If you're running a distribution business, you already know how important it is to keep things running smoothly. But how do you know if your operations are really working as efficiently as they could be? Tracking the right metrics is key! By keeping an eye on these five essential KPIs, you can spot areas for improvement, increase customer satisfaction, and grow your bottom line. Let’s dive in.
Metric 1: Order Accuracy Rate (OAR)
This one’s simple: it’s the percentage of orders that go out without any mistakes. Say you’re shipping out phone chargers, and your customer ordered a black one, but you send a blue one. That’s an error, and it messes with your accuracy rate. Mistakes mean returns, refunds, and unhappy customers.
In e-commerce, one wrong item can turn a repeat customer into a one-time shopper. Keeping your accuracy high keeps your customers happy and saves you the cost of returns.
Tips to improve
- Use barcode scanning to reduce mistakes during picking and packing.
- Train your team and add a double-check before orders go out.
- Cut+Dry’s tools can help track errors so you can figure out where mistakes happen and fix them faster.
Metric 2: Inventory Turnover Ratio (ITR)
Your inventory turnover ratio tells you how quickly you’re selling your stock. In e-commerce, this is especially important—if you’re holding onto products for too long, they’re taking up space and costing you money.
A high turnover ratio means products are flying off the shelves and you’re getting paid faster. A low ratio? You’re holding onto stuff that isn’t selling. You’re also more likely to end up with outdated or unsellable items.
Tips to improve
- Use sales data to predict what you’ll need and when.
- Focus on what sells and clear out slow-moving products with discounts.
- E-commerce platform analytics can help you forecast demand so you’re never overstocked—or understocked—again.
Metric 3: On-Time Delivery Rate (OTD)
This is the percentage of orders that arrive on time, as promised. If you’re saying “delivery in 2-3 days” on your website, you want to hit that every time. E-commerce customers are all about speed. If you deliver late, customers might cancel the order or never buy from you again.
Tips to improve
- Work with reliable shippers and track their performance.
- Optimize delivery routes so your drivers take the best path.
- Cut+Dry tools to track delivery times, helping you identify weak points in your shipping process so you can fix them.
Metric 4: Fill Rate (FR)
Fill rate shows how well you’re fulfilling orders with the stock you have. High fill rates mean you have what people want when they want it; low fill rates mean customers are waiting or finding items out of stock. In e-commerce, customers expect items to be available all the time. A low fill rate means missed sales and lost customers.
Tips to improve
- Keep popular items in stock based on past sales and trends.
- Work with suppliers who can deliver quickly if you run low.
- E-commerce tools help you monitor inventory levels and set alerts so you can reorder before stock runs out.
Metric 5: Gross Margin Return on Investment (GMROI)
GMROI measures how much profit you’re making for each dollar you spend on inventory. It’s a fancy way of asking, “Am I making money or just sitting on unsold stuff?”. In e-commerce, inventory sitting on shelves equals money you’re not making. A high GMROI means you’re spending smartly on products that bring in revenue. A low GMROI? Time to rethink what you’re stocking.
Tips to improve
- Focus on high-profit items and phase out low-margin products, especially if they aren’t selling.
- Negotiate with suppliers to get better deals on what you know will sell.
- E-commerce analytics can track which products give you the most bang for your buck, so you can make smarter buying decisions..
Conclusion
By keeping an eye on these five metrics—order accuracy, inventory turnover, on-time delivery, fill rate, and GMROI—you’re setting your distribution business up for success. And for e-commerce, these numbers are everything! With Cut+Dry, you can track these metrics and take action in real time to keep your customers happy and your business growing.
