Distribution Metrics that Really Matter
How are wholesalers supposed to add value while fending off larger competitors, growing profits, and managing daily challenges? Metrics help. Metrics provide a clear picture and a single source of truth of what is happening in every corner of the business. A comprehensive business application eliminates data silos providing centralized, accurate, and insightful data to keep everyone on the same page. Used correctly, key performance indicators help distribution executives to outmaneuver competitors, build customer trust, and maintain employee loyalty to take their businesses to the next level. In this guide, we discuss a few distribution metrics that really matter.
While most distributors use metrics to drive daily decisions, improve quality, and guide operational excellence, many have yet to harness metrics to transform their organizations. They struggle to make sense of the information due to data issues, lack of strategic vision, missing benchmarks, and a focus on lagging indicators. Further, departmental metrics do not always align with corporate goals.
This guide explains the importance of tracking key performance indicators, diverse metric types, and common mistakes made by wholesale distribution executives. Discover the most important metrics to monitor for continuous improvement and align goals for actionable metrics to transform your entire organization.
How Metrics Improve Distribution Operations
Metrics are everywhere in distribution, from accounting to sales and purchasing to warehouse operations. Monitoring data helps distributors boost sales, improve fill rates, reduce costs, fend off competitors, and optimize inventory levels and warehouse operations. However, Forrester’s Business Technographics Survey shows that just 17 percent of supply chain professionals and 22 percent of logistics and distribution professionals are using or plan to use big data analytics for planning. Below are seven benefits of metrics for distribution businesses.
Order entry, inventory management, and warehouse activity efficiency are critical for distributors. It is easy for distributors to capture efficiency benchmarks for receiving, put-away, picking, and order fulfillment activities. Once established, management monitors efficiency changes over time. These metrics enable them to understand if they are improving or spot problems early before impacting profits and customer satisfaction.
Metrics enable distributors to monitor customer loyalty, total customer value, market share, and market growth for strategic business decisions. Understand your weaknesses, capitalize on market opportunities, and fortify your strengths to fend off low-cost, offshore competitors or direct-to-consumer (D2C) manufacturers.
Distributors must align departmental metrics with topline corporate initiatives. For example, high inventory levels increase carrying costs and write-offs due to product obsolescence. Consequently, expanding inventory to improve order fill rates does not align with corporate goals to reduce costs and improve profits.
The only way to increase profits is to sell more, reduce costs, or increase prices. Metrics help distributors win business and reduce costs. Motivate warehouse staff by posting real-time metrics on a big screen in the warehouse. Monitor the correct information to optimize pricing based on value, demand, and competition.
KPIs help predict and negate risk associated with quality issues, deadstock, and inefficient processes. ABC classification ranks item relevance assisting with investment and warehouse planning. Establish KPIs to monitor risk scenarios proactively.
Metrics are essential for strategic planning, such as optimizing safety stock levels, determining where to invest capital, expanding into new markets, product retirement, and new product launches.
Other metric benefits include improved employee satisfaction, bad debt reduction, increased inventory turns, lower carrying costs, and happier customers.
A Cloud ERP solution that affords you 360-degree views of all the key metrics is beneficial to any wholesale and distribution business looking to gain a sustainable competitive advantage in the digital economy.