In this new post, we’re going to show you how you can measure delivery performance.
So if you want to:
Drive greater efficiency.
Find opportunities to reduce costs.
Get more customers to use your service.
Achieve excellence through continuous optimization.
Then, you’ll enjoy the actionable tips and techniques that we outline in this article.
Let’s dive in.
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At its core, delivery performance is the effectiveness of your organization to fulfill order requests and provide products or services to customers. How well you perform these activities depends on your teams’ ability to complete tasks according to terms of delivery and within your operational capacity.
These limits include the resources, structures, and technology you have at your disposal to keep running the various delivery processes involved in order fulfillment.
So, the only way to raise capacity without expanding is to optimize delivery performance. And in doing so, improve your effectiveness to deliver goods or services to customers.
There are four main factors that affect delivery performance. These are:
Delivery, like any other service, needs to improve to make your business stay competitive on the market.
To improve the processes, you’ll first need to evaluate the current performance. This means calculating key metrics in delivery logistics.
Measuring Key Performance Indicators (KPIs) in delivery gives you insight into the state of your operations based on data.
Evaluating and regularly tracking KPIs also paints an accurate picture of the strengths and weaknesses of your delivery.
In turn, that helps you to uncover wasteful processes and errors in your performance. But also find opportunities for improvement, which can lead to greater efficiency and effectiveness.
In fact, companies that optimize supply chains have 15% lower delivery costs than companies that don’t.
And that’s just the tip of the iceberg, since using data and monitoring KPIs also helps you to:
#1 Number of Completed Deliveries
#2 Order Accuracy
#3 On-Time Delivery
#4 Average Time Per Delivery
#5 Average Cost of Delivery
#6 Transit Time to Distance
#7 Vehicle Capacity Utilization
One of the main key performance metrics in logistics is the total number of completed deliveries.
This normally refers to the sum of all your product deliveries per month, quarter, or year.
Although it may seem obvious, the total number of deliveries is actually one of the key metrics that are used to measure other performance values.
It is the core value that helps determine the overall effectiveness of delivery performance.
For example, companies can use it to calculate the average number of deliveries, which helps them identify growth potential.
If the figure is further broken down into different categories such as product types, locations, etc. it will also help you optimize other important delivery metrics.
Order accuracy, also called the perfect order measurement, is the percentage of orders that were delivered without any errors, compared to the total number of orders.
Order accuracy helps you spot mistakes that occur during the delivery process, e.g. returned or damaged products, failed deliveries, or orders placed by mistake.
Since errors can occur at any point during the fulfillment cycle, the order accuracy rate is not easy to calculate.
One way to improve that is to make it easier to submit reports every step of the way. This can be done with the help of advanced last-mile delivery solutions.
On-time delivery is a metric that tracks the percentage (or the number) of orders fulfilled within the expected delivery date.
This is one of the most important KPIs because it improves your customer experience, customer relationship, and retention.
According to a study done by Oracle, 13% of customers will not repeat the purchase if the order was not delivered on time.
Delays can be caused by a number of reasons such as:
Figuring out which orders were delivered late can help companies find and resolve the source of the problem.
Average time per delivery, also called the average service time metric, refers to the average time required to complete a delivery over a period of time (day, month, quarter, or year).
This metric helps you determine the efficiency of your planned delivery routes and the overall effectiveness of the supply chain.
Knowing the average time and offering precise information on delivery time can have a positive impact on customer experience. But, at the same time, improve the accuracy rate of picking up orders, and reduce the number of returns.
Comparing different average delivery times across equal time periods can help you see where the process can be optimized and improved.
Calculating the average cost of delivery is done based on specific key parameters such as distance, vehicle, and product type.
When you divide the sum of the vehicle, driver, fuel and other costs by the total distance, you will get the average cost based on the distance.
If you calculate based on the product or vehicle parameter, you need to divide the sum of the vehicle cost (for a specific product), driver cost, and fuel cost by the total number of deliveries.
Knowing the value of the average cost of delivery can help you make operational changes that will reduce the cost without damaging the performance.
For example, you can invest in better quality vehicles, or tools like route optimization software.
Transit time to distance refers to the time that drivers and couriers spend in transportation from the pick-up location to the drop-off.
It compares the distance that a package travels to the time it takes it to move from pick-up to final destination.
Calculating this metric offers insight into the delivery speed and the efficiency of the delivery routes they use. That can lead to a higher-order accuracy rate and reduce the number of returns.
Once you get a clear view of the average transit time, you can also provide customers with more precise estimated times of arrival (ETAs).
The vehicle capacity utilization KPI compares the capacity of a vehicle that is used to deliver products to its total capacity.
By dividing the available capacity with the total capacity, you will get the amount of idle space that is not used for order delivery.
Calculating your vehicle capacity utilization and applying it across the fleet will show you the current profitability of delivery operations. It will also aid vehicle routing and scheduling.
If the vehicle capacity has high availability, it means that there are inefficiencies during the loading process. Or that there is room to merge some delivery routes.
In case of a low, or negative availability, the current vehicle fleet is insufficient and should be expanded.
With the global reach of technology advancement, measuring delivery performance is another process that is assisted with modern software and tools.
There are different types of supply chain management tools that can help you streamline logistic processes and measure delivery KPIs. These tools belong to the following categories:
A proper delivery management software can help you with the following components:
Since the software is involved in all aspects of the delivery process, it holds invaluable data on all the major KPIs that would be hard, or even impossible to track manually.
Take a look at seven benefits of measuring delivery performance on a regular basis:
#1 Lower Transportation Costs
#2 Raise Delivery Speed
#3 Improve Customer Experience
#4 Plan Better Schedules and Routes
#5 Easily Scale Operations
#6 Build an Agile Delivery
#7 Continuous Improvement
Transportation costs make up 50.3% of all the logistics costs. Distance, vehicle capacity, urgency, delivery area, delivery accuracy, and other factors all affect that expenditure.
Being costly and quite complex, transportation is the ideal segment to focus on when it comes to improving delivery performance.
Tracking KPIs and analyzing data allows you to make quantitative decisions to:
It can help reduce transportation costs while keeping the high quality of delivery.
Delivery speed is vital for every online business and has a huge impact on the customer satisfaction rate.
At least 34% of consumers would rather shop in physical stores than online because of long delivery times.
Diligently measuring KPIs can give you insight into the productivity of your entire delivery fleet.
After analyzing different types of data related to the delivery process, you will be able to determine which corrections to make to achieve faster delivery times.
The right data can help you raise the delivery speed by optimizing delivery routes, merging reverse and forward logistics, setting order priorities, adjusting routes in real-time, and more.
An incredible 86% of customers would be willing to pay more to buy products and services from companies with great customer experience.
Monitoring KPIs that affect customer satisfaction and performing actions based on the data gathered is the first step to forming a customer-centric supply chain.
Some of the key KPIs that can help this goal are on-time delivery, average delivery time, delivery accuracy, perfect order management, inventory management, return rate, etc.
Maximizing your customer satisfaction rate leads to more repeat orders, stronger customer loyalty, and even the growth of your customer base, which further leads to increased revenue.
Monitoring carefully selected KPIs allows you to gather data on different aspects of route management such as planned vs. actual performance (the distance driven, number of stops, time at each stop, etc.), safety-related metrics, compliance-related metrics, cost metrics (cost per mile, engine idle time, revenue per station, etc.), and more.
All this fleet performance information can be used to plan better delivery schedules and routes.
To maximize your future route performance, you should take into consideration the data coming from three different levels: dispatchers and drivers, logistic executives, and C-suite executives.
Scaling delivery logistics is essential for competitiveness in today’s market.
Companies constantly compete to provide more flexible and faster delivery options.
Investing time in KPI analysis offers valuable insights on how to stay ahead of the competition.
It also offers attractive new shipping options such as same-day delivery, without disrupting the quality of delivery operations.
Analyzing metrics such as average delivery time, on-time delivery, order accuracy, and many others offers data necessary to scale efficiently.
Choosing the right KPIs allows you to painlessly grow and expand your offer with the help of data-based projections.
Building an agile delivery operation is a modern procedure that lets companies adapt to changes and increase the efficiency of their activities.
According to McKinsey, agile operations are used by only 4% of companies, while 37% of companies started implementing the process.
Implementing agility requires access to key performance information. Closely monitoring your main KPIs helps to plan the deliveries on the go, improve the speed of delivery, and raise the level of performance.
Being on the frontline of exciting new procedures that improve the overall logistics efficiency can provide you with a significant competitive advantage.
The use of KPIs is the most efficient way to measure the overall success of an organization and to spot opportunities for improvement.
Continuous improvement is crucial for the success of any business. In this context, KPIs are used to define the actions needed to achieve improvement goals.
They also help you determine whether a potential change will have a positive or negative impact.
When KPIs are carefully chosen and regularly analyzed, companies get a chance to raise the standards of their delivery performance.
Monitoring KPIs provides a clear view of the total performance and defines quantitive steps that lead to significant improvement.
If you are ready to start measuring delivery performance, we can help you.