Vietnam’s logistics sector has been experiencing remarkable growth in recent years. The Vietnam Logistics Association (VLA) reports that the country’s logistics market reached a value of $65 billion in 2023, marking a 15.3% year-on-year increase. As the global economic landscape becomes increasingly complex and competitive, the efficiency of a company’s logistics management plays a crucial role in its overall operational success.
For businesses operating in Vietnam, effectively evaluating logistics performance can lead to optimized processes, reduced costs, improved customer satisfaction, and ultimately, enhanced market competitiveness. This article aims to design tailored logistics key performance indicators (KPIs) and monitoring metrics for different industries, and offer optimization recommendations based on logistics performance assessments.
The Importance of Logistics Performance Evaluation
1.1 Enhancing Operational Efficiency
Evaluating logistics performance helps companies identify and eliminate inefficiencies in the logistics process, thereby improving overall operational efficiency. This is vital for enhancing service quality and increasing customer satisfaction.
1.2 Reducing Costs
Continuous monitoring and evaluation of logistics performance allow companies to pinpoint cost drivers within logistics processes and implement targeted cost-control measures. This approach effectively reduces logistics costs and boosts profitability.
1.3 Boosting Customer Satisfaction
Customer satisfaction is a key indicator of logistics service quality. Through performance evaluation, companies can identify the key factors affecting customer experience and take corrective actions to enhance customer satisfaction and loyalty.
Principles for Designing Customized Logistics KPIs
When designing logistics KPIs, it is important to consider the industry’s characteristics, logistics operation models, and customer needs. Here are some fundamental principles for designing customized logistics KPIs:
2.1 Quantifiable and Measurable
KPIs should be quantifiable and measurable, allowing logistics performance to be reflected through concrete data. Quantitative indicators provide a clearer picture of the efficiency and effectiveness of logistics processes.
2.2 Aligned with Business Goals
The design of KPIs should align closely with the company’s business objectives and directly reflect how logistics management supports these goals. For instance, in the retail industry, KPIs might focus more on inventory turnover rates and order fulfillment times.
2.3 Practical and Actionable
KPIs should be practical and actionable, meaning they can be directly influenced and improved by optimizing logistics processes and operations.
2.4 Real-Time and Responsive
Logistics KPIs should provide real-time insights into logistics operations, allowing companies to promptly identify and resolve issues and optimize logistics management.
Customized KPI and Monitoring Indicator Design for Different Industries
3.1 E-commerce Sector
On-time Delivery Rate
Definition: The percentage of orders delivered within the promised timeframe.
Target: Above 98%
Benchmark: Shopee Vietnam’s 2023 report indicates that a 1% increase in on-time delivery rate correlates with a 2.3% growth in Gross Merchandise Value (GMV).
Average Order Fulfillment Time
Definition: The average time from order placement to delivery.
Target: Within 24 hours for urban areas, 48 hours for rural areas
Benchmark: Vietnam’s 2023 e-commerce report shows that reducing average fulfillment time from 36 to 24 hours boosted customer repurchase rates by 18%.
Return Rate
Definition: The percentage of shipped items returned for various reasons.
Target: Below 3%
Benchmark: Vietnam Post E-commerce Center data indicates that the industry average return rate is 5.2%, and each 1% reduction saves about 2% in logistics costs.
Warehouse Picking Efficiency
Definition: The number of items picked per warehouse worker per hour.
Target: Over 100 items per person per hour
Benchmark: Tiki’s automated warehouse system achieves 150 items per person per hour, 50% above the industry average.
Last Mile Delivery Cost
Definition: The cost of final delivery as a percentage of total order value.
Target: Below 8% of order value
Benchmark: GHN Express reports that implementing smart route planning reduced last-mile delivery costs from 12% to 7.5% of order value.
3.2 Manufacturing Sector
Raw Material Inventory Turnover Rate
Definition: The ratio of raw material consumption to average inventory over a specific period.
Target: More than twice per month
Benchmark: Vietnam Manufacturing Association reports that increasing this rate from 1.5 to 2 times per month can reduce inventory holding costs by 5%.
Production Line Material Supply On-time Rate
Definition: The percentage of materials arriving at the production line on time and meeting quality standards.
Target: Above 99.5%
Benchmark: Vietnam Toyota Motor Corporation data shows that increasing this rate from 98% to 99.5% reduced production line downtime by 60%.
Finished Goods Inventory Turnover Rate
Definition: The ratio of finished goods sales to average inventory over a specific period.
Target: More than 3 times per month
Benchmark: Vietnam Samsung Electronics optimized its supply chain to increase this rate to 3.5 times per month, compared to the industry average of 2.2, reducing warehousing costs by 15%.
Supplier Delivery On-time Rate
Definition: The percentage of supplier orders delivered according to agreed timelines.
Target: Above 95%
Benchmark: Vietnamese electronics manufacturer VinSmart reported that increasing this rate from 90% to 95% improved production plan achievement by 8 percentage points.
Internal Logistics Efficiency (e.g., Forklift Utilization Rate)
Definition: The percentage of actual working time of forklifts out of their available time.
Target: Above 80%
Benchmark: A Hanoi Industrial Park Management Committee survey indicates that increasing forklift utilization from 65% to 80% can reduce internal logistics costs by 20%.
3.3 Retail Sector
Inventory Accuracy Rate
Definition: The percentage of products with actual quantities matching system records.
Target: Above 98%
Benchmark: Vietnamese retail giant Vinmart data shows that increasing this rate from 95% to 98% reduced stockout rates by 40%.
Product Replenishment Cycle
Definition: The average time from identifying replenishment needs to product arrival at the point of sale.
Target: Within 24 hours for fast-moving consumer goods, 48 hours for durable goods
Benchmark: Saigon Co.op supermarket chain shortened this cycle to 20 hours for fast-moving consumer goods, increasing sales by 12%.
Store Delivery Accuracy Rate
Definition: The percentage of correctly delivered goods to stores.
Target: Above 99%
Benchmark: Vietnamese convenience store brand Circle K reported that increasing this rate from 97% to 99% reduced inventory transfer costs by 30%.
Cross-channel Inventory Visibility Rate
Definition: The percentage of SKUs with real-time viewable inventory status.
Target: Above 95%
Benchmark: Aeon Vietnam achieved 97% cross-channel inventory visibility, increasing online order fulfillment rates by 25%.
Return Processing Time
Definition: The average time from a customer’s return request to completion of the return process.
Target: Within 3 working days
Benchmark: The Gioi Di Dong electronics chain store data shows that shortening this time from 5 to 3 days increased customer satisfaction by 15%.
3.4 Cold Chain Logistics
Temperature Deviation Rate
Definition: The percentage of deviation between actual and required temperatures during transportation or storage.
Target: Within ±0.5°C
Benchmark: Vietnam’s largest dairy company Vinamilk reported that controlling this rate within ±0.5°C reduced product loss rates by 40%.
Refrigerated Vehicle Load Rate
Definition: The ratio of actual load to maximum load capacity of refrigerated vehicles.
Target: Above 85%
Benchmark: ABA Cooltrans data shows that increasing this rate from 75% to 85% reduced transportation cost per kilometer by 12%.
Cold Chain Break Rate
Definition: The percentage of goods experiencing temperature abnormalities or cold chain interruptions.
Target: Below 0.1%
Benchmark: Vietnam Vaccine Research Institute reported that improving cold chain management reduced this rate from 0.5% to 0.1%, increasing vaccine effectiveness by 5%.
Energy Consumption Efficiency
Definition: Average energy consumption per unit of storage space per unit time.
Target: Annual electricity consumption below 300 kWh per cubic meter of storage space
Benchmark: Ho Chi Minh City cold chain logistics center reduced energy consumption from 350 to 280 kWh/m³/year after adopting a new refrigeration system, lowering operating costs by 15%.
Refrigeration Equipment Failure Rate
Definition: The percentage of faulty refrigeration equipment.
Target: Below 1%
Benchmark: Masan Group introduced a predictive maintenance system, reducing this rate from 3% to 0.8%, avoiding potential losses of about $2 million.
3.5 Agricultural Logistics
Agricultural Product Loss Rate
Definition: The percentage of agricultural products damaged or deteriorated during transportation and storage.
Target: Below 10%
Benchmark: Vietnam Fruit and Vegetable Association reports that improving post-harvest handling and transportation reduced fresh fruit loss rates from 15% to 9%, increasing farmers’ income by 20%.
Average Transportation Time from Production Site to Market
Definition: The average time from harvesting to reaching the main sales market.
Target: Within 24 hours (for fresh produce)
Benchmark: An agricultural logistics project in northern Vietnam showed that reducing this time from 36 to 22 hours increased agricultural product market prices by 15%.
Cold Chain Coverage Rate
Definition: The percentage of agricultural products using cold chain logistics.
Target: Above 60% (for perishable products)
Benchmark: Can Tho City Agriculture Department data shows that increasing this rate for aquatic products from 40% to 65% extended product shelf life by 50% and increased export prices by 10%.
Agricultural Product Traceability Accuracy Rate
Definition: The percentage of agricultural products that can be accurately traced to their source.
Target: Above 95%
Benchmark: After adopting blockchain technology, the traceability accuracy rate of Vietnamese rice exports increased from 85% to 98%, adding a 5-8% premium in international markets.
Logistics Performance Evaluation and Improvement Strategies
4.1 Data Analysis and Performance Evaluation
After designing logistics KPIs and setting monitoring indicators, companies need to collect and analyze data to evaluate logistics performance and identify areas for improvement. Key steps in data analysis include:
Data Collection: Companies should regularly collect logistics performance data, including transport time, costs, order fulfillment, and customer satisfaction. Accurate and complete data is essential for effective performance evaluation.
Data Analysis: Use statistical analysis tools (such as SPSS, Excel, Tableau) to analyze the collected data, calculate averages, standard deviations, maximum and minimum values for each KPI, and identify bottlenecks and inefficiencies in the logistics process.
Identifying Issues: Compare KPI performance across different time periods and business lines to identify problems in logistics management, such as transport delays, low inventory turnover rates, or high customer complaints. Identifying key factors impacting performance provides a basis for developing improvement strategies.
4.2 Proposing Improvement Strategies
Based on data analysis, companies should develop targeted strategies to improve logistics service quality and operational efficiency. Common improvement strategies include:
Optimize Transport Network: Analyze transport routes and times to optimize the transport network layout, reducing time and costs. Consider adjusting transport modes (such as adopting multimodal transport) or improving delivery strategies (like optimizing delivery routes).
Enhance Inventory Management Efficiency: Use inventory management systems (such as Warehouse Management Systems, WMS) to improve inventory management accuracy and efficiency. Analyze inventory turnover rates and stock-out rates to optimize inventory structure and ordering strategies, reducing costs and stock-out risks.
Strengthen Customer Service and Communication: Improve customer service processes and enhance communication and feedback mechanisms with customers to boost satisfaction. Train customer service teams to enhance service levels and response times, reducing customer complaints.
Promote Green Logistics Practices: Encourage green logistics practices in operations, such as using low-emission vehicles and optimizing processes to reduce carbon emissions, enhancing the company’s environmental responsibility image and compliance.
4.3 Implementing Improvement Measures and Continuous Monitoring
Companies should develop detailed implementation plans and timelines based on improvement strategies, clearly defining responsibilities and evaluation criteria. Improvement measures should have clear goals and monitoring mechanisms to ensure sustainable performance improvement.
Establish a Continuous Improvement Mechanism: After implementing improvement measures, companies should regularly evaluate performance and analyze data to verify the effectiveness of the improvements and continuously optimize logistics management processes. A continuous improvement mechanism helps companies maintain high efficiency and flexibility in logistics management amid competitive market conditions.
Utilize Logistics Information Tools: Employ logistics information tools (such as Transport Management Systems, TMS; Warehouse Management Systems, WMS; Yard Management Systems, YMS) to enhance the visibility and intelligence of logistics operations, monitor performance in real-time, respond quickly to changes, and improve management efficiency.
Conclusion
Given the rapid growth of Vietnam’s logistics industry, designing customized logistics KPIs and monitoring indicators based on different industry characteristics is crucial for improving logistics management efficiency and competitiveness. Systematic logistics performance evaluation enables companies to identify bottlenecks and issues in operations and develop targeted strategies to enhance service quality and customer satisfaction.
The analysis and suggestions provided in this guide aim to offer valuable references for Vietnamese companies in logistics performance evaluation and optimization. As logistics technology continues to evolve and customer needs diversify, companies must continuously refine performance management to adapt to market changes and challenges.
