The role of the Fulfillment Center (FC) is to provide the right product, at the right place, at the right time, free of damage and at a competitive cost. With all of that in mind, every company in every industry needs to have the ability to track key distribution metrics to track performance. They need to have the ability to;
- Identify trends and opportunities for improvement
- Benchmark KPIs versus direct competitors
- Accuracy of order picking and on-time shipments
- Compare sales volume and efficiencies to historical numbers
Every function of your business should be tracking key performance metrics that include but are not limited to order fulfillment, marketing, customer service, finances, Human Resources, IT, supply chain management, and more.
For brands that sell physical goods, distribution logistics need to run efficiently.
Knowing the right performance metrics to track along with best practices for measuring success helps ensure you understand inbound and outbound logistics performance and that you can make the right supply chain optimizations. Product distribution is a very important pillar in your company.
In this article, we’ll cover common distribution metrics as they relate to fulfillment logistics, product sales, and inventory movement to help you maximize efficiencies.
What Is Distribution Metrics?
Throughout the inventory management journey, various quantitative measures known as distribution metrics are diligently tracked. These metrics encompass the entire process, from receiving and warehousing, to picking, packing, ecommerce shipping, and finally, delivering.
Distribution Metrics vs. Key Performance Indicators (KPIs)
Though often used interchangeably, metrics and KPIs have both overlap and key differences. KPIs are meant to measure if a desired value or outcome is being achieved or not, while metrics simply track what is happening throughout the supply chain.
KPIs will also hold influence on your service-level agreements (SLAs) that you have with vendors. For example, if you work with a third-party logistics (3PL) company, the 3PL is responsible for meeting specific metrics outlined in the agreed-upon SLAs. These metrics encompass various aspects, such as timely order fulfillment and efficient inventory reception and storage.
Best Distribution Metrics You Need To Make Sure You Track
When it comes to tracking ecommerce logistics performance, there are numerous metrics and KPIs to consider. These metrics have a significant impact on various aspects of your business, from profitability to meeting customer expectations. It is crucial to focus on the most important metrics that align with your goals and ensure optimal performance throughout your operations.
1. Time To Ship
The shipping time for an order starts once it is placed. Many order fulfillment companies have service guarantees for same-day shipping, next-day shipping, and other shipping time durations. For the majority of brands, the distribution metric is typically calculated based on business days. It’s important to note that this metric differs from the time it takes for an order to be shipped from a fulfillment center to its final delivery to the customer. By understanding this distinction, businesses can effectively measure and track their distribution performance.
2. Inventory Turnover Rate
The inventory turnover rate quantifies the frequency at which inventory is sold and replenished within a defined time frame. Assessing the average inventory turnover per SKU is a crucial metric for evaluating business performance, cost management, and sales. Furthermore, it allows for benchmarking against other companies within the same industry. Tracking ecommerce products is extremely important.
3. Total Number Of Orders
This represents the total volume of your orders within a specified timeframe. Typically, a month or 30 days is the standard timeframe for calculation, although it can also be done on a daily, quarterly, or annual basis, depending on your preference.
4. Total Units In Storage
To effectively manage your inventory, it is crucial to have real-time visibility of stock levels across all your products. The distribution metric is subject to continuous change as inventory is sold, replenished, new products are added, and ecommerce returns are processed. However, comprehending the quantity at hand, whether it be insufficient or excessive, has far-reaching effects. It impacts not only high warehousing expenses and tied-up capital, but also the occurrence of stockouts. The larger your range of SKUs, the greater the need to stay vigilant and proactive.
5. Order Accuracy Rate
Thill Inc. consistently achieves a remarkable order accuracy rate of approximately 99.97%, ensuring that the major majority of orders are delivered flawlessly.
6. Order Picking Rate
Just like the order accuracy rate, which considers both packing and warehouse picking, this metric represents the percentage of error-free orders picked.
7. Percentage Of Sales Lost Due To Out-Of-Stock Products
This metric represents the percentage of sales lost or refunded due to supply issues resulting from out-of-stock inventory. Inadequate inventory management can lead to overselling products that are not actually available. Consequently, when a customer places an order for out-of-stock items, you are compelled to inform them, cancel and refund their order, resulting in a lost sale.
8. Percentage Of On-Time Shipments
This represents the overall proportion of shipments that are delivered punctually or within their designated timeframe. If orders are not arriving as promised, it will hurt your business, this is why ecommerce order fulfillment is essential to your company.
9. Average Warehouse Capacity Used
This is the comprehensive count of bin, shelf, and pallet locations in your ecommerce warehouse that are currently in use. It allows you to assess your capacity and make informed decisions about downsizing or expanding your warehouses. This distribution metric is closely related to economic order quantity, as it aims to optimize the utilization of space.
10. Average Delivery Days
Also known as average transit time, this it the average number of days it takes shipping carriers to deliver orders. By distributing your inventory across multiple fulfillment centers, you can significantly decrease this metric. If you have insights into the states or regions where you frequently ship, strategically selecting your fulfillment locations can further minimize shipping zones, lower shipping costs, and transit times. This optimization allows for streamlined operations and enhanced customer satisfaction.
How To Track Distribution Metrics?
Inventory management software typically offers comprehensive reporting and distribution metrics. For instance, when utilizing our fulfillment services, clients using Thill Inc. will gain access to our free state-of-the-art fulfillment software, which will give you a competitive advantage versus your competition. While there’s a ton of special features and tools inside, the real-time data and analytics will give you the ability to make key business decisions based on the data available.
However, if you lack access to such technology, gathering data from various systems and tracking distribution metrics in a spreadsheet becomes necessary to assess performance over time.
