For eCommerce businesses often running on tight margins, it’s essential to understand where data and metrics can provide insights on your operations and workflow. Order fulfillment is one area that is often overlooked but shouldn’t be. With the right set of metrics, merchants can learn valuable insights and implement strategies and optimizations to increase ROI.
In this article, we’ll cover the top order management performance metrics eCommerce merchants need to track, and how outsourced distribution and order fulfillment can help you increase your profit margins.
8 Order Fulfillment Metrics every Business Needs to Track
There are several order management performance metrics that eCommerce retailers can use to analyze and optimize their order fulfillment processes.
Here, we define the key metrics, how they work, their importance and benefits, and how you can use them along with every other aspect of your business to improve your order fulfillment systems.
- On-time Shipping
69% of customers are less likely to shop in your store if you don’t meet your delivery window, making on-time shipping one of the top order management performance metrics to track. It gives you a ratio of orders shipped earlier or on the requested date versus the total number of orders shipped.
You can calculate metric by dividing orders shipped early or on time by the total number of orders shipped.
Let’s say you have shipped 200 orders in two days, and only 50 of them have been shipped earlier or on time, then your on-time shipping is: 50/200=0.25 or 25%
On-time shipping is a perfect order fulfillment metric to track because it tells you whether your buyers’ packages are being shipped on time. If this metric is too low, it means that there are delays in picking, packing, and shipping orders, and you risk customer dissatisfaction if you don’t address the issue.
This KPI can be improved by streamlining the pick, pack, and ship cycle through automation so that orders are out on transit within the shortest time possible.
2. Total Order Cycle Time
As more and more customers are getting accustomed to same-day and next-day shipping, total order cycle time is one of the top order management performance metrics you should not ignore. It measures the average time it takes from the time a customer orders an item until the time they receive their package, helping you know how long it is taking to get orders to your customers’ doorsteps.
To arrive at this metric, subtract the time the order was placed from the time the order was received. Then divide the resulting number with the total number of orders shipped.
Order cycle time is a beneficial metric because it tells you how effective your 3PL partners, warehouses, and carriers are at fulfilling and shipping customer orders. Lengthy order cycle time means that you need to resolve and address issues with your 3PL vendors and shipping carriers to lower the amount of time between order processing and delivery.
Supplier lead times, invoicing times, and harmonizing accounts payable and receivable are some of the areas you can address to improve this fulfillment metric.
3. Order Picking Accuracy
According to a report in Forester, 23% of returns are a result of customers receiving the wrong product. This makes order picking accuracy one of the most crucial order fulfillment metrics to track.
Order accuracy is a perfect order fulfillment KPI because it measures the ratio of the number of error-free orders over the total orders shipped.
To arrive at this metric, divide the number of error-free orders by the total number of orders, and multiply the resulting number by 100.
Low order picking accuracy means that you are not delivering the right amount of the right items to your customers most of the time. This increases the cost of issuing returns as well as affecting the likelihood of repeat purchases due to dissatisfied customers.
You can improve this key metric for fulfillment by rethinking your overall inventory management and automating it with an efficient SKU system to organize your product lines and avoid confusion in the pick and pack process.
4. Rate of Return
Almost one out of three online retail orders are returned, making the Rate of Return an important metric to track to gain insight into why customers return orders.
The rate of return is measured by dividing the total number of returned orders by the total number of fulfilled orders.
Incorrect order processing, wrong packaging, broken or missing products on transit, long delivery times, and low quality of merchandise than represented online are some of the issues you can address to lower the rate of return.
Addressing these issues will spare you the wrath of dissatisfied customers who can slap you with negative reviews, save you costly return processing, and help you boost customer satisfaction.
Keep your eyes on this order management performance metric to avoid frustrating your customers and save on return processing costs.
5. Order Fill Rate
Order Fill Rate is calculated by dividing the orders delivered on the first attempt by the total orders shipped, and then multiplying the resulting number by 100. This order management performance metric helps you track the percentage of orders that are successfully delivered on the first attempt.
Your order fill rate percentage should be as close to 100% as possible; otherwise, you need to interrogate your supply chain and last-mile delivery systems and resolve any issues.
Addressing your supply-chain lead time, interrogating your shipping carriers, packaging process, and keeping your customers updated with possible delivery dates and times through an efficient order tracking system will help you improve your order fill rate and streamline your fulfillment processes.
6. Orders Picked Per Hour
This is an important order management performance metric because it helps you measure the productivity of your warehouse's workforce. It measures the productivity of each worker over a specific hour.
This metric is calculated by dividing the orders picked, packed, and shipped by the total hours within which they were picked.
Orders picked per hour is a perfect order fulfillment KPI to track because it allows you to gauge and quantify each employee's productivity in the fulfillment centers and see whether it is in line with the number of employees you have.
You can rely on this top fulfillment metric to put systems in place to enhance your workers' output and productivity through automation to reduce travel time associated with order picking.
7. Inventory accuracy
This is an essential order management performance metric you should be measuring to reduce stockouts and backorders. Inventory accuracy helps you establish whether the inventory count recorded in your inventory management system reflects the actual physical inventory count you have in your store.
To establish your inventory accuracy, divide the database inventory count with the physical inventory count.
You should always track this key order fulfillment KPI to avoid backorders – customers placing an order for products shown as 'in-stock', but are not available for picking –or facing stock-out-situations unexpectedly.
Automating your inventory management system with SKUs is one way to improve your inventory accuracy and harmonize your recorded inventory to reflect your physical inventory.
8. Shipping Cost Per Order
This is among the top order management performance metrics to track because it helps you know the amount of money you are spending to deliver each package to your customers.
You can calculate this order fulfillment KPI by dividing the total shipping cost over a certain period by the total number of successful deliveries during that period.
To realize decent margins and remain profitable in your e-store, you should keep shipping cost per package as low as possible. If your shipping costs are low, it means that you can transfer these benefits to your customers and delight them with lower prices, or offering free or low-cost shipping.
You can lower your transportation cost per package through order consolidation, communicating with your customers to avoid failed deliveries, and negotiating great shipping deals and rates through experienced and established shipping companies like Easyship.
How Outsourced Distribution and Order Fulfillment can Improve your Order Fulfillment Metrics
Taking the time to assess, analyze and improve your fulfillment processes and systems by tracking your order fulfillment metrics will help you improve your bottom line, and make life easier for you and your employees.
If you discover the fulfillment process is consuming too much time and resources, it might be time to consider outsourcing with a Third Party Logistics Company (3PL).
Here are the benefits of outsourcing distribution and order fulfillment to a reputable and well-connected 3PL eCommerce/Logistics company.
- You get the freedom to work on other areas of your eCommerce store such as marketing and scale your online business quickly.
- It ensures that your goods are stored as close to your customers as possible, hence reducing shipping times and costs.
- You can take advantage of their eCommerce software systems to manage your inventory and monitor your order management performance metrics.
- You can access pre-negotiated shipping rates from their network of carriers
Easyship helps you outsource distribution and order fulfillment from the best 3PL providers and warehouses around the world, access pre-negotiated shipping rates from over 250 shipping couriers, offer tracking with our global package tracking system, and automate your store’s operations with our powerful shipping software.
This helps you save time and money, increase conversions, and scale your business while remaining at the top of your order management performance metrics, hence delighting your customers with a streamlined fulfillment experience.
Sign up for an Easyship account today, and start your journey to perfect order fulfillment KPIs with our powerful shipping software and tools.
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