Companies that make up the supply chain, including distributors, operate under extremely complicated and unpredictable circumstances. In the last few years, the world has seen supply chain issues impact everything from toilet paper and baby formula to car parts. Competition gets more intense every day, while customer expectations continue to rise, and perhaps above all else, margins are getting slimmer and slimmer. Understanding which metrics can help guide your distribution business will keep you well informed with up-to-date, thorough, and precise key performance indicators (KPIs) that are driven by actual data fed in from your enterprise resource planning (ERP) solution. When equipped with these metrics, you will be able to make knowledgeable decisions backed by numbers so you can bolster your bottom line and move into the future with confidence.

Today, it is vital for distributors to do anything they can to save costs, increase revenues, and boost profitability. This requires business leaders to identify each process and function where bottlenecks occur and uncover new savings opportunities based on their metrics. Nine of the most crucial KPIs are:

1. On-time delivery (OTD)

   OTD is the main measurement used to see how efficiently your processes are running. It is merely measured by dividing the number of items you are delivering on time by the total number of items you are shipping.
   
   The “on-time” factor varies depending on your customers and industry along with whether the items were shipped by your own company or handled by a third-party provider. If partial deliveries are commonplace, OTD in full is a useful metric to help understand if total orders are being delivered on time.
   
   

2. Number of deliveries

   When you use a great enterprise resource planning (ERP) system, you will easily be able to record the number of deliveries you make within a specified period of time. This information can then set a baseline that helps you reference how your distribution operations are performing.
   
   With this KPI, you can also establish the growth potential of your company by analyzing the average shipments you make. Additionally, your analyses of the number of deliveries can help identify essential information related to rush hours, peak seasons, and more. This data, in turn, will help you allocate resources, so you are ready to meet your customers’ needs.
   
   

3. Order lead time

   Order lead time is a distribution KPI that is fundamental to most companies in this field. It is the measurement of the normal amount of time taken between a customer placing an order and fulfilling and delivering that same order to the customer.
   
   

4. Customer complaints

   Customer satisfaction should always be a leading goal for distributors. To assess this metric, you need to examine the number of issues buyers have and problem incidents that occur. Be mindful, however, that customer complaints can arise from any number of things, including picking inaccuracies, shipping damage, and mis-ships, just to name a few.
   
   It is wise to measure issues and these more granular details, but be aware of things outside of your control that may impact the data. Trends are used to evaluate underlying processes and the performance of things that you can control within your operations.
   
   

5. Order accuracy

   In the world of shipping and logistics, it is imperative to measure the rate at which you are accurately delivering customers’ goods. Plus, this metric helps track the number of shipments made without the goods being damaged in the process.
   
   To gauge the quality of your distribution and supply chain, your order accuracy KPI will give you some insights that you can ultimately use to improve customer satisfaction and increase loyalty. Order accuracy will also make it easier for your customers to recommend your brand to their colleagues and peers.
   
   

6. Lost sales

   It is not unusual for a prospective customer to receive a quote and then decide to go with someone else, and this is a metric that is worth tracking. When you determine the percentage of estimates that do not actually turn into business, the data provides insights that direct your company to make changes. For example, you may need to re-examine pricing, the amount of customer service you offer, or shipping times.
   
   

7. Total order cycle time (TOCT)

   Customers have come to expect nearly immediate delivery times. This means you need to measure how long it takes to fulfill each order that customers place with your organization.
   
   TOCT is one of the distribution KPIs that can do this by measuring the time it takes to fulfill a customer’s order. It is also important to measure how long it takes suppliers to fulfill your own orders. Doing so will enable you to maximize efficiency and deliver to your end customers more quickly.
   
   

8. Transit time to distance

   This KPI refers to the amount of time it takes people to pick up items from your warehouse and drop them off at their next location. The time it takes to pick up and transport goods after a customer places an order is important because it establishes how fast your delivery couriers are.
   
   To improve your distribution services, you want your drivers to make drop-offs within the smallest timeframe possible. You can also use this KPI to improve the efficiency of your transportation routes. For example, you might be using roads that are not as efficient as others.
   
   

9. Picking and packing cost

   Everything your company does has a cost associated with it. Business leaders typically want to look at costs from a high-level, breaking out various components like labor, assets, and fixed costs. However, as a distributor, the picking and packing cost is one that is variable and under your control.
   
   This distribution KPI measures how much your organization is spending on order lines for tasks such as handling, labeling, and packing.

NetSuite support provided by Citrin Cooperman

Citrin Cooperman’s NetSuite Practice helps clients in the wholesale distribution space and understands the challenges and opportunities that exist in a customer-focused marketplace. Our team works with businesses to ensure that the right processes and technologies are in place, so wholesale and distribution firms can take control of their operations from inventory and e-commerce to financials.

To learn more about investing in an ERP system that can capture all the KPIs you need to help your business run as smoothly and efficiently as possible, reach out to your Citrin Cooperman advisor or Maria Hammadi at sales@citrincooperman.com.