An effective delivery for any e-commerce company is more than just delivering packages to customers. The speed of delivery, its success rate, return rate, cost and level of customer satisfaction may affect the profit and reputation of an e-commerce brand.
To measure the effectiveness of their collaboration with courier partners, businesses have to use certain metrics for that. Courier performance metrics help identify shipping problems, control logistics costs, minimise failed deliveries and improve the overall customer experience.
In this article, you’ll learn about 10 important performance metrics for couriers every e-commerce business should use.
What are Courier Performance Metrics?
Courier performance metrics are measurable criteria for evaluating the efficiency of work of a courier company.
These metrics show information about various characteristics of delivery services, such as successful deliveries, speed, returns, costs, cash flow and customer complaints.
For instance, a courier can offer very cheap shipping but have a high RTO rate or experience frequent delays. The combination of several metrics helps businesses understand the actual performance of the courier service and not just its shipping prices.
Why is it Important for E-commerce Businesses to Monitor Courier Performance?
It allows businesses make decisions based on data rather than assumptions when it comes to the shipping process. Moreover, some issues may be discovered using courier performance data, which might remain unnoticed when analysing general order information.
Reduce Return to Origin and Delivery Failures
Having a high return to origin and delivery failure rate can result in additional expenses and loss of revenue. Analysing these metrics can help to find out about couriers, regions or types of delivery related to failed shipments.
Increase Delivery Speed
The customers demand faster and more predictable deliveries now more than ever before. This is why monitoring delivery speed and on-time rate is important.
Control the Actual Cost of Shipping
Courier shipping costs are not limited to the price charged by the courier. Return to origin, incorrect weight, reattempts, and other additional fees can significantly increase the shipping cost.
Better Customer Experience
Failure or late delivery results in complaints from customers. Performance tracking of couriers assists in solving any delivery issues in good time to prevent any negative impact on customer experience.
Improving Cash Flows
In case of companies that are fully dependent on Cash on Delivery (COD) service, delays in remittance may have an impact on their cash flows. Remittance timing tracking helps businesses check how quickly they receive collected money.
Underperforming Courier Partners
Every courier does not perform well in all locations, product categories, and shipment types. Performance tracking allows businesses to evaluate courier performance and identify cases where there is a need for improvement or a new courier.
10 Vital KPIs to Track for Couriers’ Performance
Below are the most crucial courier performance KPIs that should be tracked by e-commerce firms.
1. Delivery Success Rate (DSR)
Delivery Success Rate is the proportion of orders that are successfully delivered to the clients compared to the overall volume of orders shipped.
Calculation formula:
DSR = (Successfully Delivered Orders ÷ Total Shipped Orders) × 100
For instance, if 950 out of 1,000 orders are successfully delivered, the delivery success rate equals 95%.
The better DSR implies that a courier is effectively completing a higher number of deliveries without failures and returns.
2. Rate of Return To Origin (RTO)
The situation when an order cannot be delivered to the recipient and has to be sent back to the vendor is known as RTO.
Calculation formula:
RTO Rate = (RTO Orders ÷ Total Shipped Orders) × 100
An increased RTO rate will lead to increased logistics expenses due to the need for both forward and reverse shipping.
One needs to track RTO rates in relation to courier service, region, payment type, product category, etc.
3. On-time Delivery Rate (OTD)
The On-time Delivery Rate represents the percentage of shipments delivered within the promised delivery time period.
OTD = (Orders Delivered On Time ÷ Total Delivered Orders) x 100
For instance, if out of 1,000 delivered orders 900 were delivered within the promised delivery time period, the OTD rate is 90%.
Measurement of OTD allows businesses to assess if courier companies are making their deliveries on time as promised.
4. Average Delivery Time
The Average Delivery Time indicates how much time shipments spend getting from the warehouse to customers.
Average Delivery Time = Total Delivery Time ÷ Number of Delivered Shipments
Also, the Average Delivery Time may be calculated for cities, states, PIN codes, couriers, and delivery services.
This measure can help to find areas where deliveries are taking more time than usual.
5. Failed Delivery Rate (FDR)
The Failed Delivery Rate indicates the percentage of failed delivery attempts.
The main causes of delivery failures include:
Incorrect or incomplete address Customer’s unavailability Customer refusal Incorrect contact information Restrictions on delivery Operational reasons
6. Shipping Cost Per Order
Shipping Cost Per Order is the mean value of money spent on each order’s shipping.
Formula:
Shipping Cost Per Order = Total Shipping Cost / Total Shipped Orders
However, companies need to take into account not only the basic transportation fee. Such factors as RTO fees, reattempt fees, fuel surcharge, weight discrepancy, and other additional charges could influence shipping cost.
The comparison of total logistics cost and delivery performance would give a more accurate picture of courier efficiency.
7. Weight Discrepancy Rate
Weight Discrepancy Rate shows the frequency when the weight reported by a seller is different from the weight registered by the courier.
It is necessary since the courier charges depend on shipment weight or volumetric weight.
Constant discrepancies will cause unexpected changes in the shipping cost and increase logistics cost for the company.
8. COD Remittance Time
COD Remittance Time shows how long the courier partner needs to make the remittance of the collected COD payments to the seller.
It is important for businesses that have a high volume of COD orders.
9. NDR Recovery Rate
NDR or Non-Delivery Report is created when a package fails to be delivered in a delivery attempt.
NDR Recovery Rate represents the percentage of deliveries successfully made from the NDRs.
Formula:
NDR Recovery Rate = (NDR Shipments That Are Delivered Successfully Later ÷ Total Number of NDR Shipments) × 100
The higher recovery rate can assist businesses in reducing unnecessary RTOs.
The ways of improving the NDR recovery rate include using customer communications, address verification, automatic notifications, and re-attempts at delivery.
10. Customer Complaint Rate
Customer Complaint Rate represents the number of complaints received related to delivery compared to the total number of deliveries.
Complaints can be caused by such reasons as:
Late delivery Damaged package Incorrect information about delivery status Bad delivery experience Missing deliveries Unprofessional courier behavior
Monitoring the rate can help to detect courier-related problems not reflected in delivery statistics.
How to Monitor Courier Performance Properly
Just gathering information is not enough. Companies require a systematic way to assess the performance of couriers.
First of all, identify the most critical logistics KPIs for your company and gather relevant data regularly, comparing performance in identical time intervals.
Companies should consider evaluating performance depending on:
- Courier partner
- PIN code
- City and state
- Delivery zones
- Method of payment
- Product category
- Shipment type
- Order value
The centralization of information in the form of the right dashboard will facilitate this task.
Regular reviews will help to notice the performance shifts promptly and take necessary measures.
Courier Performance Metrics vs Shipping Costs: Which One Is More Important?
Shipping costs are critical for e-commerce shipping, however, shipping costs should not be the only criterion for choosing the courier service provider.
In addition, the cheapest courier in terms of shipping costs does not mean that this courier provides the lowest total logistics costs.
For instance, the courier with relatively low freight rates, high RTO, delays and weight discrepancies can prove to be more costly in the end.
Businesses should therefore evaluate courier partners using a combination of:
- Delivery success rate
- RTO rate
- On-time delivery
- Average delivery time
- Shipping cost
- Weight discrepancies
- NDR recovery
- Customer complaints
The objective should be to understand the relationship between cost and overall delivery performance rather than focusing on a single metric.
Common challenges in Assessing Courier Performance
Focusing Only on Lower Shipping Costs
Favoring a particular courier only because it offers cheaper shipping rates can result in overlooking additional costs arising from failed deliveries, RTOs, delays, and discrepancies.
Neglecting Additional RTO Charges
The RTO option can result in increased shipping and handling costs that businesses need to consider while assessing the true cost of using the courier company.
Assessing Average Performance Only
The courier can be performing great across the country but poorly within certain locations. Overall average figures can mask local issues.
Ignoring Local PIN Codes Performance Data
Performance levels may vary greatly depending on PIN codes. Analyzing PIN-code level information allows businesses to determine where a specific courier company is performing better/worse.
Failing to Monitor Weight Discrepancies
Disregarding weight discrepancies can result in extra charges and higher shipping costs.
Reviewing Performance Statistics Irregularly
Courier companies’ performance can change over time depending on seasonality or other reasons. Frequent reviews can help to spot potential issues.
Failing to Compare Multiple Couriers’ Performance
Depending on a particular courier company can make it harder for businesses to see if the poor performance is caused by that courier company or a market trend.
How Technology Can Help to Optimize Performance Tracking of Couriers
With the help of technology, collection, analysis, and comparison of data of couriers will become easier.
The shipping or logistics software will be able to consolidate data of different courier partners in one system, while companies will be able to track the performance metrics of couriers using dashboards and reports.
Technology will enable businesses to:
- Evaluate courier performance
- Track the status of the shipped goods in real-time
- Detect high-RTO locations
- Analyse delivery performance of couriers by PIN-code
- Track NDR deliveries
- Control shipping costs
- Detect billing discrepancies
- Automate generation of performance reports
In the case of large shipments, automation of data analysis will simplify tracking of operations and detection of problems.
Courier Performance Metrics Checklist
This list will help you to analyze the performance of your courier partners on a regular basis:
- Rate of successful deliveries
- Rate of RTOs
- Rate of on-time deliveries
- Average time of delivery
- Rate of failed deliveries
- Cost per order of shipping
- Weight discrepancy rate
- COD remittance time
- Rate of NDR recovery
- Rate of customer complaints
- Performance by PIN-code
- Performance of couriers
- Logistics costs
Conclusion
Proper monitoring of the right courier performance metrics will go a long way in helping e-commerce companies refine their delivery operations, cut down logistics expenses, minimize RTOs, and offer customers a good delivery experience.
Instead of judging courier partners based on their shipping rates alone, it is advisable for businesses to judge them on their basis of their deliveries, speed, cost, reliability, NDR recoveries, remittance of COD, and customer complaints.
With the right data and tools in place, it will be easy for businesses to compare the performance of courier partners and make sound decisions regarding their logistics strategy.
FAQs
Courier performance metrics are metrics used to gauge a courier partner’s delivery performance, cost, reliability, and customer service.
A few of the important performance metrics are Delivery Success Rate, RTO Rate, On-time Delivery Rate, Average Delivery Time, Delivery Failure Rate, Cost Per Shipping Order, NDR Recovery Rate, and Customer Complaint Rate.
The Delivery Success Rate is determined by dividing the total number of successful deliveries by the total number of orders shipped and multiplying by 100.
A good RTO rate will vary among e-commerce businesses depending on a number of factors such as the nature of the product, payment mode, customers’ demographic profile, and location, among others.
One can reduce RTOs by improving address accuracy, customer verification, timely delivery notices, proper follow up of NDRs, and choosing the right courier partners on the basis of their performance in different locations.
