We live in a world where enormous amounts of data are being collected and analyzed every day. It does not matter which industry or business you consider, if there is traffic, there is data. This is particularly true when talking about e-commerce as well. More and more consumers are shifting to online shopping for their needs and ensuring their satisfaction is crucial when running a successful e-commerce business.
The more your e-commerce business grows, the more you will witness complexities, and hence it becomes vital for you to track certain metrics. We are not talking just numbers, we are talking about Key Performance Indicators or KPIs that are backed with real-time data so you know exactly where to focus on when you want to take your business to the next level.
In an e-commerce business, Order Fulfillment is a very sophisticated process. Every order you receive is different, and your customers might have different expectations. Some customers might want overnight shipping or special add-ons. While some of them might want both. Regardless of the condition, it is crucial to get the Order Fulfillment process right every single time. Hence, understanding and tracking certain Order Fulfillment KPIs is essential. Once you track these metrics, you can analyze the performance at every stage and improve efficiency.
There is a wide variety of Order Fulfillment KPIs you can track depending on the nature and maturity of your business, but in this article, we will talk about some of the most important Key Performance Indicators you simply cannot ignore.
This Key Performance Indicator is a straightforward method of analyzing how effective you are at shipping your orders on time. This is a ratio of the number of orders shipped on time or early divided by the total number of orders shipped in the same period. If your On-time Shipping rate is too low, it means there are significant delays in orders being picked, packed, and shipped on time. In today’s day and age where online shoppers expect super-fast deliveries, delays in shipping could mean lower customer satisfaction.
Around 70% of customers are less likely to buy from your e-commerce store if you don’t meet your promised delivery date. This is a huge number of repeat sales, and hence it is crucial to keep your On-time shipping rate in check.
On-time Shipping Rate = Total number of orders shipped on time or early / Total number of orders shipped in the same period
Order Cycle Time
This Key Performance Indicator is another important metric when it comes to understanding your performance. Order Cycle Time is the average processing time from the point the order is placed to the point where the order is shipped. This is mostly an internal metric and will tell you exactly at which point there is a delay in processing.
There are many reasons as to why there could be a delay in processing like poorly designed Warehouse Layouts and incorrect packaging practices. Regardless of the reason, it is paramount to keep your Order Cycle Time as low as possible, to ensure timely deliveries and improved customer satisfaction. This could translate into efficient order processing and increased profits.
Order Cycle Time = Time the order was shipped - Time the order was placed
Order Picking Accuracy
Order Picking Accuracy is one of the most important Key Performance Indicators when it comes to tracking your business’ efficiency. When you receive an order, you need to ensure you are picking the right item every single time. Customers not only expect fast deliveries but also the right products being shipped to them. According to research, about 23% of orders get returned because customers receive the wrong item. Hence, it is extremely crucial to ensure your Order Picking Accuracy Rate is as high as possible. A successful e-commerce business organization reported an Order Picking Accuracy of 99.8%. Meaning, leading e-commerce businesses believe their profits will drastically improve once they track their Order Picking Accuracy, and we recommend you do too.
Order Picking Accuracy = Total number of orders that are picked and verified to be accurate before shipping / Total number of orders picked in the same period
Perfect Order Rate
The Perfect Order Rate is one of the most holistic Key Performance Indicators as it includes various other metrics in the mix. Improving your Perfect Order Rate directly translates into highly efficient order fulfillment, quicker deliveries, customer retention, and most of all increased profits. As luring as it sounds, in a complex warehousing environment, maintaining a Perfect Order Rate is quite challenging. There are so many moving parts in a warehouse and making sure everything works perfectly every single time is not easy. That’s where using a powerful Warehouse Management System can come to your rescue. We recommend consulting an industry expert to know more about the best practices to improve your Perfect Order Rate, so you get it right every time.
Perfect Order Rate = (Percentage of orders shipped on time) X (Percentage of orders shipped completely) X (Percentage of orders shipped with no damage) X (Percentage of orders with accurate documentation)
Orders Picked Per Hour
This is one of the most insightful Key Performance Indicators there is. As the name suggests, it denotes the total number of orders picked per hour. But, there is more to it. It is one of the metrics that quantify the throughput of the Warehouse team. It gives you insights into how you can maximize your team’s performance and eliminate burnouts. That’s not all, you can also monitor how inventory placement affects the picking efficiency. For example, storing fast-moving inventory in locations that are easily accessible. Storing fragile inventory in separate locations to avoid damages during picking. Implementing a robust Inventory Management System can help you tackle these issues. Resulting in improved Orders Picked Per Hour rate, and in turn improving your performance.
Order Picked Per Hour = Total number of orders picked / Total number of hours spent in picking
Order Fill Rate Percentage
This is one of those Key Performance Indicators where if you improve your Order Fill Rate Percentage, you directly reduce your losses. Order Fill Rate Percentage is the percentage of orders delivered successfully in the first attempt without placing a backorder. It is recommended that you keep your Order Fill Rate as high as possible or else you will have to spend a large amount of your time investigating and tracking orders that either go missing or get damaged multiple during to-and-fro transits. The Order Fill Rate Percentage can also help you make the right logistical decision because sometimes it’s not just about saving money on shipping, but it is also about considering good shipment safety.
Order Fill Rate Percentage = (Total number of orders delivered in the first attempt without placing a backorder / Total orders placed) X 100
Peak Warehouse Capacity Used
Peak Warehouse Capacity Used is one of the most useful Key Performance Indicators there is. It might sound simple, but there is a lot of complexity involved. When we say Peak Warehouse Capacity it does not only mean empty spaces being filled. As much as it holds, it is critical to understand that a warehouse is very dynamic, just like your e-commerce business. Throughout the year, there are different seasons contributing to a large portion of your sales. Every peak season is unique and demands different warehousing strategies. Depending on what time of the year it is, you have to plan season-relevant inventory so you don’t face stockouts. For example, stocking up on Christmas sweaters in the middle of summer does not make sense. A recent survey stated around 34% of businesses has delayed shipping because they do not have the item mentioned in the order in stock, meaning one in three orders received, is not being fulfilled on time. This is another important reason why you need to implement a powerful Warehouse Management System, which can help you plan your inventory effectively and enhance your Peak Warehouse Capacity.
Peak Warehouse Capacity Used = (Amount of warehouse space used/ Total warehouse space) X 100
Average Cost Per Order
When it comes to running any profitable business, understanding the finances is critical. When we talk about the e-commerce business, the Average Cost Per Order is the total warehousing cost, including receiving, storing, picking, packing, shipping, and all the other miscellaneous expenses during the year. It is also important to track increases or decreases in sales along with comparing performance with your competition. That being said, it is important to invest in the right resources that give you extended returns. Technically equipped businesses reported that using advanced tools increased their profits by 23%, and 39% of the companies using modern technology outperformed their competition. Hence, implementing the right set of tools will help you scale your business to a whole new level.
Average Cost Per Order = Total warehousing costs for the accounting period/ Total number of orders received in the same period
The best way to improve your e-commerce business’ performance is by tracking and analyzing important metrics that are relevant to you and the nature of your business. With so much complexity and enormous amounts of data that are available, it is critical to equip your business with powerful tools so your business can scale new heights.
The above list explained in detail some of the Key Performance Indicators you should know about when tracking the performance of your business. You should also know, this list is not limited to the above few metrics. There are so many more Key Performance Indicators that can be analyzed with extensive amounts of data that are at your disposal. In today’s world, you need to have the competitive edge to keep moving forward. Customer satisfaction and loyalty can go a long way. Not just that, thinking about the well-being of your employees is also as important as customer happiness. That’s why it is of paramount importance to invest in the right tools. Tools that tell you where your focus should be, and tools that make your lives easier.
As business owners and executives, making the right call at every step of the way is critical, and to do so, having an in-depth knowledge of these Key Performance Indicators can be helpful. That’s where Hopstack comes in. With Hopstack’s advanced Analytics and Reporting module, you can effectively measure your e-commerce business’ productivity and shift your focus in the right places to make the most impact.
With Hopstack, you can create fully customizable reports and insightful dashboards to track your most important metrics and KPIs. With Hopstack’s proprietary optimization algorithm you can track and increase the throughput at every stage in the fulfillment cycle. Hopstack’s module collects over 5 million data points to capture real-time information at every stage right from picking to shipping. Planning and managing optimal inventory, space, and workforce is simpler with Hopstack’s predictive capabilities.
You could be a Warehouse Owner or a Warehouse Manager, with Hopstack you can simplify the entire process and gain full control over your Warehouse. If you want to know more about these metrics and KPIs, or if you want to learn more about the best practices to optimize your warehouse, talk to our industry experts who will guide you through the entire process.