As eCommerce continues to grow, the importance of third-party logistics companies increases. 3PL warehouses play a vital role in shipping out orders from eCommerce websites. Brands like Amazon and Walmart can’t fulfill orders themselves, so they use the help of 3PLs. Find out more about the top eCommerce KPIs warehouses should track.
Productivity
A 3PL warehouse is a crucial part of any eCommerce business. Your warehouse can help you get your products to customers faster. As a result, you will achieve more sales, revenue growth, and a better customer experience. But how do you know if your warehouse is doing its job well? Productivity is a critical metric for measuring the performance of an eCommerce operation.
How To Calculate Productivity
Productivity is calculated by dividing total output by total input. To get this number without doing any math, use inventory management software. It will calculate your productivity for you!
Inventory Accuracy
One of the most important metrics to track is inventory accuracy. This metric measures how well your warehouse is keeping track of its inventory. A high level of accuracy means you know exactly how much product is in stock. At the same time, you will know that low levels can cause problems with forecasting.
Order Fulfillment Rate
This metric shows how orders are being shipped. This helps you understand customers’ time frame to wait for their products.
Inventory accuracy measures how a warehouse can track the details of items. It is one of the most important KPIs for eCommerce warehouses. This is because it’s related to customer satisfaction and revenue. If your customers can’t find what they’re looking for, they will be unhappy and return.
There are several ways to measure inventory accuracy. But it is recommended that you focus on cycle counts and pick rates. Cycle counts involve taking a physical inventory of all locations within your warehouse. This takes place at regular intervals (usually once per year) by counting every item in each area. This gives you an accurate picture of how much product you have. It also shows you how much you should have based on sales history.
Pick rates are another way to measure inventory accuracy. This is because they tell you how often items are being picked during th supply chain. If pick rates are low, there’s something wrong with your picking system. It could also mean there are few people assigned to this task. Another reason could be that there’s something about the process itself causing delays.
On-Time Shipment Rate
On-time shipment rate is a key performance indicator (KPI). It gauges how well your warehouse performs. It comes into play when shipping out products on time. This KPI is important because it impacts the customer experience. It also affects your brand reputation. A high on-time shipment rate indicates that your warehouse is doing well. On the other hand, a low on-time shipment rate indicates that you need to step up your game.
What Is the On-Time Shipment Rate?
The on-time shipment rate measures the percentage of orders shipped on time in a given period. If the metric shows a 95% and 100% value, your warehouse has stuck to its shipping schedule. If the number drops below 95%, your operations may have some problems.
Why Should You Measure This KPI?
A high on-time shipment rate helps promote customer satisfaction. Besides, it improves customer loyalty by ensuring prompt delivery times. It also improves customer retention rates. It shows that you can deliver what they need when they need it with no delays!
Cost to Serve
Cost to serve is the cost of fulfilling an order. Th costs could include items like picking, packing, shipping, and returns processing. It includes costs associated with third-party delivery services.
It’s a key metric for measuring the efficiency of your warehousing operations. It helps you understand how much you spend on each order. Plus, it can help track where your inefficiencies occur to make improvements.
Cost to serve is a metric that measures the cost of fulfilling orders. It considers the costs associated with warehousing, picking, and shipping your products.
Warehousing Costs
Your warehouse is integral to your business. It’s where you store all your inventory. A warehouse is where your customers expect to find what they’re looking for. This is after they place an order on your website. The size and location of your warehouse will affect how much it costs to operate. For example, if you run out of space, you may have to pay more to rent extra space.
Picking Costs
Every 3PL warehouse should also take into account picking costs. Picking refers to selecting items from stock to be packed into boxes for shipment. This process involves labor and equipment such as forklifts and conveyor belts. This equipment can add up when multiplied by thousands of orders each year! If you want to save money on picking costs, look for automated manual processes. You can use robotics or other technologies so that humans aren’t involved.
Return rate
The return rate is one of the crucial eCommerce KPIs to track. It refers to the percentage of customers’ return high return orders. It can show several issues with your fulfillment strategy and customer service. So, watching this metric is essential.
Return rates can fluctuate during the first few months of a product or service launch. At this stage, people are still figuring out what they like. So expect your return rate to increase until things have settled down.
Aim for a return rate under 5%, but don’t sweat it if your numbers aren’t there yet! Ecommerce companies often have higher-than-average returns because of how they sell their wares. Before buying them, people can buy items online without seeing them. Shopping online isn’t as tactile as going into stores. Some people are cautious when making purchases at first blush via eCommerce platforms.
Conclusion
Every eCommerce business is different. So, the eCommerce KPIs that matter in one company may not matter as much to another. 3PLs need to know the companies they’re working with. That means knowing which KPIs are most vital to a particular client. That way, there will be no guesswork in understanding the outlook of each deliverable. For more details, contact sales support.