Every business needs a way of evaluating its performance to find creative ways of growing the company. One way is to adopt the top KPIs every distribution company should be tracking and incorporate them in your business model.
Understanding and implementing these KPIs can help you make specific adjustments that will enable you to achieve your business goals.
So, let's take a look at the KPIs your distribution company should track.
You can record the number of deliveries you make within a specific period, such as a month, six months, or a year. This information forms the basis of other metrics and can help you determine how efficient your distribution operations are. The average of the shipments you make can also be used to establish the growth potential of your company.
Additionally, the number of shipments can be analyzed against on-time delivery to identify essential data on rush hours, peak seasons, and more. This can help you allocate resources when and where they are most needed, enhancing overall effectiveness.
This KPI metric focuses on the amount of time your distribution service takes to ship and deliver products from the time the customer places the order. Once you find the average time it takes you to get the products where they are needed, you can share this information with the buyers to ensure they know when they will receive their purchase.
You can also use this KPI to improve your distribution company by finding ways to reduce the average time for shipping. This can help make your business run smoother and will demonstrate your reliability to the customers.
Another crucial logistics metric for distribution companies is the rate at which you make accurate deliveries. Plus, you can also keep track of the number of shipments you make without damaging the goods. If you want to gauge the quality of your distribution service and supply chain, this is one of the KPIs that can help you do that.
You can use this logistics metric to improve customer satisfaction which can help increase customer loyalty. It will also make it easier for your customer base to recommend your services to more prospects.
This refers to the amount of time your couriers take from the warehouse to the drop-off site. The time taken to pick up and transport the goods after the order is placed is important to establish because it can assist you in determining the speed of your drivers. Your drivers should be able to make the drop-offs within the least time possible, which can help improve your distribution services.
At the same time, you can use this KPI to assess the efficiency of the transport routes in your area. For example, some roads could allow you to make more deliveries within a shorter period, which can be great for business.
You should also track the amount of space your transport vehicles have in relation to the products and services you deliver. This information can help you identify underutilized resources like extra space in the vehicle, which you can remedy appropriately.
This vehicle management KPI can be used across all your cars to improve the overall performance of your delivery services. For example, you can merge different routes to maximize the amount of space you use for shipping products.
One of the costs you'll incur as you provide distribution services is packaging costs. Tracking the cost and amount of packaging materials you use can help streamline the process of picking and packing various products.
You can check the cost of the materials against the effectiveness of the packaging. For example, if large boxes carry small products, you can swap them with smaller boxes to increase efficiency. In addition, you could establish a metric for packaging items according to their specific dimensions to minimize wastage of resources.
Inventory turnover is another KPI that can help in production planning for any distribution company. It determines the number of times you completely sell your inventory in the course of a particular period. This information can be useful in identifying an effective marketing and sales strategy as you'll know the stock that quickly sells from that which does not.
A fast turnover rate is great for business, while a slow turnover could indicate some inefficiencies in turning your stock into revenue. Alternatively, you could compare this information with the average turnover rate of distribution companies to assess your performance.
Next on our list of the top KPIs every distribution company should be tracking is the equipment utilization rate. While most of the work is done by the human workforce you've hired, you'll also need technological equipment to make work easier where possible.
Responsibilities like loading and unloading bulky and heavy products might require the use of powerful machinery like a forklift. Such machinery can reduce the amount of time you need to handle various tasks, increasing your efficiency. Plus, there should be enough equipment for every available employee to work with without waiting in line.
The last KPI, your distribution company, should track is the average transportation costs. You should determine the amount of money you use to transport various goods. After, look for ways to reduce that value without compromising on the quality of your distribution services.
Evaluating the costs of transporting an entire stock against the revenue it brings can also benefit your business. Maximizing the carrying capacity is one way this KPI can help you boost your income without lowering the value of your services.
Tracking KPIs is one of the strategies you can adopt to grow your distribution company. It can assist you to allocate resources better, improve customer satisfaction, and enhance your revenue. That's why you should incorporate the KPIs in this post for a streamlined and efficient distribution process.
For a detailed and comprehensive list of distribution KPIs, download our whitepaper Top Key Performance Indicators (KPIs) for Distribution to learn more.
Finally, watch our Acumatica Distribution Edition demo to learn how the right ERP software connects people, processes, and technologies across your wholesale distribution company to facilitate everything from finances to inventory to customer relationships.
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