For ecommerce shippers, up to 70% of your budget can go to shipping fees. To better understand your shipping and transportation costs it’s important to track key parcel metrics.
There are many ways your team can analyze and track your shipping costs. Your shipping carrier should be sending you detailed invoices. If you work with a third-party logistics provider or a fulfillment partner, they should also be able to help you gather the right data to track the right parcel metrics.
The following list of key performance indicators (KPIs) includes some of the best shipping metrics to track to help optimize your ecommerce logistics, ensure customer satisfaction, and manage costs effectively.
A List of Important Parcel Metrics to Optimize Ecommerce Shipping
1. On-time Delivery Rate
The percentage of parcels delivered on or before the promised delivery date. Customer satisfaction is often the first goal of any ecommerce brand, so a high rate of on-time deliveries equals a higher likelihood of satisfied customers.
2. Average Delivery Time
The average number of days it takes to deliver a parcel from order placement to delivery. This can vary greatly depending on the shipping service you use and the delivery process. Compare actual delivery times against the estimated or guaranteed delivery times that your carrier provides. You can also track this against the average across the industry.
This might be the best metric to track to ensure you enhance the customer experience. If you feel the shipping carrier performance is already at a maximum, but delivery times are lagging, look into how to speed up the fulfillment process, order picking accuracy, order lead time, and other warehouse management KPIs.
3. Overall Shipping Expense
Track your shipping invoice across many time periods. Analyze month over month to quickly spot any increases that may need attention. You may want to do an annual cost comparison against the average cost of similar shipping services.
4. Total Packages Shipped
By tracking the total parcels shipped within various data sets (weekly, daily, monthly, and during sales or peak season), you’ll be able to use this in conjunction with other filters to process specific costs.
5. Average Package Weight
Weight is one of the main factors of shipping costs. By understanding the average weight of your parcels, you will be able to determine if you are optimizing your packaging for low-cost shipping.
Most carriers use either DIM weight or actual weight when billing. (Read more about the difference between actual and DIM weight here.) Because of this you may also want to track the percentage of packages that incur the DIM factor. Some will be billed by actual weight and some by DIM weight—knowing how much of your shipping volume is either will help you strategize your packaging to optimize for lower cost shipping.
6. Cost per Parcel and Cost per Unit
To best understand where costs are coming from, getting down to the per parcel cost and per unit cost is imperative. To get to the cost per parcel you’ll need to include the weight of each package (see above). Getting to the cost per unit will help you determine the best kitting strategy for cost savings.
If you’re looking for inspiration to cut down your per parcel shipping costs, read our case study on how Willow saved 50% by changing their packaging and carrier service.
7. Shipping Costs as a Percentage of Sales
Make sure you track shipping cost as a percentage of order value to help understand the impact of shipping costs on overall profitability. This might be one of the best high-level shipping KPIs to help you determine if your current transportation strategy is set up for operational efficiency and overall business growth.
8. Percentage of Spend by Service
You are likely giving your customers a few options for shipping services—fast, faster, and fastest. You may use shipping services for inbound, retail, wholesale, or returns that are different than your outbound shipping.
It’s important to understand how each of these services contribute to your overall expenses. You may be able to offer fewer options to customers if expediting shipping cuts into your overall profits.
9. Average Zone
Apart from weight, the other big factor determining shipping costs is the distance a parcel travel. The farther and more remote a package needs to go, generally the more expensive it is to ship.
Knowing which zones receive the most shipments allows businesses to allocate resources more effectively. This is an important metric to track to better determine inventory placement at various nodes or distribution center locations.
10. Percentage of Parcels by Zone
If a significant portion of parcels go to a particular zone, it can provide insights into customer demographics and regional preferences, aiding in targeted marketing efforts. It might indicate a good opportunity for expanding services or opening new fulfillment centers in that area.
Tracking data on the zone you’re shipping to may also work in tandem with surcharge tracking—some areas will incur more surcharges (delivery area surcharges). To do so, take number of orders that go to a specific zone each day or week, then divide that by the total number of orders you shipped that day or week.
11. Surcharges by Cost and by Type
Track the surcharges your packages incur to see how these are affecting your overall shipping invoice. By drilling down to how surcharges affect each customer order, you will be able to better assess detailed shipping costs, as some surcharges, like fuel surcharges can often get lost in the mix of overall costs.
Track surcharges in two ways: by how many surcharges you incur and separately determine the costs of each and track the cost of your surcharges.
12. Surcharge Expenses as a Percentage of Total Shipping Costs
Once you’ve determined how many surcharges you’re being charged, and how much each is adding to your shipping invoice, only then can you understand how much they are adding to your overall shipping costs.
While some surcharges are avoidable, some may not be. To limit the surcharges you pay, look at which shipping services are not affected by surcharges. Or look to another carrier (sometimes regional carriers don’t apply as many surcharges) for alternative service.
Bottom Line
One of the best ways to identify areas for improvement within your supply chain is to track the right key metrics. Not all carriers will share shipping performance in a way that give you obvious insights. With the right benchmarks and performance metrics you can enhance your business intelligence and see the important areas of your shipping mix that may need improvement, like transit times, accuracy rate, average cost, or if there are bottlenecks you need to address to improve customer expectations. You’ll also better see, forecast, and streamline your overall shipping costs.
Source from DCL Logistics
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