In today’s hotly competitive eCommerce environment, it’s easy to assume that more is always better.
But that’s not necessarily true for eCommerce fulfillment KPIs, especially if you’ve just started working with a new 3PL or have added a fulfillment operation.
That’s just one of the warnings issued in Amware’s eBook, KPIs for Warehouse Fulfillment Operations: 10 Tips, a no-nonsense primer that addresses some of the most common mistakes that companies make when setting their performance metrics for order fulfillment.
While it’s definitely tempting to establish numerous KPIs from the get-go, setting too many too soon can result in misaligned priorities – causing fulfillment personnel to pay too much attention to activities that are peripheral and too little attention to those that are mission-critical.
A smarter approach is to start with handful of essential performance metrics for order fulfillment, bearing in mind that you can always add more as the operation or 3PL relationship matures. And if you’re not sure where to start, consider ones like dock-to-stock time, picking accuracy, inventory integrity, and on-time shipping. Or apply this simple rule: If you can’t answer the “So what?” question about why a KPI has been included, that’s probably a good indicator it doesn’t belong in your starting line-up.
Order fulfillment KPIs: strategies for success
Once you’ve established your KPIs, here are some suggestions for getting the most out of the program.
Stay on it. When it comes to updating and evaluating performance data, real-time updates can make all the difference. Let’s say, for example, that you have a 24-hour inventory receipt requirement. If items are getting scanned and time-stamped when they arrive at the warehouse and those scans are uploading to the 3PL’s system and getting captured in daily reports, you can quickly recognize when products start to take an extra day to become available. Upon noticing this, you can have a quick conversation with your 3PL to develop a plan of action before these delays become a major issue.
Give your associates visibility to your KPIs. Much like basketball or hockey players will miss 100% of the shots they don’t take, fulfillment associates will be far less likely to achieve performance objectives they don’t know about. Make an effort to share KPIs with associates using dashboards, morning meetings, or workshops. Just as important, don’t forget to put these KPIs in context, providing concrete information about how and why the associate’s individual efforts will impact these performance metrics for order fulfillment.
Treat your KPIs like a thermometer, not a stick. Don’t wait until a red flag – like dissatisfied customers or higher costs – forces you to pay close attention to your KPIs. By monitoring KPIs, even when business is running smoothly, you’ll be able to identify trends, determine if they are moving in the “wrong direction,” and then take quick action to address situations before major problems occur. This kind of review also removes some of the emotional response that is inevitable if you’re only looking at KPIs and talking with your facilities or 3PLs after things have gone south.
Understand the real-world implications of certain metrics. Some KPIs that are communicated solely in terms of percentages have an uncanny way of looking better on paper than they do in reality. For example, let’s say your company ships 100,000 orders per year and you’ve decided that 98.5% shipping accuracy is a reasonable KPI. Sounds great, right? After all, if your kid came home with a 98.5 on his or her math test, you’d probably be over the moon. But when you break it down into what that performance level really means – 98,500 customers will get exactly what they ordered but 1,500 won’t – it doesn’t sound quite as terrific. Particularly when you consider that, according to some statistics, you’ll wind up paying $43.23 per error or $64,845 each year to correct them. Based on those numbers, are you really okay with that KPI? Or is there another that makes more sense, even if it costs you a little extra?
Fulfillment KPIs: bring your A-game
At the end of the day, a good fulfillment KPI program is a work in progress that’s meant to keep you and your key partners on the same page, provide early warning about areas that need to be corrected, and inspire all players to bring their A-game to every aspect of their operations. As such, it’s never too late to change yours for the better.
For more tips on fulfillment KPI management, be sure to read our fulfillment KPI management eBook. Any way you measure it, it’s worth the read.
