What are the most common distribution performance metrics used in Logistics Management?

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Logistics management is the process of planning, implementing, and controlling the efficient and effective flow of goods and services from the point of origin to the point of consumption. One of the key aspects of logistics management is distribution, which involves the movement of products to the customers or end users. Distribution performance metrics are indicators that measure how well the distribution process meets the customer expectations and business objectives. In this article, you will learn about some of the most common distribution performance metrics used in logistics management and how they can help you improve your distribution efficiency, quality, and customer satisfaction.

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Corey Weekes CPIM CIRM CSCP

Vice President, Global Logistics | Advisory Board Member | Supply Chain & Operations Management
Rakesh Singh

Sr. Specialist, Supply Chain Operations @ FedEx l Linkedin Top Voice for Logistics Management and Warehouse Operations I

1 Order fill rate

Order fill rate is the percentage of customer orders that are fulfilled from the available inventory without any backorders or stockouts. It reflects how well the inventory management and replenishment systems match the demand patterns and customer preferences. A high order fill rate indicates a high level of customer service and satisfaction, while a low order fill rate implies a risk of losing sales and customers due to unavailability of products. Order fill rate can be calculated as the number of orders fulfilled from stock divided by the total number of orders received.

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2 On-time delivery rate

On-time delivery rate is the percentage of customer orders that are delivered within the agreed or expected time frame. It reflects how well the transportation and delivery systems meet the customer requirements and expectations. A high on-time delivery rate indicates a high level of reliability and responsiveness, while a low on-time delivery rate implies a risk of damaging the customer relationship and reputation due to delays and disruptions. On-time delivery rate can be calculated as the number of orders delivered on time divided by the total number of orders shipped.

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3 Perfect order rate

Perfect order rate is the percentage of customer orders that are delivered without any errors, defects, damages, or returns. It reflects how well the quality and accuracy of the distribution process meet the customer standards and specifications. A high perfect order rate indicates a high level of excellence and consistency, while a low perfect order rate implies a risk of increasing the costs and waste due to rework, replacement, or refund. Perfect order rate can be calculated as the number of orders delivered without any issues divided by the total number of orders shipped.

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4 Distribution cost

Distribution cost is the total amount of money spent on the distribution process, including inventory carrying, transportation, warehousing, packaging, handling, and administration. It reflects how well the distribution process utilizes the resources and optimizes the trade-offs between service and cost. A low distribution cost indicates a high level of efficiency and profitability, while a high distribution cost implies a risk of reducing the margins and competitiveness due to overspending or underperforming. Distribution cost can be calculated as the sum of all the distribution expenses divided by the total sales revenue.

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5 Distribution cycle time

Distribution cycle time is the average amount of time taken to complete the distribution process, from the receipt of the customer order to the delivery of the product. It reflects how well the distribution process streamlines the operations and reduces the lead times and inventory levels. A low distribution cycle time indicates a high level of agility and flexibility, while a high distribution cycle time implies a risk of losing the market share and customer loyalty due to long waiting times or obsolescence. Distribution cycle time can be calculated as the sum of all the distribution times divided by the total number of orders shipped.

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6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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Corey Weekes CPIM CIRM CSCP

Vice President, Global Logistics | Advisory Board Member | Supply Chain & Operations Management
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Two other important metrics are Dock-to-Stock cycle time and DC occupancy / storage capacity utilization. Dock-to-Stock cycle time is an important measure of how fast your DC is processing inbound receipts, measured from truck / container DC arrival to item putaway. DC occupancy / storage capacity utilization is a measure of how full is your warehouse at the moment compared to the designed or absolute maximum. This is an important metric to monitor as operational performance is negatively impacted when DCs cross 80 to 85% of their designed limit. So forecasting this based on current levels, projected inflows and outflows is important for ensuring the operation is not heading into trouble.

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Rakesh Singh

Sr. Specialist, Supply Chain Operations @ FedEx l Linkedin Top Voice for Logistics Management and Warehouse Operations I
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Some other distribution performance metrics are: - Order variation, it is the difference between actual orders and forecast orders. Order variation is calculated as "total actual orders (-) minus forecast orders" divided by forecast orders. High negative variation indicates less utilization of resources whereas high positive variation implies a risk of losing the market share and customer loyalty due to delay delivery. Inventory accuracy, it is calculated as " Physical/available inventory (-) minus system/logical inventory" divided by system inventory. Shortage inventory implies a risk of losing the market share and customer loyalty due to non-fulfilment of orders or long waiting times.

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What are the most common distribution performance metrics used in Logistics Management?

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6

1 Order fill rate

2 On-time delivery rate

3 Perfect order rate

4 Distribution cost

5 Distribution cycle time

6 Here’s what else to consider

Logistics Management

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What are the most common distribution performance metrics used in Logistics Management?

1

2

3

4

5

6

1 Order fill rate

2 On-time delivery rate

3 Perfect order rate

4 Distribution cost

5 Distribution cycle time

6 Here’s what else to consider

Logistics Management

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