For businesses it has become essential to keep track of objectives and monitor performance to achieve the results they have in mind. Success is not a matter of chance but a deliberate pursuit. Fortunately there is a way to track progress, thanks to KPIs, the Key Performance Indicators that allow teams to measure specific parameters objectively and obtain quantifiable results for more informed decisions and to improve overall performance.
What are KPIs?
Key Performance Indicators (KPIs) are metrics used by companies to measure their progress towards achieving the goals they have established. Every business can select specific KPIs to monitor based on their relevance to the industry and department.
Order fulfillment KPIs
For ecommerce, order fulfillment is undoubtedly the aspect on which customer satisfaction and loyalty directly depend on. This is why tracking data around order fulfillment processes through KPIs can become the gateway to a thriving ecommerce. By monitoring customer-focused and warehouse-focused KPIs, businesses can identify areas for improvement and optimize their operations for an efficient fulfillment process.
Let’s explore the most common and useful order fulfillment KPIs for your business.
Which order fulfillment KPIs should your business measure?
Customer-focused KPIS
- On-Time Shipping percentage
- Order Cycle Time
- Perfect Order Rate
- Order Picking Accuracy
- Return Rate
- Fulfillment Accuracy Rate
On-Time Shipping percentage
This KPI measures the percentage of orders shipped within a certain timeframe.
Formula: Number of orders shipped on time / total orders shipped over same period × 100
Order Cycle Time
This KPI measures the average length of time between a customer placing an order and delivery. High order cycle times often stem from inefficient order and warehouse management procedures. This suggests a review of picking and packing procedures and integration of automation for better efficiency and speed.
Formula: (Delivery Date – Order Date) / Total Orders Shipped
Perfect Order Rate
This KPI measures how many orders you ship without errors and delays. This metric signifies that the company has an efficient workforce, effective management processes and, ultimately, satisfied customers.
Formula: Percentage of orders delivered on time × percentage of orders complete × percentage of orders damage free × percentage of orders with accurate documentation × 100
Order Picking Accuracy
This KPI measures the percentage of orders picked without errors. Ecommerce businesses should have this percentage as close as possible to 100%. Discover the best strategies to improve order picking accuracy.
Formula: number of orders picked and verified to be accurate prior to shipping / total number of orders picked in time frame × 100
Return Rate
Returns equal lost revenue and expensive processing operations. A high return rate means some aspects of your ecommerce need to be revised, for example identifying the causes of returned items could lower this percentage. Often these are attributable to delivery delays or errors in fulfillment, poor product-quality checks, poor item descriptions and photos on websites. Moreover, it is advisable to invest in a smooth and clear returns process to transform this phase into a pleasant experience for customers.
Formula: Number of orders returned / total number of orders shipped
Fulfillment Accuracy Rate
This metric measures the percentage of correct products delivered on time to the right customer in optimal condition.
Formula: Total number of accurately filled orders / total number of orders shipped in a timeframe
Warehouse-focused KPIs
- Dock to Stock Cycle Time
- Order Fill Rate
- Orders Picked Per Hour
- Inventory Accuracy Rate
While customer-focused KPIs certainly depend on the quality of a brand’s fulfillment operations, it is equally important to measure specific metrics that focus on warehouse operations and inventory management which also directly impact the efficiency of fulfillment processes.
Dock to Stock Cycle Time
This KPI measures the time between when products are received from a supplier and when they are sorted in inventory management systems. It allows businesses to easily identify the efficiency of dock management and product handling.
Formula: Sum of the cycle time in hours for all supplier receipts / total number of supplier receipts
Order Fill Rate
Monitoring this metric is useful to fulfill orders faster, meet customer expectations, and even stop them from switching to a competitor for faster shipping. A high order fill rate means your business is planning correctly and optimizing inventory management.
Formula: (Number of customer orders shipped / number of customer orders placed) ×100
Orders Picked Per Hour
This KPI measures productivity in order picking. By automating this process you eliminate potential human error and improve accuracy.
Formula: Total orders picked/Total hours worked in picking
Inventory Accuracy Rate
This KPI measures the accuracy of a business’ inventory management system, specifically the percentage of recorded inventory that matches the physical inventory available. Low inventory accuracy is often associated with disorganized storage and poor inventory management. High percentage of inventory accuracy can drastically improve order fulfillment and consequently the success of a business.
Formula: (number of counted items that match inventory database/Total number of items counted) x100
Monitor Order Fulfillment KPIs with WMS Software
Monitoring KPIs is fundamental to improve the performance of a business and the quality of the services it offers. To achieve excellence in all departments, businesses can invest in a WMS software which, apart from automating and speeding up processes, can accurately store all relevant data needed to track KPIs. Once you track your relevant order fulfillment KPIs, you will be able to identify areas where you excel and those where you need a touch of polish, all in view of a more streamlined and efficient fulfillment process.
