The flow of content:
|Four key metrics|
|1. Rate of returns|
|2. Accuracy order picking|
|3. Order lead time|
|4. Purchasing frequency|
Measuring the success of any activity is vitally important. The results make it easy for us to judge whether our management in a particular way is having good results in our business? Or does our management require fixing a few loopholes?
The key metrics or key performance indicators help in achieving the business objectives and they prove to be helpful in decision making. Therefore, a lot of importance is given on analyzing the performance of each activity and so is the case in terms of order management.
Then here you go…
Here are 4 such key performance indicators in order management that help us in identifying our weaknesses so that we can fix it accordingly.
1. Rate of Returns
Returns are an inevitable part of any business especially eCommerce. Understanding the rate at which a company receives returns from the customers is a key factor is getting insights into the problems the customers are facing with the product.
UPS has termed January 2, 2020, the second and largest spike in returns as “National Returns Day,” with around 1.9 million product returns. It is a whopping 29% increase from last year.
Hence, learning this valuable information will allow you to improve on product quality and thereby reduce the rate of returns.
Here’s a formula to calculate the rate of returns:
Rate of returns = Number of units returned/ Number of units sold
For getting better results, it is essential to bifurcate the results based on the reasons for return. Hence, it will enable you to pinpoint exactly the shortcomings of the product or service and then you can make strategies for improving on it.
To know more about the Rate of Return and how to reduce it, click here.
2. Accuracy in Order picking
Picking is the most important activity in order fulfillment. Picking the right product quickly and carefully results in faster delivery and therefore, high customer satisfaction and gaining positive reviews from the customers.
But what if the product picked up is not of the right brand or is faulty? That would be a sure shot to dissatisfaction in customers and losing out on potential customers due to negative reviews.
Hence, product picking for an order should be done with utmost care and accuracy.
To measure the accuracy of order picking use this formula below:
Picking accuracy = (number of orders – number of inaccurate item returns/ total number of orders) * 100
The most important factor in reducing returns and fulfilling orders in an accurate manner is picking accuracy. The more accurately you pick orders, the more is your perfect order percentage.
Picking accuracy is one of the most important KPIs. If this KPI is at a low performing level, it can suggest that the warehouse owners are using manual picking or the order management is not upto the required level. Picklists are not generated and followed properly.
The company with high picking accuracy indicates that the company has high-quality control standards, uses both automation and manual procedures to pick orders, has flawless order management processes, employees are trained, correct shipments, and has inculcated control levels and goals to ensure they have a target to meet.
Moreover, less order picking accuracy will lead to increased cycle times and a surge in incorrect shipment numbers.
3. Order lead time
Order lead time is yet another indicator or proper order fulfillment process. Having a good lead time has a deep impact on customer satisfaction and this makes it the most important for any eCommerce retailer.
Order lead time means the time taken for a retailer to pick, pack, and deliver the ordered item to the customer.
The lead time can be easily calculated using the following formula:
Order lead time = Average lead time taken for all orders / total orders fulfilled
It is a crucial parameter to judge an ecommerce company’s order management prowess. Click here to know more about the order lead time.
4. Purchasing frequency of the customers
Another factor for determining the success of order fulfillment is the frequency at which a customer orders products from the eCommerce retailer.
This helps in evaluating the orders you get throughout the month or year and it will help you in determining which products sell out faster and are in demand so can stock them in enough quantities.
The formula to calculate the purchasing frequency is as follows:
Purchasing frequency = total number of orders received / number of unique customers.
Keeping track of all the metrics mentioned above will surely help to improve the order management processes. Hoping this article will help you to achieve your order management objectives.
Krishna Jani is a content specialist with 10+ years of experience in the field. Presently working as a professional writer for Orderhive, no.1 inventory management software that powers several businesses all across the world. She is an avid birder and nature lover who loves to explore national parks and wildlife sanctuaries during her leisure time.
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