Distribution is an increasingly competitive space. Wholesalers must manage daily logistical challenges while facing a growing pool of competitors.
One tool which can help distribution companies more effectively navigate these pain points is the distribution KPI, or Key Performance Indicator. KPIs in distribution can provide a clear picture and a single source of truth about what is happening across your distribution business. These metrics, when leveraged with a comprehensive ERP designed for distribution, can also help distribution executives outmaneuver competitors of any size, enhance customer loyalty, and help employees get even better at their jobs.
Types of KPIs
KPIs in any industry or context fall under four categories: descriptive, diagnostic, predictive and prescriptive. Let’s look at each.
- Descriptive – Descriptive KPIs are the starting point for all analyses of metrics. They are primarily used to analyze lagging indicators and understand what happened. With this knowledge in hand, you can then transition to other types of metrics.
- Diagnostic – If descriptive metrics analyze the what, diagnostic metrics analyze the why. Diagnostic metrics gathered over time can be analyzed with diagnostic metrics.
- Predictive – Prescriptive KPIs are the next layer up, working with both descriptive and diagnostic KPIs as their key ingredients. These metrics predict likely outcomes or performance.
- Prescriptive – Finally, prescriptive analytics combine descriptive, diagnostic, and predictive metrics to develop a strategy for preventing issues before they happen. Prescriptive KPIs often involve advanced mathematical modeling.
KPIs Relevant to Distribution
There are thousands of metrics out there that can help you increase distribution efficiency. Below, we’ve divided some of the most relevant into high-level categories:
- Revenue and Profit
- Cash Flow
- Perfect Order Rate / On-Time Shipping Ratio
- Dock to Stock Efficiency / Accuracy / Cycle Time
- Picking Efficiency / Accuracy / Cycle Time
- Packing Efficiency / Accuracy / Cycle Time
- Shipping Efficiency / Accuracy / Cycle Time
- Receipt / Put-Away Cycle Time
- Space Utilization
- Customer/Vendor Returns/Exchanges by Reason
- Shipping / Transportation Costs
- Labor Utilization / Labor Costs
- Days Sales of Inventory
- Back Order Rate
- Stock-Out Rate
- Back Orders as a Percent of Total Sales
- Inventory Accuracy (Physical Inventory)
- Inventory Count and Value by ABC Rank
- Inventory Valuation
- Inventory Turns by Item / Item Class
- Carrying Costs by Item / Item Class
- Order Fill Rate
- Physical Inventory Cycle Count Time
- Operating Margin
- Quote-to-Cash Cycle
Quality Control KPIs
- Cost of Poor Quality
- Customer Quality Complaints
- Quality Returns
- Corrective Actions
- Vendor Quality
- Quality Audits
- Time to Resolution
Technology for Improved Metrics Management
It is easy enough to generate distribution metrics. The challenge for distribution managers and executives is ensuring that data is clean and consistent and that they can disseminate it effectively to all stakeholders. Too often, companies rely on error-prone data collection or us analog, spreadsheet analysis, delaying information sharing.
As an alternative, distributors looking to gain an edge in the space should turn to holistic ERP applications with embedded business intelligence. These tools can analyze data from multiple sources. Modern cloud ERP applications, like Acumatica, provide a rock-solid data foundation with configurable inquiries, actionable reports, personalized dashboards, and insightful data analysis to transform business operations. In addition, custom workflows connect cross-departmental workflows with collaboration tools.
Distribution KPIs are useful in and of themselves. When you power them with an ERP solution, they are truly transformational tools for distributors. Contact us today to learn how ERP can help your distribution company.