Four Areas to Evaluate for the Best Supply Chain KPIs
It can be tempting to set a static goal and measure daily progress against it; however, in a climate that can change direction in a moment, your business practices can become outdated quickly. Warehouse key performance indicators (KPIs) are the best tools to guide actionable measures in afulfillment center. KPIs reflect the state of your efficiency on multiple levels.
Do you have the best supply chain KPIs for the job? The following four areas will help you start.
Inside the Warehouse
When a company works with an in-house fulfillment center, it's comparatively easy to collect information on stock levels, average pick and pack times and other order-centric metrics. When it comes to e-commerce, these data points help inform important sales-driven considerations like free shipping thresholds, methods and discounts. That's why it's important, when working with a third party fulfillment provider (3PF), to ensure the right level of transparency before entering into a contract. Your 3PF provider should be able to:
- Deliver automated reports with data points derived from daily operations.
- Offer services beyond direct-to-consumer shipping.
- Provide feedback on sales efforts, such as discounts used or items bought in a specific period.
Remember, like a valued member of your team, you don't want to waste time "training" a service provider that has no interest in keeping up with your pace. Your 3PF provider can — and should — be much more than a simple shipping solution. Given the important role they play for clients, they need to encourage and support their partners’ goals and strategies as well. If you have to arm-wrestle desired KPIs out of systems, you can — and, again, should — question what exact services are covered in your contract.
Outside the Warehouse
Without the reach and range of 3PF services, certain logistics KPIs / goals become much harder to reach. Consider a company taking hits on its bottom line through "empty miles" — the cost of transporting an empty truck between two locations. If they only have so much product to move and only so many places to move it, this waste is unfortunately inevitable. Place a 3PF in the picture, however, and it's more likely that those "empty miles" can be used to transport another client's items, thus driving down transportation costs for everyone involved. If you aren't already figuring out how much transportation costs your company from a holistic standpoint — miles, manpower, gas and so on — you can't say for sure if your shipping methods are profitable or at the least, neutral. Decisions made from that unknown can exacerbate the negative impact of initial profit loss, and a vicious cycle can easily aggravate.
Even when a 3PF secures a logistics provider on your behalf, don't be shy about asking for feedback, such as "scorecards" for performance over time. It's your right to know and it helps determine which carrier works best to ensure your needs are met. Ultimately, performance (good and bad) plays a heavy role in overall customer satisfaction, so it's in your best interest to request information regularly from your provider(s). These scorecard / KPI checkups can help improve the flow of your orders while also lowering operational costs.
Alongside Your Providers
The more intricate and widespread the supply chain, the more tolerant it tends to be for events like late or incomplete deliveries from partners. When another supplier is waiting in the wings to pick up the slack, it's common for a business to switch gears, get their shipment of goods or materials elsewhere, and go back to the offender the next time they need to order. Just because it’s a small mistake, it doesn't mean it should be repeated, nor that doesn’t affect supply chain efficiency. Even if your staff hasn't come to you with a big client-centered problem, it doesn't mean that one isn't brewing. Ask clients and employees frequently if they're having any issues with KPIs like fill rate and overall inbound shipment times. These telltale signs will emerge when a business in your chain is struggling, be it financially or due to lack of strong leadership within the organization.
Without dependable data to structure your supplier-based warehouse KPIs, your 3PF won't be able to hand over accurate data points. This can result in miscalculating important things like inventory holding cost, opportunity cost, and, an inventory issue may even affect consumer sales. The lesson here is that warehouse KPIs will directly influence other KPIs, which is all the more reason to keep your data clean and current, no matter how innocuous the source may seem. When starting a new partnership in your supply chain, be sure to hash out concrete, numerical expectations as well as your expectations for shared data — this will prevent your KPIs from failing before they begin due to lack of concern on the part of your partner's staff.
Within Your Company
Sales and fulfillment may have once been disconnected, now, technology has made them inseparable. While bringing in sales and marketing sometimes feels like a delay to overall operational efficiency, you need the KPIs as much as they need yours. If data sharing is encouraged, you'll be able to get a heads up about upcoming item pairings for discounts — enabling you or your 3PF to place these items near each other in the warehouse for faster picking. Likewise, you'll be able to inform departments about common item pairings, allowing them to structure future marketing around what's already working for the customers. Rob O'Burne of Supply Chain Quarterly explains this creates a positive, data-driven feedback loop minimizing miscommunications and maximizing consumer satisfaction.
Bringing warehouse KPIs to the C-Suite also allows your company leadership to understand a snapshot, rather than getting "lost in the weeds" of a lengthy report. Business favors fast, informed decisions, and it's hard to beat KPIs as a rapid fire language. Once you've acclimated your C-suite to target ranges and over-time performances of your selected KPI set, communication becomes considerably easier and tends to support your fulfillment center goals in the process.
Even the best supply chain risk management KPIs can't make up for operational gaps in fulfillment operations, but when they're layered over an existing high-performance team, they take results from good to great in a flash. Taking the time to collect, measure and compare these data points ensures the unlikelyhood you'll get blindsided by sudden shifts in supply or demand. That peace of mind is one even the highest quarterly budgets can't simply buy outright. So, if you have it, keep it up! If you don't, there's never been a better time to start setting things in motion for supply chain KPI collecting.