition

$ The KPI issued to measure the percentage of goods delivered shortor damaged

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O#t&o#nd KPIs

• #3 +hortages 5 !amages on arrival at destination

Number of units delivered short or damaged per week

Total number of units despatched per week

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O#t&o#nd KPIs


• !ecline in customer satisfaction• ost sales• "ost of returns

• edelivery costs

$ Possible cause

• Poor stacing

• Inappropriate pacaging material• Insecure mode of transport• Poor handling during customs inspection

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S#mmary

• :hen a company contracts out its logistics re*uirements, KPIsare usually written into the contract

• These are mutually agreed and if the service provider fails, the

service provider may face financial penalties'

• The service provider may insert clauses to protect itself againstunusual circumstances' /or e&ample, there may be a target todespatch a particular number of loads in a wee'

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S#mmary

• KPIs should be used to identify problems areas in the business

• The problem areas should then be addressed to ensureimprovement in performance

• • :hen KPI targets are consistently met, the target can be raised

to encourage continual improvement

• Too many KPIs or over complicated KPIs can be counterproductive and not reflect the true state of the business

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S#mmary

• Agree how often the KPIs will be published and who will receivecopies

• It is important that the calculation of the KPI is clear

$ 2sually in percentage terms$ Time period covered

• %nsure those people reading the KPIs fully understand whatthey are measuring

• +ome software pacages offer real time KPI monitoring on yourdestop

KPI Example

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Cases ordered &y c#stomers 'Tota" cases de"i*ered ++

Prod#ct "ines ordered ,Prod#ct "ines o#t of stoc- '

KPI Percenta.e of "ines de"i*ered *ers#s "ines ordered

0>53>

KPI ?;>@

KPI Percenta.e of cases de"i*ered *ers#s cases ordered

==,>>>5 #>>,>>>

KPI ?==@

KPI Example

19-kpis

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