In today’s eCommerce world, businesses are catching on to the fact that exceptional on-time delivery (OTD) plays a crucial role in customer satisfaction. In fact, more and more an exceptional OTD is key to an ecommerce operation’s success. To enhance the delivery experience for customers, companies must employ key performance indicators (KPIs) to identify and rectify any shortcomings.
So, what are the top KPIs specifically targeting on-time delivery? Which KPIs can sharpen your eCommerce operations by eliminating bottlenecks, inefficiencies, and shipping issues related to timely deliveries? Indeed in this age of eCommerce, knowing and using these OTD KPI are key to a business’ survival. Join me as we dive into the top 5 on-time delivery KPIs that can elevate your customers’ delivery experience.
“It is not necessary to change. Survival is not mandatory.”W. Edwards Deming
- 1. On-Time Delivery KPI: The First Measure Of Delivery Performance.
- 2. Order (Click)-To-Delivery KPI: On-Time Delivery The Key Component Of This Metric.
- 3. Delivery Promise Accuracy KPI: The Promise Date Is The Key Driver Of On-Time Performance.
- 4. Order Fill Rate KPI: 100% Order Fill Rate + 100% On-Time Delivery = Happy Customer.
- 5. WISMO (Where Is My Stuff?) Calls / Returns KPIs: Caused By Late Deliveries, Poor Ship Status, Ineffective eCommerce Operations.
1. On-Time Delivery KPI: The First Measure Of Delivery Performance.
The On-Time Delivery Key Performance Indicator (KPI) is a crucial metric for evaluating the efficiency and effectiveness of a company’s eCommerce delivery process. This metric measures the percentage of orders delivered on or before the promised delivery date. A higher on-time delivery rate indicates a better customer experience. Obviously, your customer is pleased because they receive their orders when expected.
By monitoring and improving this KPI, businesses can enhance their overall customer satisfaction and build loyal, repeat customers. Here is the 2-step process for how you calculate your On-Time Delivery (OTD) rate for this key KPI:
2-Step Process To Calculating On-Time Delivery
First Determine If A Shipment Is Late.
The formula for this is: If the promise date is later than the delivered date, then the shipment is on-time, else it is late. For example, the promised date is April 1st and the shipment was delivered on April 2nd. Therefore, it is late. Next, do this calculation for every shipment. Indeed, every shipment is either on-time or late (or never was delivered). Obviously, it is best if you acquire the shipment data and use a business intelligence (BI) application to automate this process.
Second, Compare Your Calculated OTD Rate Against Your Target KPI .
Next, you aggregate your delivery results into an overall OTD rate and compare it to your target KPI. For example, as an eCommerce company you may set your target OTD KPI as 97%.
Then, you need to calculate your OTD rate and see how it compares to the OTD KPI. The OTD formula is as follows: the number of shipments delivered on-time divided by total number of deliveries, then multiplied by 100 to get the OTD percentage. For example, if you have 100 shipments and 95 were on-time, then your OTD rate is 95%. As a result, you need to prioritize an root cause analysis as you are not meeting your OTD KPI of 97%.
“Without data, you’re just another person with an opinion.”W. Edwards Deming
2. Order (Click)-To-Delivery KPI: On-Time Delivery The Key Component Of This Metric.
This is the key metric for eCommerce operations as it measures the entire fulfillment operation, not just the delivery segment. Basically, this KPI measures the orders delivered on-time divided by the number of orders. A variation of this KPI is called the perfect order index. Specifically, the perfect order index is a a compilation score that includes the percentages of orders delivered on-time (i.e the OTD KPI), percentage of orders completed, percentage of damage-free orders, and other measurements such as accurate documentation.
3. Delivery Promise Accuracy KPI: The Promise Date Is The Key Driver Of On-Time Performance.
This metric consists of measuring customer orders delivered on or before the customer’s promised delivery date. Then divide this number by the total number of orders. In particular, this KPI highlights the importance of the promise date that is determined by the shipper. Additionally, your on-time delivery rate is a key driver for meeting this KPI.
Also, it is important to understand how much the promised date will drive your transportation service levels. Indeed, how you set your promise date can be a two-edged sword for your operations. For example, if you set your promise date standard at four days, you will lose customers to competitors like Amazon with a two-day standard. On the other hand, if you set an unrealistic promise date standard of one day, you end up with many late deliveries and a low delivery promise accuracy KPI. So it is key to set a competitive promise date that your eCommerce operations can deliver on to delight your customers.
4. Order Fill Rate KPI: 100% Order Fill Rate + 100% On-Time Delivery = Happy Customer.
The Order Fill Rate KPI calculates the proportion of orders fulfilled without any shortages or shipment issues. Combining the order fill rate with the on-time delivery rate is essentially your perfect order index or Order (Click)-To-Delivery rate as described above. Ideally, your goal is to have a 100% KPI for your order fill rate. This.is is essential for an outstanding customer experience, as it ensures that customers receive what they ordered when they expect it. Achieving high marks on both these metrics demonstrates a company’s commitment to excellence and serves as a significant differentiator in competitive markets.
5. WISMO (Where Is My Stuff?) Calls / Returns KPIs: Caused By Late Deliveries, Poor Ship Status, Ineffective eCommerce Operations.
A lot of calls into eCommerce contact centers are “Where is my stuff?” calls. It is key that you keep track of these types of calls and take proactive actions to assure your customers have visibility to their shipment orders. Indeed, your customer service agents across all channels need to have accurate, complete, and timely information to customer order status. Lastly, by minimizing WISMO calls, this will help you reduce returns and bad customer reviews.
Also, a large percentage of returns is an indicator that your customers are less than delighted with your eCommerce operations. So having a returns KPI will help focus on decreasing returns. Now, returns can happen for a variety of issues. First, it can be because you delivered the shipment late and the customer had no use for the product. Other reasons for return to shipper (RTS) events can include things like customer moved, shipment damaged, wrong product shipped, or customer mis-ordered to name a few.
“It is not enough to do your best, you must know what to do, and then do your best.”W. Edwards Deming
For more ideas and information on improving your eCommerce supply chain, see Shipium’s Complete eCommerce Supply Chain Guide and Purolator’s What To Know About eCommerce Supply Chain Management.
For more articles from Supply Chain Tech Insights, see our latest topics on shipping.
Greetings! As an independent supply chain tech expert with 30+ years of hands-on experience, I take great pleasure in providing actionable insights to logistics leaders. My background includes implementing 100s of innovative solutions using emerging technologies and a data-centric development approach. I have also provided business intelligence (BI) solutions for 1,000s of shippers. For more about me, click here.