A trade lane (or trade route) refers to a specific pathway along which goods are transported between two or more locations, typically across international borders. Trade lanes are established based on the flow of goods and the economic relationships between countries or regions. They encompass both maritime and air routes and play a crucial role in global supply chains by facilitating the movement of goods and fostering international trade.
Transit time refers to the duration it takes for goods or shipments to travel from their origin to their destination. It is a crucial metric in supply chain and logistics management, as it directly impacts delivery schedules, inventory levels, and customer satisfaction. Transit time encompasses the entire journey of a shipment, including transportation, handling, and processing at various checkpoints along the route.
Transloading refers to the process of transferring goods or cargo from one mode of transportation to another, typically from one type of truck or railcar to another, or from rail to truck and vice versa. This logistical practice is often employed to optimize transportation routes, reduce costs, and improve overall efficiency in supply chain operations.
A Transportation Management System (TMS) is a specialized software solution designed to streamline and optimize transportation and logistics operations within supply chains. It provides functionalities to effectively manage and control the movement of goods from origin to destination.
Transportation lead time refers to the duration it takes for goods to be transported from the point of origin to the final destination. It encompasses the time required for transportation activities, including loading, transit, and unloading, across various modes of transport such as road, rail, air, or sea.
A transshipment is the process of transferring goods from one transportation vehicle or vessel to another during their journey from origin to destination. It typically occurs at intermediary points along the supply chain route, where cargo is transferred between different modes of transportation, carriers or vessels.
Twenty-foot Equivalent Unit (TEU) is a standard unit of measurement used in the shipping industry to quantify the cargo-carrying capacity of container vessels. It represents the volume of a standard twenty-foot-long shipping container.
An Ultra Large Container Vessel (ULCV) is a massive container ship used on major trade routes, capable of carrying over 14,000 TEUs.
Vendor Managed Inventory (VMI) is a supply chain management strategy where the supplier or vendor takes responsibility for managing the inventory levels of their products at the customer's or retailer's location. In this arrangement, the vendor monitors the inventory levels based on agreed-upon criteria such as sales data or inventory levels, and initiates replenishment as needed.
Verified Gross Mass (VGM) is a term used in the shipping industry to refer to the total weight of a packed container, including its contents and packaging materials. It is a crucial requirement mandated by the International Maritime Organization (IMO) under the Safety of Life at Sea (SOLAS) convention to enhance safety in maritime transportation.
A floating structure with its own mode of propulsion designed for the transport of cargo and/or passengers. In the Industry Blueprint 1.0 "Vessel" is used synonymously with "Container vessel", hence a vessel with the primary function of transporting containers.
A vessel sharing agreement (VSA) is a cooperative arrangement between shipping companies that allows them to share space and resources on vessels for specific routes.
Vessel bunching refers to the situation where multiple vessels arrive at a port simultaneously or within a short period, leading to congestion and delays. This clustering of vessels can overwhelm port facilities, causing extended wait times for berthing, loading, and unloading operations.
A vessel call sign is a unique identifier assigned to a ship for radio communication purposes. It is used to distinguish the vessel from others in maritime communication systems, including VHF radios and satellite communications.
A vessel omission (sometimes called a port omission) occurs when a scheduled vessel does not call at a planned port during its voyage. This disruption means that the vessel skips the port entirely, which can impact the transportation and delivery schedules of goods.
In cargo shipping, vessel rotation is the planned sequence of port calls that a shipping vessel follows on its route to optimize cargo loading and unloading operations.
The timetable of departure and arrival times for each port call on the rotation of the vessel in question.
A journey by sea from one port or country to another one or, in case of a round trip, to the same port.
Warehouse utilization is a logistics metric that refers to the effective use of available warehouse space for storing goods and inventory.
Order for specific transportation work carried out by a third party provider on behalf of the issuing party.
Logistics yard management refers to the process of overseeing and controlling the movement of trucks, trailers, containers, and other vehicles within a yard or distribution center. This includes tasks such as scheduling, tracking, and coordinating the arrival, departure, and storage of these vehicles.
9 Essential Logistics KPIs
KPIs in logistics help to optimize operations, reduce costs and deliver a better customer experience.
We surveyed a panel of logistics professionals for their take on some of the most important operational KPIs for logistics teams…
1. On-Time Delivery (OTD)
The percentage of orders delivered to customers on or before the promised delivery date.
How to Measure: OTD is calculated by dividing the number of on-time deliveries by the total number of deliveries, providing insight into logistics efficiency and customer service performance.
Why It’s Useful: On-Time Delivery is a direct measure of reliability and customer satisfaction. High OTD rates indicate effective logistics planning and execution.
2. Order Picking Accuracy
The percentage of orders delivered correctly without errors in quantity, product type, or other specifications.
How to Measure: Order picking accuracy is determined by dividing the number of accurate orders by the total number of orders shipped.
Why It’s Useful: This metric helps you understand the reliability of order picking and fulfilment processes. Improving order accuracy minimizes returns, improves customer satisfaction, and reduces operational costs associated with errors.
3. Shipping Cost Per Unit
Shipping cost per unit is a logistics metric that calculates the average cost of shipping one individual item or unit of product.
How to Measure: Shipping cost per unit is determined by dividing the total shipping costs by the total number of units shipped.
Why It’s Useful: This logistics KPI helps in understanding, comparing and controlling costs, enabling more cost effective logistics operations.
4. Transit Time
The average time taken to move goods from the point of origin to the destination.
How to Measure: Transit time is measured by calculating the duration between the time a shipment is picked up and when it is delivered to its destination. This metric is typically tracked in hours or days.
Why It’s Useful: Having an accurate understanding of transit time is crucial for optimizing delivery and order schedules and improving supply chain agility.
5. Freight Cost Per Mile
Freight cost per mile is a logistics metric that represents the average cost incurred to transport goods over one mile (or kilometer).
How to Measure: Take the total freight cost divided by the number of miles (or kilometers) traveled.
Why It’s Useful: This KPI helps assess and compare the efficiency of transportation routes and cost-effectiveness of carrier services.
6. Warehouse Utilization
The percentage of warehouse space that is being used.
How to Measure: Warehouse utilization is determined by dividing the total occupied storage space by the total available storage space and then multiplying by 100.
Why It’s Useful: Maximizing warehouse utilization helps reduce storage costs and ensures that space is used efficiently.
7. Order Cycle Time
Also referred to as order dulfilmment cycle time, this refers to the total time from when an order is placed until it is delivered to the customer.
How to Measure: Order cycle time is determined by tracking the time elapsed through each stage of the customer order fulfillment process, from order receipt to fulfillment and delivery. Is is typically calculated in hours or days.
Why It’s Useful: Thanks to the Amazon effect, customers are becoming accustomed to quick order fulfilment. This trend is most prevalent in consumer goods and retail e-commerce. Shorter order cycle times improve customer satisfaction and can give a competitive advantage in markets where speed is critical.
8. Fill Rate
The percentage of customer orders that are fulfilled completely from available stock at the time of the order.
How to Measure: Fill rate is determined by dividing the number of items shipped complete by the total number of items ordered. For example, if a customer order includes seven different SKUs and six are available when the order is picked, the fill rate for that order would be 86%.
Why It’s Useful: A high fill rate indicates that the company can meet demand without delays, which is crucial for maintaining customer trust and satisfaction.
9. Damage Rate
The percentage of goods damaged during transit or handling.
How to Measure: Damage rate can be measured at the shipment or item level. It is determined by dividing the number of damaged items or shipments by the total number of items or shipments. For example, if you fulfill 100 orders and customers report damaged items in five of them, your damage rate would be 5%.
Why It’s Useful: Damage rate is useful for assessing the effectiveness of handling and packaging processes. Minimizing damage rates reduces waste, returns, and incremental shipping costs, while also improving customer satisfaction.
The importance of logistics KPIs
Taken collectively, these logistics KPIs provide a comprehensive view of logistics network performance and efficiency, enabling businesses to identify areas for improvement, reduce costs and boost customer satisfaction.