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Measuring Supply Chain Performance: Shipment
What's in this blog post?
- Real first-person examples of good and bad shipping stories
- The four most important shipping KPIs you must be monitoring
- Access to further guides on supply chain metrics and overall company metrics
I’m by no means an expert in supply chain, but I am an expert in online shopping, so quality shipping is an important aspect of my purchasing habits. Lucky for you though, I do work with a number of experts in the field of supply chain logistics who filled me in on the most important metrics behind the process of getting my order from the warehouse shelf to my front door and why they matter to your supply chain.
Overall supply chain performance can be measured by examining three key questions:
- Is the supply chain supplying the things your organization needs?
- Is it providing customers with the things they need?
- And is it doing it all in the right time and for the right price?
To find the answers, there are seven critical Key Performance Indicators (KPIs) you should be monitoring. The first three of those KPIs are tied to inventory. You can read about those in the blog post: Measuring Supply Chain Performance: The 7 KPIs You Need to Know (part 1: Inventory)
Today, I'm going to dig into the KPIs that matter most for the shipping end of your supply chain.
The four most important KPIs for shipping
KPI for shipping #1: On time in full delivery
This KPI is the basic measure of timely delivery in its complete condition. “In full” is an important distinction for this metric. Unless the entire order arrives on time in the full quantity that was purchased, the order should be considered late.
This KPI can be measured as an overall percentage across all orders. While this number is useful, in many cases will not provide the level of detail needed to catch problems as they arise. An overall average could meet company standards without revealing that one warehouse pulling shift, for example, is far outperforming another. Your analytics solution should allow for digging into this data by date, location, shift, and individually employee.
KPI for shipping #2: Average days late
Late deliveries are never ideal, but tracking every late order can help the organization understand the consequences of late deliveries. As a consumer, I’m never happy when an online delivery doesn’t arrive when it was promised at the moment of purchase. There is a vast difference however between a delivery that’s one day late and one that’s one month late. And my loyalty to a brand very much depends on whether those late deliveries are outliers or commonplace.
Just recently I ordered a gift for a friend’s birthday from an online vendor. The order was promised to reach my door within seven to 10 days. I had a two-week window until her birthday, so 10 days would still allow me plenty of time. Except it didn’t arrive in 10 days. Or 11. Or 12. When I tracked my package I saw that it was still on a shipping container on its way from China … and it would arrive in another two weeks. I was not happy. The chances of me using that vendor again? Zero.
In another instance, a shipment of household cleaning supplies coming from an online marketplace that I commonly purchase from wasn’t waiting for me on my front porch on the guaranteed delivery day. This vendor, however, almost always makes good on their delivery promises. In many instances, packages even show up early. Will this instance of late delivery weaken my loyalty to their brand? Absolutely not.
Your business intelligence solution should give company employees insight into every step of the delivery process, making it easy to zero in on what causes delays when they happen. Full visibility into how many days a product spends in the factory, in the warehouse, and on route to the customer will make it easy to spot red flags.
KPI for shipping #3: Rate of returns due to shipment damage or shipment error
When it comes to shipping metrics, quality of delivery is just as important of time of delivery. Does it actually contain what the customer ordered? Did the delivery arrive in the same condition as when it left the warehouse?
I just got married, so if you had walked into my apartment any time over the past three months, it would have looked like a home goods warehouse with the amount of boxes arriving each day off of our wedding registry. One particular box, however, arrived looking like it had been kicked down the street the entire way from the department store to our front door. Needless to say, the tea cups inside weren’t completely intact.
Was it the vendor’s warehouse where this damage took place or was it the fault of the delivery service? In the end, it doesn’t matter because the items still had to go back to the vendor, counting as a red X for this shipping KPI. So if you aren’t doing the delivery internally, be sure the company you partner with is one you trust.
KPI for shipping #4: Order picking accuracy
While many of the aforementioned KPIs can be attributed to anything along the line from warehouse to customer, order picking accuracy is focused specifically on the quality of warehouse operations. Order picking errors result in the wrong product reaching the customer. It also signifies a breakdown in warehouse efficiency, as time must be taken to return the incorrect order and track down the right one to re-send to the customer.
A proper system will ensure some type of verification process for each item before it leaves the warehouse. This should be digitally recorded and analyzed to spot any trends and fix any problems proactively.
Do you need more help in determining the KPIs that are right for your company? Avoid information overload and focus on the metrics that matter most with this guide for KPIs for any industry: the Metrics that Matter.