Ecommerce 3PL Metrics To Track
Have you noticed your ecommerce fulfillment business ramping up this year? You might be wondering, how long will this ecommerce wave last as certain parts of the country slowly reopen? With ecommerce demands on the rise, logistics professionals can expand their fulfillment by first benchmarking business performance and then optimizing internal processes for growth. Third-party logistics (3PL) warehouses wanting to fuel growth and recognize areas to improve operational efficiency must first understand what’s driving consumers to buy online and why every warehouse should track ecommerce key performance indicators (KPIs) regularly to meet these demands.
Ecommerce Growth is Here to Stay
Why will ecommerce continue to expand? A recent consumer behavior survey by Ernst & Young shows that buyers will continue to be reluctant to shop in physical stores and engage with crowds for the foreseeable future. Although lock down measures in some states have lifted, the same survey highlights 75% of American consumers don’t visit physical stores often and not surprisingly, a majority of consumers don’t feel comfortable engaging in outdoor activities like going to the gym, watching a movie, or visiting a restaurant given the pandemic resurgence. Despite states reopening local businesses across the US, a majority of consumers remain cautious.
These social distancing preferences may be here to stay, which means that these same consumers will continue to buy online and ecommerce growth will continue for the foreseeable future. With steady ecommerce sales on the horizon, warehouses have a strategic opportunity to lay a foundation for long-term growth. The key differentiator for 3PL warehouses that boom versus those that bust will be how well they perform on three essential ecommerce key performance categories.
KPI Category #1: Inbound Workflows
Inbound or receiving workflow KPIs measure how well a warehouse processes and sorts incoming inventory shipments. These performance metrics include overall dock-to-stock time, labor productivity per worker, and average time to put away inventory. Dock-to-stock time is the total average time it takes from when a 3PL unloads a truck’s inventory to inspecting/verifying it to putting it away at its proper warehouse location. Labor productivity measures how many tasks and types of jobs a warehouse worker completes over a specified time period (i.e., per hour, per day, etc.). Why is this important? By measuring labor productivity and tracking dock-to-stock time, warehouse managers can determine areas for improving operational efficiency in the receiving process, recognize top-performing employees, and prevent labor shortages. Leveraging a warehouse management system (WMS) with tools like SmartScan mobile barcode scanning help automate put away processes and ensure accuracy in receiving and put-away jobs.
KPI Category #2: Inventory Management
A second important key performance category is inventory management – which includes storage utilization, inventory movement and aging, and storage billing. Storage utilization represents how much total space a 3PL uses for specific customers or SKUs, usually expressed as a percentage. Monitoring utilization can give a warehouse owner complete visibility into their capacity to prioritize putting away top-selling shipments first and to avoid space shortages. Inventory management and aging is essential to track to determine which items have high turnover and help staff know when to discard expired products. WMS technology, like 3PL Warehouse Manager, provide interactive inventory reporting tools that help warehouses generate reports by SKU, location, and other attributes to empower staff to make data-driven decisions. Last, recurring storage fees can be a pain to manually track in Excel or transfer from paper-based methods to an ERP system like QuickBooks. Imagine how much time it can save a warehouse when they automate invoice management via billing automation. The impact of this technology will reduce the time it takes warehouse staff to generate, send, and collect invoices from customers, capturing more revenue.
KPI Category #3: Outbound Workflows
Finally, outbound workflow KPIs like average pick-to-ship time and service level agreement (SLA) fulfillment metrics can empower 3PLs to evaluate how quickly they can service their customers and process orders. Pick-to-ship time is the amount of time it takes from picking an item to ensuring an item is packaged and ready to ship out of the warehouse. This time varies widely from warehouse to warehouse depending on the items being shipped; however, a warehouse generally wants to minimize how long it takes to prepare orders for outbound shipments. Nowadays, customers have high expectations and want to do business with a trusted 3PL who consistently meets their SLAs. 3PL warehouses should measure and continuously improve SLA fulfillment can with real-time dashboards tracking the order statuses throughout the fulfillment process.
Why Measure Warehouse Performance?
World renowned management expert Peter Drucker once said, “If you can’t measure it, you can’t improve it.” The key to continuous improvement and becoming a 3PL that customers love working with is measuring your warehouse’s key performance indicators that matter for ecommerce. These key performance areas include inbound workflows, inventory management, and outbound workflows, where warehouse businesses can always improve processes and ride the ecommerce demand curve to produce sustainable growth.
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