Back in the days before Red Stag was founded, an eCommerce business was thriving – or was it? It was successful, sure, but also lost out on a ton of sales because the 3PL they partnered with couldn’t handle the pressure. Late shipments, missing pieces, inaccurate inventory, you name a problem and our business had it. Not quite as successful as it seemed at first glance. We quickly realized just how important having a great 3PL was, and decided to create one ourselves. Thus, Red Stag was born.
However, many businesses don’t realize how much money they’re losing on fulfillment, and how much money they could be saving if it was being done better. But how do you measure what good and bad fulfillment looks like? Read on for a list of key fulfillment metrics that will help you get a better read on the state of your fulfillment, and if you need to step up your game.
1. OTIF (Deliveries On Time and In Full)
Your early adopters really believe in what you’re selling. They’re willing to take a chance on you, and they just want to support you – they won’t be upset if you make a small mistake or two when fulfilling their order. Maybe it’s a little late, maybe it’s missing something (that you’ll fix, of course), but they’ll understand.
If this has been your line of thinking when you’re growing rapidly, and justify mistakes as growing pains, you’re looking at it all wrong.
Instead, put the focus on OTIF (Deliveries On Time and In Full). This means that the full product is delivered without anything going wrong, including being late, missing pieces, damaged packaging, etc. When you’re growing so fast you can barely keep up, it’s easy to brush off those mistakes as “things that happen,” but in reality, you’re just putting off the inevitable breakdown later on when those mistakes keep happening, you keep growing, and you haven’t addressed the root of the problem. It’s harder to recognize when you’re losing customers at the beginning, but once you get larger it will be impossible not to notice – and you’ll really pay for those mistakes. By focusing on building a strong foundation of flawless OTIF deliveries, you’ll set yourself up for success later.
2. Inventory turns
Welcome to one of the biggest balancing acts you’ll face as a business: how much inventory to keep on hand. Not enough and you’ll leave money on the table when demand fluctuates. Too much and you’re taking money out of your pocket that could be used to help grow the business, and now you just have inventory sitting around. Calculating your inventory turns for your products will tell you how many times that inventory sold in a given time period (like a quarter, or a year). If your inventory turn isn’t where you want it, what should you do?
It’s always going to be a tough balance in the beginning, but one way you can help yourself out is to focus on fewer products. Fewer SKUs means less inventory to keep on hand, manage, and keep track of. Instead of building out an incredible inventory management platform (which is probably not on your budget), make your inventory work for you and be as efficient as possible with your product offerings.
3. Workforce turnover
One of the most overlooked metrics is workforce turnover, especially at the distribution center level. Turnover is one of the most expensive costs of any business, both in time and money, but is frequently overlooked. Warehouse work may be difficult and turnover can be expected to be higher than a “white collar” job, but that doesn’t mean it doesn’t matter. Just like any other business, turnover is a major indicator of the health and happiness of your workforce.
Warehouse employees are, in many ways, the heart of your business. They have the huge responsibility of making sure that every customer receives the exact physical product they ordered, and on top of that pressure, there is also the burden of working a physically laborious job. A high turnover rate signals that your workers are unhappy, and that you may not be providing the experience to your customers that you think you are. Happy workers will work for you and help you achieve your goals as a business.
4. Average order processing time
When a customer orders from you and chooses two-day shipping, they probably don’t realize that that doesn’t include order processing time. If your average order processing time is several days and they get their product five days later, they aren’t going to be happy. Aside from clearly communicating how long it will take for you to process their order before shipping it, what else can you do?
Pay attention to your average order processing time and try to streamline it as much as possible. You want there to be as little of a gap as possible between the customer placing the order and the order getting shipped. There’s a lot that goes into processing an order – creating the order for the warehouse, checking inventory, packing the order – but if you can shorten this timeline, your customers’ happiness will skyrocket.
Refer to this piece to define order processing time
5. Percentage of customers reachable within 1-2 days via standard ground shipping
Finally, how many customers can you reach within 1 to 2 days with standard ground shipping? Having a national fulfillment network is vital if you want to reach your customers quickly and efficiently. By strategically placing your fulfillment centers (or working with a 3PL that does) you can save money and time shipping the orders, and your customers will be much happier.
When you’re growing rapidly and the orders are pouring in, it can seem like you don’t need to worry too much about the nitty-gritty of your order fulfillment – things are getting delivered, and that’s all that matters, right? Well, hopefully this list has shown you that by turning your attention to how successful (or unsuccessful) your fulfillment operations are, you can hone in on key areas to change and hopefully grow even more in the future.
Guest post courtesy of Jake Rheude, VP of Marketing at Red Stag Fulfillment