With today’s technology, retailers have seemingly endless access to hundreds of data points, and it can be difficult to discern which metrics matter. But regardless of whether you’re a retailer with 10 locations or hundreds, measuring logistics performance is critical to business success. By first identifying and then analyzing these insights, retailers can gain visibility into what is working well and what isn’t, and where there are opportunities to improve efficiency, cost savings and customer satisfaction.
Pulling the right levers to adjust your supply chain strategy can make a huge difference in today’s competitive market by ensuring that your store shelves are stocked accordingly and packages arrive to customers on time and as expected. If it can be measured, it can be improved! In this article, we’re going to break down what three key retail metrics are, what they mean, the formula for calculating them, why they’re important and suggested adjustments to optimize your supply chain and boost sales.
Inventory Turnover
Definition: The speed at which a business sells and replenishes its inventory during a given period, also known as “stock turn.”
Formula: Cost of goods sold/average inventory cost
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Why It’s Important: Typically a high inventory turnover rate means that products are sold quicker and a low turnover rate indicates weak sales and excess inventories. However, high or low inventory turnover can also be attributed to how quickly or slowly a retailer can move their goods around. If the current logistics strategy isn’t able to support the pace at which a store is selling its products, it can be losing out on millions of dollars in sales.
Suggested Logistics Adjustment: The first step is understanding your demand patterns over time, which can ebb and flow based on customer demand. Implementing the right technology can help you analyze the peaks and valleys to help with forecasting, but the more nimble and flexible you can be when it comes to moving inventory around, the faster you can react in real time. According to a 2023 Kearney study, excess inventory is a $250+ billion problem in the U.S. alone.
Cross-docking can be a great method to keep inventory in motion with high levels of visibility. Cross-docks help retailers quickly replenish popular store items while eliminating the need to spend costs on traditional warehouse space, like storing excess inventory that might not be in demand. At the cross-dock, the loads are arranged so that each shipment is delivered on the best equipment, based on the cheapest cost and service needs. That might be using a 53-footer, box truck or smaller type of equipment like a cargo van.
Cross-docking also reduces overall linehaul and detention costs while simultaneously reducing “stem distance,” or the distance traveled to deliver goods. The right transportation technology vendor can route local pickups from multiple vendors going to the same customer, batch them at a cross-dock, and once they fill up a full truckload, ship them directly to the customer’s facility/store with no additional steps. With the right technology, customers have full visibility of where their freight is, allowing them to consolidate shipments and reduce costs across the board.
Number of Damage Claims
Definition: Freight damage is any partial or total physical damage to goods during the shipping process. This can be the entire shipment, a pallet or a parcel.
Formula: The number of damaged shipments/the total number of shipments
Why It’s Important: Whether a retailer is expecting a pallet of goods to a store or a customer is expecting a delivery directly from the retailer, when a package or pallet is delivered damaged there are financial and customer satisfaction repercussions. Damaged goods are often returned to the shipper, which means additional labor costs in making, packaging, shipping and transporting the products. Just one damaged item can have a trickle-down effect at every step of the supply chain. According to a report by Packaging Digest, as much as 11% of unit loads arriving at a distribution center have some level of damage. Brands not only lose their products but also are unable to meet retail store deadlines. Consistent problems with damaged deliveries not only disrupt your business but also affect your reputation with customers.
Suggested Logistics Adjustment: There are several different methods toreducefreight damage rate, but if specifically focused on reducing handling, there are several ways to bypass the traditional LTL or parcel hub-and-spoke network that can reduce potential damages along the freight’s route to its destination. A pool distribution strategy allows brands to “pool” your shipment together with other shipments that are being delivered to multiple destinations within the same geographic region.
For example, if you have freight headed to multiple stores within the same geographic region, you can bypass LTL and parcel by pooling those shipments together, utilizing a sophisticated routing algorithm and a fleet of vehicles in various sizes to allow for dynamic right-sizing of capacity for the load whether that’s a box truck, 53-footer or cargo van. With new visibility technology, you can see where your freight is at any point during its journey. This eliminates the sortation process at multiple zones, reduces handling costs and potential for damage and the shipper pays a lower rate while increasing the likelihood of on-time delivery.
Sales Inventory per Square Foot
Definition: A store’s average revenue for every foot of sales space, including non-selling space such as a stock room, fitting rooms and receiving areas.
Formula: In-store sales/the store’s total square feet of sales space
Why It’s Important: Your sales per square foot tells you how efficient you are with the sales space you have available and helps you make smarter decisions regarding your inventory, store layout and product placement.
Suggested Logistics Adjustment: While sales per square foot can be influenced by several factors outside a retailer’s control, like seasonality, consumer preferences and trends or economic conditions, adjusting to these changes in real time can help maximize sales inventory in-store. Typically stores that needed to transfer inventory either from a warehouse or from store to store and couldn’t fill a full truck were stuck waiting for an LTL or parcel carrier that could match their freight with others heading in the same direction, even if it was just a couple of miles.
Partnering with a tech-forward freight network that dynamically right-sizes capacity regardless of volume and has a flexible fleet of different-sized vehicles unlocks new capacity for shippers looking to move their freight fast, and restock shelves faster, at lower rates. There are also cost savings when it comes to fuel due to smaller vehicle sizes and easier access to stores in crowded urban areas where larger vehicles are not allowed. Setting up predictable delivery windows with exact delivery times for seamless inventory and labor management can ensure you have the right labor in place to quickly load or unload vehicles. This is especially integral for sensitive fright like perishable produce.
Daniel Sokolovsky is a Los Angeles-based entrepreneur and Co-founder and CEO of WARP. As CEO, Sokolovsky is responsible for managing the company’s overall operations, including managing the company’s organizational structure, guiding the WARP brand and overall company strategy. Prior to founding WARP he founded AxleHire, enabling expedited urban last mile delivery for shippers looking to give their customers an ‘Amazon-like” experience. During his six years at AxleHire, Sokolovsky worked to push AxleHire into new verticals and sustainability partnerships. Sokolovsky grew up in the world of logistics, working in his family’s courier business and often experiencing the inefficiencies firsthand. Sokolovsky also operated an on-demand food delivery startup based in Berkeley before entering ecommerce logistics. He studied Applied Mathematics at University of California Berkeley.
