Top 10 Order Fulfillment Metrics / KPIs to Measure Performance

We live in a world with emerging technologies, distribution networks, and process automation. These advancements have not only minimized costs for e-commerce businesses, but they have also allowed customers to enjoy same-day or next-day delivery.

As an e-commerce business, you need to identify ways to improve your processes and customer response time. If you do not, you will get left behind by the competitors.

So, how do you monitor and evaluate how well your current order fulfillment process is performing? The best strategy is to form a solid set of order fulfillment metrics. Below, we share essential data you will need, recommendations for procedures to analyze it, how you can analyze it, and different strategies to improve each of these metrics:

Top 10 Order Fulfillment Metrics and KPIs to Measure Performance

1. Order Picking Accuracy
2. Total Order Cycle Time
3. Order Fill Rate
4. Perfect Order Rate
5. Shipping Cost Per Order
6. On-Time Shipping
7. Rate of Return
8. Orders Picked Per Hour
9. Dock to Stock Time
10. Inventory Accuracy

1. Order Picking Accuracy

Order picking accuracy is a critical metric for e-commerce and order fulfillment. This measurement assesses the percentage of error-free orders out of the total shipped orders. 

Order picking accuracy also explains how likely a product will arrive to the customer without any issues. This metric gives you a good idea of how reliable the order picking processes are.

• Order Picking Accuracy (%) = (The Total Amount of Error-Free Orders / The Total Number of Orders) X 100

For example, if the amount of error-free orders you deliver is 70 and the number of orders you had was 80, your order picking accuracy is 87.5%

A low order picking accuracy could mean many things, but mostly it will indicate problems with order fulfillment. 

Not only will this result in lower customer satisfaction, but it will also mean adding higher costs for returns. You could also lose out on additional revenue from a lack of repeat customers.

To improve your order picking accuracy metrics, evaluate your current inventory management process. There could be opportunities for productivity boosts or automating parts of your system.

A reliable SKU system could accurately organize your products and eliminate confusion or inconsistency in the picking process.

2. Total Order Cycle Time

Nowadays, customers have high expectations for how quickly they receive their goods after ordering. Not meeting these expectations could affect your brand name and reputation.

Therefore, total order cycle time is an essential metric for a business to monitor. This metric represents the average time for a consumer to receive their goods after placing an order. To accurately calculate the total order cycle time, use the following formula:

• Total Order Cycle Time = Actual Ship Date – Customer Order Date

Simply put, if your actual shipping date is the 25th of June and your customer punched the order in on the 20th of June, you have a 5-day order cycle time. 

A low total order cycle time means your business is responsive to its customers. When you constantly keep this metric low, you can advertise it on your website to entice people to buy. 

On the other hand, a longer order cycle time means your internal teams are not in sync. There could be bottlenecks in your operations that you need to identify and optimize.

To help reduce your total order cycle time, analyze all the processes and systems for shipping and picking orders. 

Locate areas where you could automate to save money and time. The order cycle time metric can also convey how effectively your warehouses, carriers, and 3PL partners coordinate orders. Strengthening these relationships could also contribute to a lower cycle time.

3. Order Fill Rate

The order fill rate will evaluate the percentage of orders that get delivered successfully on the first try. This metric ties in with order picking accuracy, but it indicates how accurate the entire order fill rate process is. To calculate order fill, follow this simple and straightforward formula:

• Order Fill Rate = (Orders Delivered on the first try) / (Total Orders) * 100

If the total number of orders you delivered on the first try are 90 and the total orders are 100, your order fill rate is 90%. 

Order fill rate is essential to track because it shows how reliable your company is at fulfilling orders. If the metric does not hover near 100%, you should audit where the issue might be. Start with analyzing inventory management processes, supply chain lead time, vendor relations, last-mile delivery systems, and other shipping carrier gaps.

Tending to your supply chain lead time is also another effective place to start. You might need to interrogate or engage with your shipping carriers to understand how all parts of the process operate. You could also invest in a reliable order tracking system to improve the fulfillment process, optimize your order fill rate, and quickly communicate delivery updates to your customers.

4. Perfect Order Rate

Perfect order rate assesses what percentage of total orders ship without deviations or errors. This measurement will show you the performance of your delivery and storage systems. It could also help you improve other areas like customer satisfaction, budgeting, cost management, and overall process improvement. There are four main components that contribute to a “perfect order”:

• The product must be delivered and arrive in its complete form product
• The product must arrive on-time
• The product must arrive undamaged
• The product must arrive with proper documentation

When you calculate order performance, you will perform this routine calculation:

• Perfect Order Rate = (Percentage of Orders Delivered On Time) x (Percentage of Orders Completed) x (Percentage of Orders Free of Damage) x (Percentage of Orders with Accurate Paperwork and Documentation) x 100

Supposing that the percentage of orders delivered on time is 90%, the percentage of orders completed is 80%, the percentage of orders free of damage is 85% and the percentage of orders with accurate paperwork and documentation is 75%, your perfect order index would be:

90%*80%*85%*75%*100 = 45.9%

According to the American Productivity and Quality Center data, top-performing organizations have an average perfect order rate of 90%. 

To help increase your Perfect Order Rate, try changing how you take and accept orders, distribute your inventory, deliver your products, and send out invoices and documentation.

5. Shipping Cost Per Order

Shipping Cost Per Order is one of the most critical metrics for order management. It tells you how much money you spend each time you deliver a product to a customer. Therefore, you can also see how profitable you are, given the costs to get the product to a customer. To accurately calculate shipping cost per order, follow the below formula:

• Shipping Cost Per Order = (Total Shipping Cost Over a Set Period of Time) / (Total Number of Successful Order Deliveries During the Same Time Period)

If the total shipping cost over a period of time is $500 and the total number of successful order deliveries during the same period is around 50, the shipping cost per order will be $10.

It’s best to keep the shipping cost per order as low as possible. Margins and profitability goals will motivate you to investigate ways to minimize this figure. By keeping your shipping costs small, you can realize these cost savings on your bottom line.

Shipping cost per order is also an excellent metric for budgeting purposes. While shipping cost per order is a single figure, there are several costs that make up the “total shipping costs over a set period of time.” You can evaluate which costs you can mitigate or minimize, contributing to a lower shipping cost per order.

6. On-Time Shipping

There are several competing e-commerce stores in the marketplace offering same-day shipping or timely delivery. Your company’s ability to ship items quickly and efficiently will be critical for customer retention and future revenues. If you do not adhere to your promised delivery time, you could also lose out on repeat business.

It provides you a ratio of total orders shipped before the “requested date” versus the total amount of orders. To calculate the on-time shipping metric, you will need to perform the following calculation:

• On-Time Shipping = (Total Orders Shipped on Time or Early) / (Total Number of Shipped Orders)

For example, you shipped 500 orders last week. Out of the total orders, 75 of them were shipped on time or earlier than the requested date. If that’s the case, your on-time shipping rate is (75) / (500) = 15%.

It’s crucial to note that On-Time Shipping is different from Order Cycle Time which refers to the average time taken to ship out an order without including the actual shipping time:

• Order Cycle Time = (Delivery Date – Order Date) / Total Orders Shipped

On-time shipping is a helpful metric because it tells you how often your customers’ packages are shipped in a timely manner. 

If the delivery date is the 28th of November while the order date was the 25th and the number of total orders shipped during the time is 10, the order cycle time would be 3/10 = 0.3 days per order. 

If this number is lower than average, there might be hiccups in packing, picking, or shipping your packages. To improve this metric, you can look at consolidating the pick, ship, and pack cycle through process improvement or automation.

7. Rate of Return

Customers return packages for several reasons. The rate of return is a critical metric because it provides more insights into why buyers return items.

• Return Rate = The Total Number of Returned Packages / The Total Amount of Orders Fulfilled.

If the total amount of orders returned is 50 and the total amount of orders fulfilled is 1000, the return rate is 5 %. 

Lowering your rate of return will boost customer satisfaction in the long run. It will increase the chance of customers placing repeat orders. 

There are several areas you can address to lower your rate of return, including order processing, incorrect packaging, missing product, or broken product. When you identify these potential gaps, you could minimize the number of negative online reviews.

8. Orders Picked Per Hour

Orders picked per hour are another essential order fulfillment metric to track because they could minimize backorders and stockouts. 

Optimal inventory management and accuracy is when your physical inventory count matches the figure in your inventory system. These fulfillment metrics serve as a “check” to ensure these two figures align.

When your inventory is accurate and aligned in the system, you can provide reliable information to customers. 

Potential buyers will navigate the e-commerce site, and the product pages will tell them if you have it in stock. If your orders picked per hour do not match the system, then customers might place an order for something that is unavailable which will likely lead to disappointment. 

To accurately measure orders picked per hour, perform the following calculation:

• Orders Picked per Hour = (Total orders picked and successfully shipped) / (Total hours worked in picking and shipping)

If you pick and successfully ship 25 orders and the total hours spent on the process is close to 5, then you have a rate of 5 orders picked per hour.

9. Dock to Stock Time

Dock to stock time is another order fulfillment metric that measures how efficient your stocking capabilities are. The dock to stock time metric calculates the total amount of time between receiving inventory to the time it is put away. To calculate the dock to stock time metric, do the following calculation:

• Dock to Stock Time = (Time Received Inventory Is Completely Put Away) – (Time the Inventory Was Received or Incoming)

If the time that the received inventory is put away in 5 days and the time the inventory was received or incoming is 3 days, the dock to stock time is 2 days. For smaller companies, dock to stock time can and should be in hours. 

This critical cycle starts when the warehouse team receives goods or delivery packages from the supplier and ends when the goods are completely placed in their spot in the warehouse and accurately documented in the warehouse management system or inventory management system. If this cycle takes too long, it might be time to analyze your current receiving processes.

10. Inventory Accuracy

Inventory accuracy enables you to assess stock quantities within your inventory management system. You will then compare the numbers with the amount of physical inventory. This metric goes hand-in-hand with Dock to Stock Time and will serve as a critical accuracy check in the system. To calculate your inventory accuracy, follow the below formula:

• Inventory Accuracy = (Database Inventory Count) / (Physical Inventory Count)

If the inventory count in your database shows 90 units while the physical count reveals there to be 100 units, the inventory accuracy is 90 percent. 

Your physical inventory count should ideally be the same as the number reflected in your inventory management system or warehouse management system. In larger warehouses or distribution centers, there are typically differences. However, an unusually high inventory inaccuracy rating could cause customer complaints, unforeseen backorders, and higher costs.

If you are seeing discrepancies, it might be time to evaluate your current receiving processes. There could also be issues in how new employees are trained. It is critical to look at all angles when optimizing inventory accuracy.

Takeaway

As you can see, there are multiple ways to assess the performance of your order fulfillment metrics. The first step is to assemble these metrics, then to identify where the issue went wrong.

Each of these metrics will guide you toward effective problem-solving. At the end of the day, the top priority is ensuring fulfillment through the supply chain and doing what you can to enhance customer experience and satisfaction.

Since the consumer is inevitably the one driving the demand, it’s critical that businesses successfully provide them with their desired products in the time and place they want.