Insights eCommerce

Why is measuring KPIs important for your company

To understand just how your business is performing, you have to know more than just how many products you’re selling.

You must have an honest and effective method of measuring key performance indicators (KPIs) and subsequently analysing this information to get a wider view of your business’ success.

Whilst the bottom-line is sales figures, looking solely at the end of the purchase funnel is a dangerous approach that could see those very sales, start to dry up. Alongside the many aspects of business management, there are numerous KPIs to focus on to make a long-term success of your order fulfilment operation.

When looking at fulfilment exclusively, these KPI metrics can be boiled down across the following areas:

The Customer KPI & Order Cycle Process KPI

Specifically, The Customer KPI should be focused around the customer’s order to shipped timings. That is to say the percentage of orders that were shipped on (or before) the requested shipping date. This KPI will show just how effective your shipping process is and where, if found, any improvements can be made across the picking and packing times. In failing to set a desired KPI goal for this process, businesses run a very real risk of a decline in both standards and customer satisfaction.

Secondly, is The Order-Cycle Process KPI or, the time it takes from purchase for the customer to receive the physical product. As before this KPI explores the customer relationship to your internal processes but looks at the time taken from the order being placed to it being received on the doorstop. Similar to the above point this will take into account the effectiveness of your warehouse but also the elements not directly in your control, such as courier partners and invoicing. In essence if your order cycle times are declining, so too is the mood of the customer.

The Process KPI

There are any number of possible KPIs that could fall into this grouping depending on the level of detail one wishes to go into (the more the merrier). Important to consider as a wider group revolve around two specific accuracy KPIs which I’ve dubbed: The Flawless KPI & The Precision KPI. With any number of possible metrics, The Flawless KPI looks into the handling skill of your warehouse staff in moving products without damage or loss and ensuring orders arrive on time, undamaged and with the associated correct invoicing information all intact. The Precision KPI however, looks simply at the accuracy of your order-picking process and returns a percentage showing the number of picked correctly ahead of shipping.

With both these process KPIs a mindful take is taken again, against customer satisfaction. Receiving a slightly damaged product is one thing, but the wrong product entirely is completely unacceptable. In either case if these figures drop below your desired KPIs then it could be time to review the process from top-to-toe surrounding staffing or even your inventory management processes.

As mentioned, there are other KPIs to consider such as Order Pick Rates; Product Restocking; actual Accuracy in the Delivery (correct address) and with these or indeed any Process KPIs if you do, you can and indeed should be assigning a desired KPI goal towards the activity.

The Engine-Room KPIs

Throughout this post we’ve looked at the key performance indicators around put loosely your order fulfilment operation and whilst key to your overall success I’ve left what I’ve dubbed ‘The Engine-Room KPI’ until last. The engine-room is your warehouse, the home of the order fulfilment process, without which none of the above would be possible and so it requires a few words of its own. Looking at KPIs for this area and there are perhaps only two main considerations; The Goods-In KPI & The Inventory KPI.

In the case of the former, this is about the speed of product being taken in and how it is subsequently held. Receiving stock thus, is the fuel to the engine, without it you won’t go anywhere, so accurately recording its receipt and storage safely is of the utmost importance. A KPI here could revolve around speed of stock orders being received from purchase, or the time taken from delivery to storage.

From the Goods-In KPI comes the accurate recording of stock, or inventory management if you will. Ensuring the inventory is booked-in and your warehouse management system (WMS) updated enables the sales process to continue. Failing to do this often leads to shortfalls in stock, the dreaded “out of stock” message and unnecessary re-ordering of product, leading to higher overall costs. An inventory KPI thus, could be a physical stock check scheduled accordingly and measured against what the WMS is displaying.

However, you choose to label your KPIs its essential the process start immediately, the result will be a more efficient environment, a possible uplift in cost management and most importantly more satisfied customers. You must pick the KPIs that will benefit your business’ performance the most. Even if you find you are hitting these targets regularly, keeping an eye on them will ensure your business remains at its peak and importantly, in the black.

To learn more about the KPI metrics we use at Elovate and for more information about how our order fulfilment services could work for you contact us today.

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