Whats is the best KPI for measuring E commerce fulfilment?

When running an e-commerce fulfilment operation, whether it's a small storeroom or a warehouse the size of a football field, one of the biggest challenges is identifying the right Key Performance Indicators (KPIs) to measure and manage performance effectively. With so many moving parts, from order picking and packing to shipping and labor management, it can be easy for costs and efficiencies to spiral out of control, especially as your operation grows and you introduce additional labor.

Key KPIs in e commerce fulfilment

Over the years, I’ve worked with numerous metrics that seemed crucial at the time. From tracking the number of orders shipped to measuring the number of lines processed per order, each metric offered valuable insights into different aspects of the fulfilment process. However, one of the main issues is that these metrics can sometimes provide a fragmented view of performance, especially when trying to manage a diverse range of order sizes and complexities.

The Problem with Traditional Metrics

Consider this: one worker might pick 100 small orders in a day, while another processes just 10 large orders. Traditional metrics, like the total number of orders shipped, may fail to capture the nuances of these different workloads, making it difficult to assess efficiency accurately. Additionally, factors such as the layout of your warehouse, the placement of products, and even the distance employees have to walk to pick items can significantly impact performance but are often overlooked in standard KPIs.

For example, I once discovered that employees were walking an average of 10 km a day just to fulfil the basic picking requirements. This distance not only impacts worker fatigue but also drives up labor costs as more time is spent on walking rather than picking.

A Simpler, More Effective KPI: Cost Per Order Shipped

After years of trial and error, I’ve found that the most effective and straightforward KPI for measuring the performance of an e-commerce fulfilment operation is the Cost Per Order Shipped. This metric boils down your entire operation into a single, actionable figure that encapsulates both efficiency and cost-effectiveness.

Here’s how you calculate it:

1. Identify Direct Labor Costs: Start by aggregating the total labor costs for the day that are directly related to the picking, packing, and shipping of orders. This includes wages for all employees involved in these activities.

2. Count the Orders Shipped: Next, count the total number of orders that were successfully shipped out on that day.

3. Calculate the Cost Per Order: Finally, divide the total labor cost by the number of orders shipped. This gives you the cost of labor per order shipped.

This KPI provides a clear picture of how efficiently your labor force is converting effort into shipped orders. While other metrics may fluctuate based on order size and complexity, the Cost Per Order Shipped tends to remain relatively stable over time, offering a consistent measure of daily performance.

Why This KPI Works

The beauty of this metric lies in its simplicity and its ability to adapt to different operational scales and complexities. Whether your average order contains 40 items or just 2.3, the Cost Per Order Shipped will provide you with a baseline figure that you can use to evaluate daily performance.

By focusing on this KPI, you can also quickly identify opportunities for improvement. For instance, if your Cost Per Order Shipped increases, it might indicate inefficiencies in the picking process, a need for better warehouse layout, or even an issue with labor management. Conversely, if you manage to reduce this cost, it’s a clear sign that your fulfilment operation is becoming more efficient.

Final Thoughts

In the complex world of e-commerce fulfillment, it’s easy to get lost in a sea of metrics. However, by focusing on the Cost Per Order Shipped, you can gain a clear and actionable understanding of your operation’s performance. This KPI serves as a reliable foundation upon which you can build further improvements, whether it’s optimizing your pick paths, adjusting labor allocation, or reorganizing your warehouse layout.

Ultimately, the Cost Per Order Shipped is not just a measure of efficiency—it’s a reflection of how well you’re managing the delicate balance between labor and output in your e-commerce fulfilment operation. Keep this KPI at the forefront, and you’ll be well on your way to running a leaner, more cost-effective fulfillment process.

To sum up, the best KPI for measuring E commerce fulfilment is the cost per order value

How Dark Store Systems Can Enhance E-commerce Fulfilment

Dark store systems are transforming the e-commerce landscape by offering a focused and efficient approach to order fulfilment. A dark store is essentially a retail outlet or warehouse that operates exclusively as a fulfilment centre for online orders, with no customer-facing services. These systems are particularly advantageous for businesses seeking to optimise their fulfilment operations, reduce costs, and improve customer satisfaction.

Key Areas Where Dark Store Systems Excel:

1. Efficient Use of Space

• Optimised Layouts: Unlike traditional retail spaces, dark stores are designed specifically for picking and packing operations. This enables more efficient product placement and minimises the time spent by workers moving between items, significantly improving picking efficiency.

• Higher Inventory Density: Without the need to accommodate customer browsing, dark stores can hold a greater amount of stock in the same space, maximising storage capacity and reducing the overall footprint required.

2. Faster Order Processing:

• Dedicated Fulfilment: As dark stores are not open to the public, all operations are centred on fulfilling online orders. This singular focus results in quicker processing times and faster dispatch, enhancing delivery speed and improving customer satisfaction.

• Advanced Automation:Dark stores often incorporate automation technologies, such as conveyor belts, automated storage and retrieval systems (AS/RS), and robotics, to accelerate order picking and reduce the potential for human error.

3. Improved Inventory Management:

• Real-time Stock Monitoring: Dark stores typically use sophisticated inventory management systems that allow for real-time tracking of stock levels. This reduces the risk of overselling and ensures that popular items remain in stock.

• Centralised Inventory Control: Businesses can manage inventory across multiple locations more effectively by using dark stores as central hubs, ensuring optimal stock distribution and minimising out-of-stock situations.

4. Cost Efficiency:

• Lower Overheads: Without the need for customer-facing elements like display areas or checkout counters, dark stores operate with lower overhead costs. These savings can be passed on to customers or reinvested in other areas of the business.

• Labour Optimisation: Dark stores enable more efficient use of labour by focusing all efforts on order fulfilment. Workers can be trained specifically for picking and packing tasks, increasing productivity and reducing labour costs.

5. Enhanced Customer Experience:

• Faster Delivery: With strategic locations closer to urban centres and optimised fulfilment processes, dark stores can offer quicker delivery times, including same-day or next-day delivery options.

• Order Accuracy: The focused environment of a dark store reduces the likelihood of mistakes, leading to more accurate orders and higher customer satisfaction.

In conclusion, dark store systems provide a robust solution for e-commerce businesses looking to scale their operations efficiently. By concentrating solely on the fulfilment process, dark stores can improve order accuracy, reduce costs, and significantly enhance the overall customer experience. As the demand for rapid, reliable e-commerce delivery continues to grow, dark stores are becoming an increasingly vital component of successful retail strategies.