The Essential Guide to Shipping KPIs for E-commerce Success
Published on July 03, 2024
Have you ever tried to bake a cake without measuring the ingredients? It may turn out a beautiful cake, but chances are you will end up with a mess. Well, managing your e-commerce shipping without tracking key performance indicators (KPIs) will likely deliver the same kind of results.
As someone who has helped many e-commerce businesses grow, I can tell you that shipping KPIs make a company more profitable and more successful.
This guide will take you through the most important shipping KPIs for e-commerce businesses. Whether you are just starting out or a brand looking to scale, understanding these metrics can help you achieve some great results.
But before we start, let's clarify two words we'll be using in this article: Metrics vs. KPI's. The 2 are similar but not the same - all can be measured, but not all will weigh into the health of your business and determine changes. KPI focus on the strategic while metrics are often measure of the operations.
What Are the Elements I Should Be Tracking for My Shipping Operations?
Tracking the key metrics of your shipping operations is important for your business for many reasons. First, the outliers give you an early indication of an issue, Second, it measures the profitability and efficiency of your business. Lastly, it will give you a way to directly impact your customer shipping experience.
When I think about shipping KPIs, I think about it in three different ways:
- The operational part: This includes the fulfillment or carrier perspective. You can have a lot of different metrics here, such as pick pack rate, accuracy, and processing time.
- The expense part: This covers your shipping costs, shipping charges, and the surcharges being passed through from your carrier. It's about truly understanding your cost per package, cost per item or SKU, and how much it costs for you to ship across your service area.
- The customer experience part: This includes metrics like order processing time. This is the time from when the order is completed on the website, passes through fraud checks, reaches your fulfillment center, and is passed off to your carrier. You'll also want to look at cancellations and undeliverables – everything that has the potential to impact your customer and their experience with your brand.
By monitoring KPIs in these three areas, you'll get a comprehensive view of your shipping operations. You’ll be able to identify areas for improvement, optimize costs, and enhance customer satisfaction.
Even though we’ve separated them in three parts, these metrics are interconnected. By improving one area, you’re likely to improve others.
However, it's important to note that these metrics focus primarily on fulfillment centers, which are designed for e-commerce and direct-to-consumer shipping. If your business also involves distribution centers or warehouses, you'll need to consider distribution metrics.
What Are Distribution Metrics?
Distribution metrics help you understand how efficient your shipping operations are. They cover aspects like order accuracy, on-time delivery rates, and inventory turnover. These metrics serve as early indicators of any issues in your supply chain.
New to inventory? Learn which inventory is best for you between periodic and perpetual system.
22 KPIs to Track to Improve Your Shipping Operations
Now that we understand the important different views of the business to measure and why, let's dive into the KPIs that can help you measure and optimize your shipping operations.
The data and the metrics can be viewed in many different ways and timeframes. Don't make the mistake of becoming paralysed by the amount of data and attempting to measure every metric. Below, we have identified a set of KPI's per time frame and what those metrics tell you. If you aren't learning something or modifying something from the KPI - it may not be a necessary one for your business, or can be one you look at on an ad-hoc basis.
Here are the key KPIs you should be tracking:
Daily Operational KPIs
1. Order Processing Time
The time it takes from when a customer places an order to when it's ready for shipment.
Why it's important: This metric directly impacts customer satisfaction and operational efficiency.
How to track it: Measure the time from when an order is placed to when it's ready for shipment.
What to do with the data: If processing times increase, investigate potential bottlenecks in your fulfillment process and address them promptly.
2. Pick Pack Accuracy
The percentage of orders that are picked and packed correctly without errors.
Why it's important: Affects inventory accuracy, returns, and customer satisfaction.
How to track it: Calculate the percentage of orders picked and packed correctly based on your auditing process measured against your benchmark, at least 95% or better.
What to do with the data: If accuracy drops, review and improve your picking and packing processes, or provide additional training to staff.
3. Cancellations and Out-of-Stock Items
The number or percentage of orders cancelled or items that are out of stock when an order is placed.
Why it's important: Represents lost sales and potential customer dissatisfaction.
How to track it: Monitor daily cancellations and out-of-stock incidents.
What to do with the data: High cancellation rates might indicate issues with your inventory management or product listings. Address these promptly with your supply chain team to minimize lost sales.
4. Shipping Time vs. Order Processing Time
A comparison between the time taken for internal order processing and the shipping time promised to customers.
Why it's important: Provides both business and customer perspectives on order fulfillment.
How to track it: Compare the time taken for internal processing versus the time promised to customers.
What to do with the data: If there's a significant gap, consider adjusting your promised delivery times or improving internal processes.
5. Order Split Percentage (for omnichannel businesses)
The percentage of orders that require multiple shipments to fulfill.
Why it's important: Order splits can significantly increase shipping costs.
How to track it: Calculate the percentage of orders that require multiple shipments.
What to do with the data: High split percentages may indicate a need to optimize inventory distribution across your fulfillment network.
Monthly/Quarterly Carrier KPIs
6. First-Time Delivery Rate
The percentage of packages delivered successfully on the first attempt.
Why it's important: Affects customer satisfaction and potentially your shipping costs.
How to track it: Calculate the percentage of packages delivered successfully on the first attempt versus total orders delivered.
What to do with the data: Low rates might indicate issues with address accuracy or carrier performance. Address these with your carrier or improve your address verification process.
7. Average Transit Time
The average time it takes for a package to reach the customer once it has left your facility.
Why it's important: Impacts customer satisfaction and your ability to meet delivery promises.
How to track it: Calculate the average time from when a package leaves your facility to when it's delivered.
What to do with the data: If transit times are longer than expected, consider negotiating with your carrier or exploring alternative shipping options.
8. On-Time Delivery Rate
The percentage of orders delivered by the promised delivery date.
Why it's important: Directly affects customer satisfaction and your brand reputation.
How to track it: Calculate the percentage of orders delivered by the promised date.
What to do with the data: If rates are low, work with your carrier to improve performance or adjust your promised delivery times. Tools like Buster Fetcher can help you automate this process and file refund claims on your behalf.
9. Freight Invoice Accuracy
The accuracy of your carrier's invoices compared to your shipping records and contract rates.
Why it's important: Ensures you're not overpaying for shipping services.
How to track it: Compare your carrier invoices against your shipping records and what has been negotiated to identify discrepancies.
What to do with the data: If discrepancies are found, work with your carrier to resolve them and potentially negotiate better rates.
Monthly/Quarterly Expense KPIs
10. Shipping Cost per Package
The average cost to ship each package.
Why it's important: Helps you understand and control your shipping expenses.
How to track it: Divide total shipping costs by the number of packages shipped.
What to do with the data: If costs are higher than your forecast, look for ways to optimize packaging, negotiate better rates, or adjust your shipping pricing strategy.
11. Shipping Gap
The difference between the shipping revenue collected from customers and your actual shipping expenses.
Why it's important: Shows the difference between shipping revenue and expenses, indicating profitability.
How to track it: Subtract shipping expenses from shipping revenue collected from customers.
What to do with the data: A negative gap might indicate a need to adjust shipping charges or find ways to reduce shipping costs.
12. Shipping Expense as Percentage of Sales
The proportion of your total sales that goes towards shipping costs.
Why it's important: Provides context for your shipping costs relative to your overall business.
How to track it: Divide total shipping expenses by total sales.
What to do with the data: If this percentage is too high, consider strategies to reduce shipping costs or increase average order value.
13. Percentage Spend by Carrier/Service
The proportion of your total shipping spend allocated to each carrier and service level.
Why it's important: Helps optimize your carrier mix and negotiate better rates.
How to track it: Calculate the percentage of your total shipping spend going to each carrier and service level.
What to do with the data: If one carrier is significantly more expensive, consider shifting volume to more cost-effective options.
14. Surcharge Analysis
An analysis of the additional fees charged by carriers beyond the base shipping rate.
Why it's important: Surcharges can significantly impact your shipping costs.
How to track it: Analyze your top surcharges by both spend and frequency.
What to do with the data: High surcharges might indicate a need to adjust your shipping processes or negotiate with your carrier.
15. Regional and Channel Analysis
A breakdown of shipping costs and performance by geographic region and fulfillment channel.
Why it's important: Helps optimize your fulfillment network and pricing strategy.
How to track it: Analyze shipping costs and performance by region and fulfillment channel (e.g., DC, store, dropship).
What to do with the data: Use this information to optimize your fulfillment strategy, potentially leveraging ship-from-store or adjusting regional pricing.
Monthly/Quarterly Customer Experience KPIs
16. Customer Promised On-Time Delivery Rate
The percentage of orders delivered by the date promised to the customer at checkout.
Why it's important: Directly impacts customer satisfaction and trust in your brand.
How to track it: Compare actual delivery dates to the dates promised at checkout to identify any gap.
What to do with the data: If this rate is low, consider adjusting your promised delivery times or improving your fulfillment processes.
17. Delivered to Door vs. Delivered to Depot
The proportion of packages delivered directly to customers' doors versus those left at pickup locations.
Why it's important: Affects customer convenience and satisfaction.
How to track it: Calculate the percentage of packages delivered directly to customers versus left at a pickup location based on total shipments.
What to do with the data: A high depot delivery rate might indicate a need to adjust delivery options or improve address accuracy.
18. Undeliverable Packages
The number or percentage of packages that cannot be delivered and are returned to the sender.
Why it's important: Represents potential lost sales and customer dissatisfaction.
How to track it: Monitor the rate of packages returned as undeliverable.
What to do with the data: High rates might indicate issues with address accuracy. Improve your address verification process on your site.
19. Refused Deliveries
The number or percentage of packages that customers refuse to accept upon delivery.
Why it's important: Can lead to returns and refunds, impacting your bottom line.
How to track it: Monitor the rate of packages refused by customers.
What to do with the data: High refusal rates might indicate issues with product quality, customer communication, or fraudulent orders. Investigate the root causes and address them.
Other Important Metrics
20. Inventory Turns and Inventory to Sales Ratio
Tracking KPIs is crucial for effectively managing your product stock. However, when it comes to shipping, two KPIs are particularly essential.
Inventory turns measure how many times your inventory is sold and replaced over a period. The inventory to sales ratio compares the value of your inventory to your sales.
Why it's important: Indicates inventory health and efficiency.
How to track it: Calculate how often you sell through your entire inventory in a given period.
What to do with the data: Low turn rates might indicate overstocking. Use this data to optimize your inventory levels.
21. Box Sizes and Dunnage Usage
An analysis of the different box sizes you use and the amount of packing material (dunnage) used in your shipments.
Why it's important: Impacts shipping costs and sustainability efforts.
How to track it: Analyze your box size distribution and dunnage (packing material) usage.
What to do with the data: Optimize your packaging to reduce costs and improve sustainability.
22. Cost per Order
The total cost associated with fulfilling and shipping each order.
Why it's important: Provides a comprehensive view of fulfillment costs.
How to track it: Calculate total costs (including storage, shipment, picking, and packing) per order.
What to do with the data: Use this to inform pricing strategies and identify areas for cost reduction in your fulfillment process.
Best Practices When Implementing Shipping Metrics
Now let's be real—knowing your KPIs is great, but it's not a magic wand. Numbers alone won't transform your shipping game. The real magic happens when you pair them with solid, tried-and-true practices.
These are the kinds of moves that'll have your KPIs trending in the right direction and your customers happy.
- Build a relationship with your BI team or identify the analytics and reports you need ahead of time. Once you start scaling, you'll have an incredible amount of data to manage.
- Use these metrics as early indicators of issues. For example, if your processing time suddenly increases from 3 days to 4 days, that's a sign to investigate.
- Don't generate reports with 72 different KPIs. Identify the key ones that truly indicate the health of your business and allow you to make the best decisions.
- Look at some metrics daily (like order processing), some weekly (like order splits in omnichannel businesses), and others monthly or quarterly (like shipping expenses and carrier performance).
- For omnichannel businesses, understand the costs of shipping from different locations (e.g., fulfillment center vs. stores) to optimize your strategy.
- Consider the impact of different fulfillment options like ship from store, in-store pickup, and dropship on your shipping KPIs.
- Analyze your shipping costs by region to inform your pricing and fulfillment strategies.
Conclusion
We've covered a lot of ground here. Understanding the differences between various shipping KPIs is crucial for optimizing your e-commerce supply chain.
By staying on top of them, you'll be well-equipped to navigate the challenges and opportunities of e-commerce growth.
Buster Fetcher in-depth reports can help you get insight on your shipping operations easily without the need to dive deep into your data.
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