There are hundreds of possible metrics in the textbooks that your distribution operations could track. Having a grasp of each metric can provide some sort of value to the company. But there are a few that are critical to your business performance and goals. Those few are known as key performance indicators (KPIs). They need to relate to your goals, they should be available automatically from your ERP as transactions complete. Everyone should know how the metric is calculated and how their jobs affect those metrics.
Here are a few I like.
Rate of perfect order completion
You need at least one metric that indicates your customer satisfaction. Perfect order completion means every line of an order is shipped complete and on time. Your customer wants the baseballs - not the bats. And she doesn’t want either after the season is over. Bragging about 99% on time delivery is meaningless if you miss 1% of each customer order.
Cost per order shipped
Are you spending too much? Add up payroll, the electric bill, maintenance on your forklifts, and payments on your ERP system. All the bills have to be paid. Are shipments down? Have you reduced payroll to match? Your business is variable and this measure helps watch overall costs related to today’s volume.
Dollars per line shipped
You should have a revenue metric to keep things in balance. If you ship a lot of simple orders only moving a box to the UPS truck, this indicator will go down. If you have a lot of more complex orders where each one needs to be finished with a particular color faceplate and individually boxed for shipment, this will go up. Your business is variable. If the revenue per line is falling, you might need to reduce costs or look for a different mix of customers and products.
Dock to stock time
You should have an efficiency metric and this one also highlights your throughput speed. How many minutes did it take yesterday from the moment a delivery truck arrived until the products were all received and placed in bins? If you can’t find it, you can’t ship it. If you put it away quickly, you probably are picking and shipping quickly too.
Imagine yourself at a sporting event. Time is moving on the Jumbotron. The scores for each team are in huge lights. Other statistics such as number of fouls, balls and strikes, outs, etc. are shown in smaller lights.
What metrics are on your company Jumbotron?