Regardless of the business area, KPIs (Key Performance Indicators) provide companies with a tangible way to measure and track progress toward their objectives. A vast array of KPIs exists to let merchants know what they are doing well, what needs work, and what requires critical attention.
In retail eCommerce, the realm of order fulfillment presents all manner of opportunities for process improvement, and KPIs can provide some of the most specific insights to that end.
At SkuNexus, order fulfillment management is a major component of the software solutions we design. Our work with clients across a broad array of retail sectors has shown us how important fulfillment optimization is to any brand looking to lower costs, increase revenues, and scale its business.
We know that the number of metrics available can be dizzying, so we are providing here 10 of the most important order fulfillment KPIs. Armed with this data, merchants can see where work is required, adjust processes as needed, and monitor results to ensure success going forward.
These KPIs center around speed and accuracy in order fulfillment processes. Poor performance here (delayed shipping, late delivery, incorrect items, etc.) can and will significantly impact customer satisfaction.On-Time Shipping
Definition: Percentage of orders shipped on or before expected shipping date.
Formula: (# orders shipped on time/Total # orders shipped over same period) x100
On-time shipping is the successful culmination of your other fulfillment operations. The ability to make an accurate shipping date promise, and adhere to it, signifies an organized, well-controlled warehouse. A continual failure to meet projected ship dates needs immediate attention to identify where breakdowns are occurring.Order Cycle Time
Definition: Average length of time between customer placing order and delivery.
Formula: Cumulative # of days between when all customer orders are placed and when customers receive product/Total # orders in time frame
Time reduction in fulfillment can best be achieved through automation. Automated order routing and directed fulfillment operations accelerate the process, reduce/eliminate manual decision-making, and save time. Unforeseen delays during shipping can impact this metric, but long order cycle times are generally the result of less-than-optimal order and warehouse management procedures.Internal Order Cycle Time
Definition: Average length of time between order placed and shipped.
Formula: Cumulative # of days between when customer orders are placed and shipped/Total # orders in time frame
By eliminating shipping time from the equation, this KPI provides a narrower look at your fulfillment processes. Any increases here demand review of picking and packing and, again, may suggest increased automation is needed.Perfect Order Rate
Definition: Measurement of how many orders ship without any issues whatsoever.
Formula: [(# orders delivered on time / # orders) x (# orders complete / # orders) x (# orders damage free / # orders) x (# orders with accurate documentation / # orders)] x 100
An aspirational KPI for any merchant whose fulfillment operations are well-optimized. This metric reflects a disciplined and focused workforce, sound management, efficient processes, and, ultimately, satisfied customers.Order Picking Accuracy
Definition: Percentage of orders picked error-free.
Formula: (# of orders picked & verified accurate prior to shipping/Total # of orders picked in time frame) x100
The total, or near-total, elimination of picking errors is a viable goal for eCommerce merchants of all sizes. Tightly-controlled receiving and putaway operations can ensure items are in the right place, and rigorous barcode scanning and automated picklists help provide the framework to achieve as close to 100% picking accuracy as possible.
Warehouse & Operations KPIs
While customer-centric KPIs certainly also gauge the quality of a brand’s fulfillment operations, these metrics focus specifically on warehouse operations and inventory management.Order Fill Rate
Definition: Percentage of orders fulfilled from stock on-hand.
Formula: (# of orders shipped/# of orders placed) x100
A high order fill rate suggests well-executed demand planning and optimized inventory control. Issues here can be the result of poor inventory management and lack of inventory sync between channels, as well as unforeseen demand spikes/supply chain hiccups. A major software system upgrade may be necessary to solve these problems.Lines Picked/Shipped Rate
Definition: Measures fulfillment performance across multiple product lines.
Formula: Total order lines picked and shipped/Total hours worked in picking and shipping
Because orders may comprise items from different product lines, this is a broad metric to identify fulfillment disparities between them. Results may involve placing certain lines in different locations, altering picking/packing methods, or any other changes to improve efficiency.Orders Picked Per Hour
Definition: Productivity KPI for individual pickers.
Formula: Total orders picked/Total hours worked in picking
Arguably the most employee-specific KPI in order fulfillment. Elimination of manual decision-making for pickers through automation is an excellent way to improve this metric and increase picking accuracy simultaneously.
Dock to Stock Time
Definition: Time to receive, sort/process, and place items in storage.
Formula: Sum cycle time in hours for all supplier receipts/Total # of supplier receipts
An efficient loading dock is a catalyst. Breakdowns and tie-ups here will have a negative ripple effect throughout the warehouse, whereas well-managed and executed dock-to-stock processes provide a foundation for optimized fulfillment.Inventory Accuracy Rate
Definition: Difference, expressed as a percentage, between what you actually have in available physical stock and what you think you have.
Formula: (# of counted items that match inventory database/Total # of items counted) x100
Poor inventory accuracy is the result of disorganized storage, shrinkage (from damage/miscounting to theft/fraud), and/or suboptimal inventory management. Prioritizing inventory accuracy can dramatically improve order fulfillment (better organization, lower risk of stockouts, systemic integrity).
At SkuNexus, our goals are aligned with our clients - we work to design management software solutions so that all their KPIs, regardless of category, are moving in the right direction.
If you would like to learn more about SkuNexus and what we can do for your eCommerce business, please schedule a demo.
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Editor's Note: This post was originally published in 2018 and has been completely revamped and updated for accuracy and comprehensiveness.