It’s no secret that supply chain companies operate under extremely complicated and unpredictable situations. In the last couple years, the world has seen supply chain issues impact everything from toilet paper and baby formula to car parts and everything in between. Competition gets stiffer every day, while, at the same time, customer expectations continue to rise. Perhaps above all else, margins are getting slimmer and slimmer.
Today, it’s vital to do anything you can to save costs, increase your revenues, and boost your profitability. That sounds great on paper, but how do you actually identify each process and function where bottlenecks occur and where new opportunities to save pennies can be found?
The answer: you need to know your metrics.
The appropriate metrics will help guide your distribution business and 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 you’re armed with this information, you’ll be able to make knowledgeable, intellectual decisions that are backed by the numbers so you can bolster your bottom line and move into the future with confidence.
So, which KPIs are most crucial? Here’s a look at some of our favorites.
1. On-Time Delivery (OTD)
OTD is the main measurement you’ll use when you want to see how efficiently your processes are running. It’s merely measured by dividing number of items you’re delivering by the whole sum of units you’re shipping.
The “on time” factor varies, depending on your customers and industry, as well as 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 you drill down into further details.
2. Number of Deliveries
When you use a great ERP system, you’ll 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 determine how your distributions operations are performing going forward. With this KPI, you can also establish the growth potential of your company by analyzing the average shipments you make.
Your analyses of the number of deliveries can also help you identify essential information related to rush hours- peak seasons, and more. This data, in turn, will help you allocate resources so you’re ready to go when your customers come calling.
3. Order Lead Time
Order lead time is a distribution KPI that’s fundamental to most companies in this field. It’s the measurement of the normal amount of time taken between an order being placed and that same order being fulfilled and delivered to the customer.
4. Customer Complaints
Customer satisfaction should always be a leading goal for your organization. If this is the case, you need to be examining the number of buyers’ issues and problem instances that are occurring. 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’s wise to measure issues and these more granular metrics, but be aware of the things outside of your control that might also impact the data. You can utilize any trends to look at underlying processes and performances of things you can control within your process flows.
5. Order Accuracy
In the world of shipping and logistics, it’s imperative to measure the rate at which you’re accurately delivering customers’ goods. Plus, this metric also helps you track the number of shipments you’re making 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 will ultimately improve customer satisfaction and increase loyalty. It’ll also make it easier for your customers to recommend your brand to their colleagues and peers.
6. Lost Sales
It’s not impossible for a prospective customer to receive a quote, then decide to go with someone else. This is a metric that’s worth being tracked. When you determine the percentage of estimates that don’t actually turn into any business being conducted, the data can give you insights that can direct your company to make pivots. For example, you might need to re-examine pricing, the amount of customer service you offer, or your shipping times.
7. Total Order Cycle Time (TOCT)
Customers have come to expect nearly immediate delivery times, which means you need to measure how long it takes to fulfill each order being placed with your organization.
TOCT measures the time it takes to fulfill a customer’s order. Mind you, you should also be measuring how long it takes suppliers to fulfill your own orders so you can deliver to your end customers.
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 the order is placed is important because it establishes how speedy your delivery couriers are. To improve your distribution services, you want your drivers to be able to make the drop-offs within the most minimal timeframe possible.
You can also use this KPI to improve the efficiency of your transportation routes. For example, you might be using roads that aren’t as efficient as others.
9. Picking and Packing Cost
Everything your company does as a cost associated with it. You might want to take a high-level tactic, breaking out various components like labor, assets, and fixed costs. However, as a distributor, the picking and packing cost one that’s variable, and it’s under your control.
This distribution key performance indicator measures how much your organization is spending on order lines for tasks such as handling, labeling, and packing.
Work with MIBAR
At MIBAR, we’ve worked in the wholesale distribution space since our inception and know the challenges and opportunities that exist in the customer-focused marketplace. We work with some of the best in the business, and know that with the right processes and technologies in place, wholesale and distribution firms can take control of everything from inventory to ecommerce to financials.
When you’re ready to invest in an ERP system that can capture all the KPIs you need to utilize to make your business run as smoothly and efficiently as possible, reach out to our team at MIBAR. We’re here to help you make the most of your business, from the ground, up.
Additional Distribution Resources
Modern Warehouse: Introduction to WMS Features
Compare Distribution ERP Systems: ERP Evaluation Checklist
How to Succeed When Manufacturers Are Pushing Distributors into Ecommerce
