Importance of developing metrics and KPIs in logistics and supply chain operations

Metrics and KPIs help a business to evaluate the performance of its supply chain and logistics operations against a pre-set benchmark. This enables the business to detect any fluctuations immediately enabling managers to take action quickly to rectify the situation.

Also, if metrics and KPIs indicate a company’s logistics and supply chain operations are consistently meeting required performance levels, a company can decide to set a higher level of performance to aim at. Metrics and KPIs are critical in improving a company’s supply chain strategy.

Performance metrics and KPIs provide managers with the visibility of their company’s supply chain performance and allows them to perform objective qualitative as well as quantitative evaluation of the supply chain.

Metrics used by Walmart in its SCM department

I have selected Walmart for my analysis; Walmart is the largest retailer in the world with the highest inventory turnover, sales per square, and operating profit among discount retailers. This success is attributable to the company’s excellent supply chain management.

The company stocks products that are made in over 70 different countries and operate over 11,000 stores. The success of Walmart is attributed to its innovative supply chain operations. The company has leveraged technology to improve its supply chain and logistics management.

Also, the company has established strategic partnerships with vendors that enable it to acquire products at competitive prices from suppliers.

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Walmart also uses cross-docking, a logistic practice that allows the company to transfer products from incoming or outgoing truck trailers without extra storage in between. The company also uses technology to track inventory and restock which reduces operating costs.

Following are three metrics used in SCM at Walmart:

Metric Required for Compliance
Order Defect Rate (ODR) <2%
On-Time Shipment Rate >99%
Valid Tracking Rate >95%

 

According to Walmart, Order Defect Rate refers to the number of orders that have a defective dividend by the total number of orders in a certain period. Walmart requires its sellers to maintain an ODR of not more than 2% as per the company’s seller performance standards. On-Time Shipment Rate metric regards delivering products to customers in a timely manner.

What does the company require?

The company expects a seller to confirm orders either before or on the expected shipment date. The company requires sellers to strive to achieve and maintain an on-time shipping rate of not less than 99%. Valid Tracking Rate refers to the percentage of orders that have valid tracing information.

The company requires sellers to ensure packages have correct tracking numbers and are channeled through the suggested carriers. Sellers are required to provide URLs that enable customers to keep track of their shipments. At least 95% of the shipments should be compliant.

The seller KPIs are meant to help maintain a high standard of customer satisfaction even when sellers are buying via the company’s Marketplace Sellers. The metrics thus help the company maintain customer trust for third-party dealings.

How to develop KPIs that track ethical performance

To develop KPIs that evaluate ethical performance, a company needs to establish ethical principles that everyone in the company is expected to adhere to.  So these principles form the code of conduct. Once this code of conduct is implemented, the management should measure how well these ethical standards are being met.

For example, tracking customer complaints and analyzing them reveals the extent of compliance. Ethical performance at the workplace can be measured by tracking the workdays lost due to accidents or injuries. Surveying employees may also reveal how well they are being treated by their supervisors.

Ethical performance extends to the community, a company should also track the amount of time its employees spend on volunteer work or the amount of money they contribute to local charities to evaluate their ethical responsibility to the community.

However Measuring ethical performance helps focus employees’ attention on the advantages of behaving ethically. So this can help improve the ethical performance of the entire organization.

It also ensures the company supports employees’ growth. Ethical KPIs also help companies to manage values related to quality management, diversity management, strategic planning and promotes a positive public image.

This analysis of KPIs in logistics and supply chain operations was carried out by Help in Homework’s paper writing services. If you would like to know more about the topic or have any other analysis that needs to be written, you can visit their website here Help in Homework.

 

 

 

3 thoughts on “Importance of developing metrics and KPIs in logistics and supply chain operations

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