Measuring Performance

The key objectives of any distribution channel include providing the right product, at the right place, right time, and damage free at a competitive cost. Fundamental to achieving and sustaining these objectives is measuring performance.  The most common performance measures are handling productivity, space utilization, accuracy, damage, service, cost, and inventory.

• Handling productivity is often measured in units or lines picked per hour or total handling cost per unit.
• Space utilization is evaluated based on the percentage of total space available for storage, percentage of useable storage space actually used for storage, and storage cost per unit of product.
• Accuracy involves measures of location and record accuracy, the percentage of items picked correctly, and the percentage of orders picked correctly.
• To measure the damage, percentage of items picked that are undamaged when received by the customer are considered and the percentage of orders picked without damaged merchandise are considered.
• Service as a measures of performance include fill rate which is based on the number of orders that were filled completely.
• Cycle time is also a critical performance measure to determine service and efficiency where dock to stock cycle time is a critical measure of how long it takes to make material available following receipt and order cycle time measures the elapsed time from order receipt until order shipment. Order cycle time may also include transportation to measure the total elapsed time until the customer receives the product.
• Cost and inventory is a performance measure which includes total distribution centre cost per unit handled, distribution centre cost as a percentage of sales, and inventory turnover.