Inventory Accuracy
Scenario:
Your retailer flags shrink issues or phantom inventory for your item. You compare system inventory to physical counts at key DCs or stores to identify gaps—helping uncover lost product, mis-scanned cases, or replenishment errors.
Storage Utilization Rate
Scenario:
You’re reviewing warehouse efficiency and want to justify expanding or reorganizing storage space. You calculate the storage utilization rate to show how much of your current warehouse capacity is in use—and whether it’s nearing capacity or underutilized.
Inventory Days of Supply
Scenario:
You’re discussing replenishment strategy with a demand planner and need to show how long your current inventory will last at the current rate of sales. Calculating days of supply helps you balance between avoiding stockouts and minimizing excess inventory.
Economic Order Quantity (EOQ)
Definitions:
- D = annual demand
- S = setup costs
- H = annual holding cost
Scenario:
You’re evaluating your inventory ordering strategy to minimize total costs. By calculating the EOQ, you determine the optimal order quantity that balances ordering costs with holding costs, ensuring efficient inventory management and cost savings.
Logistics & Fulfillment Metrics
Perfect Order Percentage
Scenario:
You’re preparing for a business review with a key retailer. To demonstrate your operational excellence, you highlight your high Perfect Order Percentage—showing that you’re not just delivering on time, but also in full, undamaged, and with all required documentation. This metric also serves as a powerful internal benchmark. By measuring Perfect Order Percentage across different retailers, your team can identify performance gaps and set improvement goals that span your entire supply chain.
Total Order Cycle Time
Scenario:
A retailer flags consistent late deliveries. By calculating Total Order Cycle Time regularly, you identify delays happening during processing. This metric is also essential when setting up new ship points with a retailer. It helps determine your lead time—from PO cut date to arrival at the distribution center—so you can provide accurate shipping windows and reduce risk of non-compliance right from launch.
On-Time Shipping Percentage
Scenario:
You notice a spike in shipping-related deductions and decide to review your on-time shipping percentage over the past quarter to identify areas of concern. By measuring this frequently, you can identify patterns, improve logistics coordination, and reduce costly compliance fines.
Note:
Walmart tracks supplier’s On Time In Full (OTIF) metrics. Walmart suppliers can access the OTIF Dashboard in Retail Link to monitor their performance and drill into late or incomplete shipments. Improving your on-time shipping rate directly impacts your OTIF score—and can help prevent avoidable fines.
Order Fill Rate
Scenario:
You start tracking your order fill rate weekly to identify gaps in your fulfillment process. A lower fill rate flags where inventory is falling short of customer demand, helping you adjust production and replenishment more accurately.
Distribution Costs (as % of Sales)
Scenario:
By calculating distribution costs as a percentage of sales, you can evaluate how efficiently your logistics are scaling with revenue and whether cost reduction efforts are needed.
Distribution Costs (Per Unit Shipped)
Scenario:
You’re comparing two 3PL providers and want to evaluate which is more cost-effective. Calculating distribution costs per unit shipped gives you a clear benchmark to assess performance and negotiate better rates.
Deductions & Disputes
Gross Chargeback/Deduction Rate
Scenario:
By calculating your gross deduction rate, you can monitor how much of your revenue is being lost to chargebacks, returns, and disputes. Tracking this metric regularly helps you set realistic goals and identify trends that need root-cause analysis. A best-in-class rate is around 1% or lower.
Net Chargeback/Deduction Rate
Scenario:
By tracking your net chargeback/deduction rate, you gain insight into how much revenue was lost after recovering what was disputed. Monitoring this rate over time gives a clear picture of how deductions are impacting your business. Aim for 1% or lower to stay competitive.
Win Rate
Scenario:
You’re reviewing your deduction recovery performance and see that while your team is winning most disputes by count, the dollar-based win rate tells a different story. By measuring both, you get a full picture of performance: quantity shows consistency, while dollar amount reveals impact. A low $ win rate might mean you’re losing high-value disputes—signaling the need to strengthen your recovery efforts where it counts most.
Average Time to Dispute Resolution
Scenario:
Tracking this over time helps identify trends, which can help to understand when to expect payback/resolution. In addition, monitoring this regularly helps pinpoint bottlenecks and improve workflows, ultimately speeding up resolution and improving supplier-retailer relationships.
For a deep dive on common accounting formulas, definitions, and best practices, check out SupplierWiki’s Accounting Playbook for CPG Suppliers!