When evaluating the success of your sales, you don’t just take a blind estimate of how well you think your product is performing. You dive deep to analyze your business’s numbers and identify areas for improvement so that you can tweak your brand’s strategy to perfection.
You should take the same approach when it comes to your shipping operations.
Too many business owners fall into the trap of making their transportation processes an afterthought. However, by knowing which key shipping metrics and KPIs to prioritize, you can optimize your logistics, enhance your customer satisfaction, and drive your profitability through the roof.
Understanding Key Performance Indicators in Logistics
Key performance indicators, also known as KPIs, are quantifiable metrics that businesses use to measure and evaluate their performance over time.
Without identifying and tracking KPIs that are important for your business’s growth, you can’t accurately measure your progress and make sure that your operations are improving and becoming more efficient as time goes on.
The same principle applies to KPIs for logistics: Failing to identify and track shipping KPIs can cause your product transportation system to stagnate or steadily decline.
Fortunately, you can avoid this outcome and set your logistics on a positive trajectory by learning more about which shipping performance metrics to pay attention to.
The Role and Importance of KPIs in Logistics
What are key performance indicators in logistics, and why are they so important?
Put simply, KPIs in logistics can help your business track and improve various aspects of your shipping process, such as delivery costs and timelines. This, in turn, can help ensure you’re receiving the most reliable, cost-effective, and efficient service possible.
How KPIs Drive Data-Driven Decision-Making in Shipping
You should never leave the success of your shipping system up to guesswork.
Instead, know your numbers and set goals for how you plan to improve them.
Fortunately, the shipping process inherently involves many quantifiable metrics. That means it's easy for business owners to:
- Access and view their shipping data
- Gain a clear picture of their successes and shortcomings
- Identify areas that need improvement
With a comprehensive overview of your shipping performance, you can practice informed decision-making and strategic planning for the future.
Comprehensive Overview of Shipping KPIs
You can’t optimize your shipping operations if you don’t know which indicators to stay on the lookout for.
Optimal KPIs empower businesses to:
- Check the company’s health and identify warning signs early
- Hold their team and carriers accountable
- Work toward a “north star” of defined success
In the next section, we’ll detail the main factors you should keep in mind when determining how successful and streamlined your shipping system actually is.
Essential KPIs for Freight and Parcel Shipping
To gain meaningful insights on how your business’s freight and parcel shipping system is faring overall, track these three KPIs:
- Transportation Expenses – When shipping products, it’s critical to secure cost-effective rates for both freight and parcel deliveries. Negotiating better terms can lead to significant savings over time. Small reductions in cost, even just a few cents per delivery, can cumulatively have a substantial impact on your bottom line.
- On-time Delivery Rate – Consistent, timely deliveries are crucial for customer satisfaction and retention in both freight and parcel shipping. Late deliveries can tarnish your reputation, so it's essential to investigate and address any delays promptly. This means identifying and resolving root causes, whether they stem from internal processes or carrier performance, to improve punctuality.
- Claims Ratio – This measures the frequency of claims filed due to delivery issues in freight and parcel shipping. A low claims ratio is indicative of reliable service, so choose carriers with a proven track record. If issues arise, such as missed deliveries or damaged goods, having a carrier that maintains a low claims ratio can be advantageous for claim compensation processes.
Operational KPIs for Logistics Optimization
Pay attention to these operational KPIs and you can start making noticeable enhancements to your logistics that optimize your operational efficiency and benefit your bottom line:
- Damage Incidence – To minimize the risk of goods being damaged in transit, partnering with carriers known for handling freight and parcels with care is essential. Ensure all items are properly labeled and packaged, using materials suitable for their protection, such as sturdy boxes and cushioning supplies.
- Cost Efficiency per Shipment – Achieve greater cost efficiency by optimizing the size and weight of your shipments, leveraging discounted supplies, and tapping into business rates offered by carriers. Engaging in negotiations for better rates will also contribute to overall savings.
- Ancillary Fees – Monitor any additional fees applied to your shipments for extra services or labor. By understanding when and why these charges are incurred, you can take steps to avoid them in the future, streamlining your cost structure for both freight and parcel deliveries.
- Delivery Timeliness – If your goal is to expedite deliveries, evaluate your shipping methods and routes. Ground transport might be a faster option for nearby locations, while air might be preferable for longer distances. Evaluating transit times will help you optimize delivery schedules and customer satisfaction.
Evaluating and Measuring Shipping Performance
You’re now familiar with the concept of shipping KPIs, which means you’re one step closer to cutting your transportation costs, increasing customer satisfaction, and boosting your profits.
But before you can reap the benefits of shipping KPIs, you need to learn how to access and measure the indicators we’ve discussed thus far.
Methods and Tools for Tracking Shipping KPIs
You know which KPIs to keep an eye on, but how do you go about tracking and analyzing these metrics? Common methods include:
- Manual analysis – Whether you do the job yourself, designate the responsibilities to your team, or outsource an individual or company to handle the measurement of your shipping KPIs, it’s possible to implement manual analyses. However, this involves complex calculations, in-depth data segmentation, and overall, a lot of time and money.
- Software solutions – Modern technological innovations provide viable alternatives for handling your shipping performance metrics. In fact, you can utilize digital platforms to collect, organize, and analyze your shipping KPIs for you. Many business owners find this option to be more convenient, efficient, and cost-effective.
Benchmarking and Analyzing KPIs for Continuous Improvement
Once you’ve set up a system for tracking your data, you need to set goals for optimizing your shipping operations based on the new insights you gain.
But how do you know which goals make the most sense for your business?
By using a benchmarking system that compares your brand’s performance against industry standards, you can ensure that your metrics are up to par. Ideally, you’ll work to exceed the numbers achieved by your competitors, as well as the industry average, with enough time and dedication.
To that end, consider using these simple steps to set helpful benchmarks:
- Research your competitors to gain insights
- Analyze your current metrics in relation to your industry
- Brainstorm actionable targets that you can start working toward
Real-Time Data and Its Impact on Shipping Performance
The shipping world is fast-paced and ever-evolving. To secure the best deals, optimize your operational efficiency, and provide superior service for your customers, you need access to real-time data.
It’s not good enough to collect shipping documents that are weeks old and try to draw meaningful conclusions from them. Instead, you need to analyze real-time information on aspects like route efficiency, delivery speed, and transportation spend to make improvements promptly and avoid costly inefficiencies.
Fortunately, with the help of a smart tech solution on your side, you can monitor your shipping performance on a constant, real-time basis.
Integrating Technology in KPI Tracking
With modern technological innovations, businesses no longer need to track and analyze KPIs manually. Instead, you can entrust your KPI tracking to a capable software program.
By doing so, you can significantly shorten the time it takes your leadership team to make performance-improving strategic decisions.
The Role of Advanced Analytics in KPI Monitoring
Even if you kept a meticulous paper trail of your shipping KPIs, it would be difficult to look at all your data and get a clear picture of where you stand and what needs improvement.
This is where the power of technology comes in.
With digital platforms that offer advanced shipping analytics, you can:
- Gain instant, in-depth visibility into your supply chain performance
- Ensure that your numbers and calculations stay precise and accurate
- Leverage visual data models like charts and graphs
Automation in Tracking and Reporting KPIs
With automated digital systems, you can set up customized KPI tracking and shipping reporting with minimal effort. Then, you can choose how often you want the tech tool to report back to you.
So, instead of carving out valuable time each day to stay on top of your performance tracking, you can set up an automated system and forget about it until you need it. When you’re ready to analyze your progress, your data will be just a click away.
Challenges and Solutions in Shipping KPI Management
If tracking shipping KPIs is new to you, you may encounter some common obstacles. To that end, watch out for these two challenges and use our advice to handle them confidently:
- Freight invoice accuracy – It can be difficult to track your KPIs precisely if your carrier invoices contain errors, so perform freight or parcel auditing to snuff out mistakes in your invoices. This will ensure that you’re working with accurate information and may even save your business money by showing you opportunities to claim refunds.
- Choosing the right KPIs – Improper performance metrics can distort your decision-making and lead you to shift your strategy in inefficient ways. Ensure that the KPIs you choose are meaningful, directly related to specific objectives, and capable of providing fast feedback.
Lojistic’s Comprehensive Approach to Shipping KPI Management
Here at Lojistic, we know that shippers like you need a fast, convenient, and effective way to track your logistics and make improvements as you go.
We also know that you don’t want to manage several different software programs for tracking your KPIs, managing your carriers, auditing your freight invoices, and researching shipping trends.
That’s why we put all of those features into one simple platform.
How Lojistic Empowers Businesses with Effective KPI Tracking
Our all-in-one Lojistic platform helps you keep track of key shipping metrics by:
- Storing all your shipping history in one place
- Providing detailed carrier performance analytics
- Uncover cost-saving opportunities through freight and parcel auditing
Our platform allows you to either self-audit using our intuitive tools or opt for Lojistic's expert team to manage the shipping audit and refund recovery process for you. This means you can spot errors, claim refunds, and even have Lojistic handle payments to carriers, all through one streamlined service.
Additionally, our special Compare Mode lets you effortlessly benchmark the impact of your shipping strategies. Gain a comprehensive understanding of what's working, what isn’t, and identify ways to achieve your shipping performance goals.
Setting up a Lojistic account can be done in just a few minutes. Sign up today to experience the Lojistic difference in optimizing your shipping operations and maximizing savings.
Paredes R. The Importance of KPIs in Your Business. Safety Culture. December 13, 2023. Accessed January 26, 2024. https://safetyculture.com/topics/kpi/
Key Performance Indicators (KPIs) in Logistics. Logistics Cluster. Accessed January 26, 2024. https://log.logcluster.org/key-performance-indicators-kpis-logistics
Director of Parcel Rate Services
Prior to his role at Lojistic, Matt held significant positions in the industry, including his tenure as Senior Pricing Advisor at FedEx. Matt analyzed pricing programs and wrote pricing contracts for some of FedEx’s largest e-commerce and retail shippers. He also managed projects for the FedEx Global Pricing Approval Systems and Strategic Account Executive Inputs.
Matt earned a BS in Computer Engineering and an MBA in Finance from the Joseph M. Katz School of Business at the University of Pittsburgh.