How to Use Metrics to Evaluate Your Order Management

With so many guides and information about using your business's resources, figuring out what really matters can be overwhelming. Even one hiccup in order fulfilment as your business grows can slow you down if not properly tracked and addressed. That’s why evaluating your order management processes is essential to keeping things running smoothly.

In this guide, we’re going to dive into the key metrics that will help you evaluate order fulfilment and the performance of your third-party logistics (3PL) providers. We'll break down what these metrics are, why they’re important, and how you can track them.

Our goal is to make this as straightforward and useful as possible so you can focus on what you do best – growing your business. Let’s begin making sense of these metrics and turning them into tools for your success!

We will discuss:

• Order Accuracy 
• On-Time Delivery 
• Order Cycle Time 
• Order Fill Rate 
• Customer satisfaction 
• Dealing with Troubling Order Management Metrics

Why Evaluating Metrics Matters

So, you’ve poured all your energy and resources into developing a successful, sustainable, and efficient order fulfilment process. You’ve got everything organised from start to finish. But how do you really know how well it’s working? How can you identify which parts of your business are excelling and which could use some improvement?

Metrics are the key. They let you evaluate your success, optimise logistics, reduce costs, and enhance customer satisfaction. For example, if you’ve invested in a new inventory management system, metrics can show you if it’s effectively reducing stockouts and excess inventory. Or if you’ve revamped your shipping process, metrics reveal whether your changes are actually speeding up delivery times and improving customer feedback.

And if you’re relying on a third-party logistics provider (3PL), metrics like on-time delivery rates and order accuracy help you ensure they’re meeting your expectations.

Neglecting to track metrics, however, carries risks. Without these insights, you’re navigating in the dark, potentially missing inefficiencies and cost-saving opportunities. 

You might not realise where improvements are needed or how to address customer complaints effectively. In short, failing to measure performance means risking subpar results and missed growth opportunities. Why gamble with your success when metrics can provide the clarity you need?

Top 5 Ways to Evaluate Your Order Fulfilment 

There are numerous ways to use metrics to track the success of your order fulfilment processes. If you are a more established business, you may already know a few that we will discuss. Whether you're just starting out or at an international business level, exploring new ways to track eCommerce success is always beneficial. 

Many businesses track metrics of different types for different purposes and at various frequency levels, but what is clear is that the more your business monitors these numbers, the more likely you are to improve. 

As a guide, you should aim to glance at these order management metrics multiple times a week and analyse them further regularly. 

1. Order Accuracy

When evaluating your order management, a sensible place to start is to look at how many accurate orders are getting to your customers. You might think, “There’s more to evaluating the success of orders than just order accuracy.” Don’t worry. We will look at other aspects of orders, like delivery times and order cycle times, later, but for now, let’s take it one step at a time.

First, let's define what constitutes an "accurate" order. This will vary for every business, but it usually includes:

• Correct items included
• Correct quantities
• Correct product conditions
• Accurate shipping address
• Correct packaging

Consider this: 23% of consumers return products because they received the wrong item. Successful direct-to-consumer (DTC) retailers typically aim for order accuracy rates above 95%. However, it’s rare for a company to achieve a 95%+ order accuracy rate consistently. Aiming for around 90% can significantly minimise disruptions caused by returns for incorrect items.

Several factors can affect your order accuracy, including human errors like packing, picking, and data entry mistakes, issues with Order Management Systems (OMS), warehouse management inefficiencies such as poor tracking, inefficient workflows, product variations and similar items confusing, and incorrect items received from suppliers. 

Without actually calculating your order accuracy, you might not realise there’s a problem until it’s too late and your business’s reputation has been damaged.

To calculate order accuracy, gather data on the total number of orders processed (this is your denominator) and the number of accurate orders (this is your numerator). You can collect this information from your Order Management System, Warehouse Management System, customer returns, and customer feedback. 

The formula is simple: (Total Correct Orders / Total Orders Shipped) x 100

2. On-Time Delivery

Did you know that 63% of online shoppers say that delivery speed influences their purchase decisions? This shows how important on-time delivery (OTD) is for small businesses aiming to keep customers happy and returning for more.

Ensuring timely delivery is critical. While some factors—like carrier issues or natural disasters—are out of your control, getting shipping right is more important than ever. 

When deliveries hit the mark, customer satisfaction soars and returns drop. So, nailing OTD can directly enhance your customer satisfaction scores, average order value, and loyalty.

Before you start tracking OTD, you need to define "on-time" for your business. This could mean deliveries within the promised window, by a specific cutoff time, or within a certain number of days from the order date. Setting clear expectations on your e-commerce platform helps build trust. The more you meet or exceed these expectations, the better your customers feel about your business.

Measuring Success in On-Time Delivery

To measure OTD, gather data on your total number of orders shipped and the number delivered on time. This information can come from your Order Management System (OMS), which tracks order placement, shipping, and delivery dates. Carrier Tracking Systems will show delivery status and actual dates, and Customer Service Logs can highlight any delivery complaints or inquiries.

You can track this metric by calculating the following formula:

Formula: (Total On-Time Deliveries / Total Orders Shipped) x 100

3. Order Cycle Time

Next on your list should be order cycle time—an important metric for evaluating how well your order fulfilment process is running. With 38% of online shoppers abandoning their carts if delivery takes more than a week, keeping your order cycle time short can make a big difference in customer retention.

When setting up your order fulfilment process, you likely had goals for how quickly orders should be processed and delivered. Tracking order cycle time gives you a clear view of how long it takes from when a customer places an order to when they receive it. As your business expands, keeping this time short can get trickier, but it’s essential for several reasons:

• Customer Satisfaction: Shorter cycle times lead to higher customer satisfaction scores and repeat business.
• Inventory Accuracy: Efficient order fulfilment helps ensure your inventory levels are accurate and well-managed.
• Operational Efficiency: Spotting bottlenecks in the order management system can streamline the fulfilment process.
• Competitive Edge: Faster delivery times can set you apart and boost your average order value.

Understanding Order Cycle Time

Order cycle time is the total duration from when a customer places an order to when it’s delivered to their doorstep. It covers every stage of the order fulfilment process, including order entry, processing, inventory allocation, picking, packing, shipping, and final delivery.

For instance, if an order is placed on July 1st and delivered on July 7th, the cycle time is six days. This means it took six days from when the customer placed the order to when they received it.

You need to calculate the average cycle time to measure order cycle time across more orders. Here's how:

1. Collect Data: Gather the order placement and delivery dates for each order over a specific period.
2. Calculate Individual Cycle Times: To calculate the cycle time for each order, subtract the order placement date from the delivery date.
3. Compute the Average: Add up all the individual cycle timers and divide by the total number of orders.

Order Cycle Time = (Delivery Date – Order Date) / Total Orders Shipped

On a larger scale, if you have 5 orders with cycle times of 4, 6, 5, 7, and 6 days, you would calculate the average as follows:

• Sum of Cycle Times: 4 + 6 + 5 + 7 + 6 = 28 days
• Total Number of Orders: 5
• Average Order Cycle Time: 28 days ÷ 5 orders = 5.6 days

Tools like Warehouse Management Systems (WMS) and delivery tracking systems will help you gather and analyse this data efficiently.

4. Order Fill Rate 

Your fill rate is your ultimate performance metric – think of it as the health check for your order fulfilment process. It tells you the percentage of orders completed successfully without any issues. Essentially, it’s a measure of how well you’re meeting your customers' needs right off the bat.

The fill rate can sometimes be tricky to nail down because what counts as a "successfully completed" order can vary. Usually, it means the orders that are entirely filled from your stock on the first try, without any backorders or missing items.

Why is It So Important?

1. Customer Satisfaction: A high fill rate means happy customers. When customers get their orders complete and on time, they’re more likely to return and recommend your business.
2. Operational Efficiency: Keeping an eye on this metric helps you spot inefficiencies in your supply chain and inventory management so you can fix them and streamline your operations.
3. Sales and Revenue: It’s a hat trick! Better fill rates lead to more sales and higher revenue because customers trust that you’ll deliver what they need when they need it.

Setting the Bar

You should constantly aim for a fill rate as close to 100% as possible. Hitting around 95% is solid, but dipping below 85% clearly indicates that something’s off in your order management process.

Most businesses don’t include returns in this calculation, so focus purely on getting those orders right the first time.

• Order Fill Rate by Product Category: Break down your fill rate by different product categories to see where you might have inventory challenges or opportunities.
• Order Fill Rate by Customer Segment: Understand your performance with different customer segments. Tailoring your inventory management to meet the needs of your best customers can boost your fill rate.

In short, monitor your order fill rate closely. It’s a critical indicator of your success, customer happiness, and bottom-line performance.

Formula: (Number of orders fulfilled successfully  / Total number of orders) x 100

5. Customer satisfaction 

Last but certainly not least on our essential metrics list is customer satisfaction rating. The other metrics we have discussed today are all inherently significant indicators of your customer satisfaction rating, but you can also directly track your overall customer satisfaction rating. 

For small businesses, understanding how your customers feel about their experience is crucial for evaluating your order management process. Customer satisfaction is a key indicator of your order management success. While many businesses assume that filled orders equate to happy customers, the real insight comes from actively seeking and analysing customer feedback.

You can track your customer satisfaction rate in many different ways. Let’s examine the best ways for your business to do this. 

Customer Satisfaction Surveys

Use tools like SurveyMonkey or Google Forms to send surveys to customers after their orders are fulfilled. Measure overall satisfaction, delivery time, packaging quality, and accuracy. For example, if 80% of customers rate their experience as “excellent,” it’s a strong positive indicator of your performance.

Net Promoter Score (NPS)

Ask customers, “On a scale of 0-10, how likely are you to recommend us to a friend?” Calculate NPS by subtracting the percentage of Detractors (0-6) from Promoters (9-10). An NPS of +50 suggests strong customer loyalty.

Customer Reviews and Feedback

Monitor reviews on platforms like Google, Yelp, and social media. Look at average ratings, sentiment analysis, and common themes. For instance, a 4.5-star rating with praise for prompt delivery indicates high customer satisfaction.

Return Rates

Calculate the return rate by dividing the number of returns by the total number of orders. Analysing this data helps spot trends, such as during peak seasons like Black Friday. A return rate of 10% with many returns due to incorrect items may highlight areas for improvement in order accuracy.

Definition and Measurement

Using customer surveys, feedback forms, and Net Promoter Score (NPS) and analysing reviews and return rates should give your business a strong, overarching view of your customer base's happiness. However, if you need a specific numerical value for customer satisfaction, you can calculate it as follows:

1. Assign Scores: Each survey response is given a numerical score.
2. Calculate Average: Add the satisfaction scores and divide them by the highest possible score.
3. Convert to Percentage: Multiply the result by 100 to get a percentage.

Example: If the maximum score is 5 and the average score is 4, the CSAT percentage would be (4 / 5) x 100. 

In short, keeping your customers happy is at the heart of your business. Regularly track these metrics to ensure you meet their needs and make informed decisions to enhance their experience. This will help improve your order management and build a loyal customer base that supports your growth.

Dealing with Troubling Order Management Metrics 

No business operates flawlessly all the time. It’s natural to encounter some less-than-ideal metrics as you evaluate your order management processes. However, how you respond to these troubling metrics is the key to success. 

Here’s a streamlined approach to addressing and improving your order management metrics:

1. Order Accuracy

If your order accuracy isn’t what you expected, don’t worry. Perfect order accuracy is rare, especially for expanding companies dealing with high demand. Common causes include human errors in picking and packing, inaccurate data entry, and system inefficiencies.

• Training: Ensure staff is well-trained to minimise human errors.
• Technology: Implement barcode scanners and automated verification systems.
• Process Simplification: Streamline workflows to reduce complexity.

2. On-Time Delivery

Poor on-time delivery rates can significantly impact customer satisfaction and loyalty. Inefficient order processing, carrier problems, or external factors like weather might cause delays.

• Process Optimization: Streamline order processing steps to reduce delays.
• Carrier Management: Partner with reliable carriers and have backup options.
• Inventory Management: Organise inventory for quick picking and packing.
• Customer Communication: Keep customers informed about order status and delays.

3. Order Cycle Time

Long order cycle times can frustrate customers and lead to cart abandonment. This issue often arises from inefficient workflows or bottlenecks in the fulfilment process.

• Workflow Analysis: Identify and address delays in your order fulfilment process.
• Automation: Implement automation to speed up order processing and inventory allocation.
• Supplier Coordination: Ensure timely replenishment of stock through close coordination with suppliers.

4. Inventory Accuracy

Inaccurate inventory levels can lead to stockouts, overstock, and financial discrepancies. Discrepancies often result from data entry errors, theft, or damage.

• Regular Audits: Conduct physical counts regularly and compare them with records.
• Real-Time Tracking: Use inventory management systems with real-time tracking.
• Employee Training: Train staff on accurate inventory handling and reporting procedures.

Partnering with a 3PL for Overall Improvement

A third-party logistics (3PL) provider can significantly enhance your order management metrics by offering specialised services and advanced technology. 3PLs often have established processes and systems to reduce errors and streamline operations. They provide expertise in logistics, warehousing, and distribution, which can improve order accuracy, on-time delivery rates, and overall efficiency. 

Partnering with a reputable 3PL allows you to leverage their infrastructure and experience. This helps you scale your business and focus on core activities while they manage the complexities of fulfilment.

Final thoughts: Tracking Order Management Success

Keeping tabs on your order management metrics is crucial for your business's success. By focusing on key areas like order accuracy, delivery times, and inventory levels, you can pinpoint exactly what’s working and where you need to step up your game.

Think of these metrics as a roadmap for your business. They help you see what’s going well and where there’s room for improvement, making it easier to enhance your fulfilment processes and keep your customers happy.

So, take these insights and run with them. Adjust, optimise, and celebrate the wins. With the right metrics in hand, you're not just managing orders—you’re setting your business up for long-term success. Let's turn those numbers into your secret weapon for growth!

Driving Growth With Streamlined Order Fulfilment Processes

At Core, we recognise the complexities involved in expanding your business operations, effectively monitoring order management metrics, and meeting your customers' demands for flawless order fulfilment. Since 2014, we’ve partnered with businesses of all sizes and across diverse industries to refine their processes and bring their success metrics as close to perfection as possible.

Contact us today to learn how we can support your growth and simplify your order fulfilment process.