But as the desire to build data-led cultures expands, there is also the risk of data overload, particularly for CEOs and brand owners overseeing various business functions, especially eCommerce fulfilment.
So when it comes to evaluating the performance of your eCommerce fulfilment, how do you decide if things are running smoothly or if you have a potential issue on your hands?
1. Order Accuracy
One of the most important KPIs to monitor regularly is the number of orders picked, packed and shipped correctly as a percentage of all orders.
Order accuracy = (total orders fulfilled accurately/ Total orders fulfilled) *100
Studies have shown that accuracy can have a significant impact on customer satisfaction. According to a survey by Forrester, 89% of consumers are less likely to shop with a retailer again after a negative experience with an incorrect order. In addition, another survey found that 63% of consumers said that receiving the wrong item is the most frustrating part of the online shopping experience.
Unfortunately, inaccurate orders will occur within any fulfilment processes; however, minimising this will help safeguard your brand and profit. On average, a good order accuracy for direct-to-consumer (DTC) brands is 96-98%. A declining order accuracy rate is a pivotal sign of a problem within your operations and typically occurs due to training, processes or capacity limitations.
2. Total Order Cycle time
As Amazon continues to transform shipping times, eCommerce consumers’ expectations are also changing. According to a recent study by McKinsey, consumers expect online orders to be delivered the next day. For other brands, the pressure is on to meet customer expectations with delivery times.
While many businesses struggle to meet these expectations, brands must deliver on the timescales they promise consumers. Monitoring the total order cycle time will allow brand owners to ensure they continue to deliver the promised customer experience.
Number of days elapsed between all orders placed and when delivered / total number of orders in time frame
Increased time within the order cycle will result from an issue within your in-house fulfilment or with your delivery courier.
3. Distribution Costs (As A Percentage Of Sales)
As with any operation within your organisation, it’s crucial to monitor costs, and that’s no different for your eCommerce fulfilment operations. It is generally accepted that optimising distribution channels can help reduce costs and improve operating margins for a brand. However, rising costs can negate the benefit of efficiency developed elsewhere.
These costs include all expenses relating to receiving and storing stock and picking, packaging, and shipping orders.
Distribution costs (as a percentage of sales) = total distribution costs / total sales
Monitoring your total distribution costs over time is a great way to identify an issue if there is a sudden cost spike.
4. Average Warehouse Capacity Used
As your brand grows, your storage needs will also increase. However, with many brands affected by seasonality, that usage will likely fluctuate throughout the year. Research has shown that, on average, the utilisation rate for warehouse space is approximately 65%, which means that 35% of warehouse spaces are not used to their full capacity. With the average cost per square foot for warehouse space in the UK at £5.92, the business could be paying £2.07 per unused square foot.
For brands that are growing rapidly or facing seasonal peaks, you may find yourself rapidly running out of space when they are faced with consistent growth and seasonality growth. Monitoring average warehouse capacity usage and predicting future use can provide the foresight to seek solutions or cost-saving alternatives.
Average Warehouse capacity used - amount of warehouse floor space used / total warehouse space x100
5. Total Number Of Customer Complaints
While customer complaints are not traditionally associated with operational KPIs, for an eCommerce brand, they are critical and are a key warning signal that your customers are unhappy with the service.
According to data from the UK’s Department for Business, Energy and Industrial Strategy, the number of customer complaints about deliveries in the UK has been steadily increasing in recent years. In 2020, there were over 1.5 million complaints about deliveries, up from just over 1 million in 2018.
The most common complaints were related to late or missing deliveries, followed by issues with the condition of the goods upon arrival. In addition, there were also many complaints about poor communication and customer service from delivery companies.
An increase in complaints about orders and delivery is a clear signal of a problem within your eCommerce fulfilment process.
How to manage a drop in operational performance?
As brands grow, it’s common to experience turbulence within their operational performance, particularly as they outgrow their in-house capacity or existing provider.
However, eCommerce businesses must react fast to protect their brand and ensure customers continue buying. For some brands, it may be time to consider the next stage of fulfilment.
