5.1 Measurement of distribution performance
Measurement of distribution performance is the systematic process of collecting, calculating and reporting figures that show how well the distribution function delivers goods to customers: how reliably, how quickly, how accurately, at what cost and in what condition. It turns the objectives of the distribution plan into measurable targets, and shows whether they are being met. Because what is measured gets attention, the choice of measures also guides how the distribution team behaves.
Example: the distribution manager of a wholesaler supplying retail shops may report every month the percentage of orders delivered on time and in full, the cost of distribution per carton delivered and the number of customer complaints, and compare each with the month's target and the same month last year.
Dimensions of distribution performance
- Service (effectiveness): Whether customers receive the right goods, in the right quantity, at the right place and time, in good condition, with correct documents.
- Cost (efficiency): How much is spent on transport, storage, handling and administration to achieve that service.
- Time: How long it takes from receiving an order to delivering it.
- Quality: How many deliveries are damaged, wrong, short or returned.
- Asset use: How fully vehicles, warehouse space, equipment and staff are used.
- Safety and sustainability: Accidents, fuel use and emissions.
Characteristics of good performance measures
- Relevant: Linked to the distribution objectives and to what customers value.
- Measurable: Based on data that can be collected reliably and consistently.
- Clearly defined: Every person calculates the measure the same way, for example agreeing what counts as "on time".
- Balanced: Cover service and cost together, so that one is not improved at the expense of the other.
- Controllable: Measure what the people held responsible can actually influence.
- Timely: Available soon enough to act on.
- Few and focused: A small set of key measures is easier to follow than a long list.
The performance measurement process
- Define the objectives of distribution, taken from the distribution plan and customer requirements.
- Select the key performance indicators (KPIs) that show whether each objective is met.
- Define each KPI precisely: formula, data source, frequency and who is responsible.
- Set targets for each KPI, based on past performance, customer agreements and benchmarks.
- Collect the data from delivery records, systems, cost reports and customer feedback.
- Calculate and analyse the results, comparing them with targets, past periods and benchmarks, and finding the causes of gaps.
- Report the results to the people who need them, in a clear form such as a dashboard or scorecard.
- Take corrective and improvement action, and assign responsibility and deadlines.
- Review the measures and targets regularly, so they stay relevant as the business changes.
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Create a free account 🔒5.2 Tools used to measure distribution performance
Tools for measuring distribution performance are the methods, frameworks, systems and documents used to collect performance data, calculate the measures and present the results so that managers can act on them. Some tools capture data (delivery records, system…
🔒5.3 Key metrics in distribution performance
Key metrics are the specific measures, each with an agreed formula, that show how well distribution is performing. They fall into service metrics (what the customer experiences), cost metrics (what the service costs), quality metrics (damage, returns and losse…
🔒5.4 Benefits of measuring distribution performance
Measuring distribution performance gives managers facts instead of impressions. It shows where distribution is doing well, where it is failing and what each improvement achieves, and it gives everyone involved a shared, objective picture of the service and its…
🔒5.5 Factors affecting distribution performance
Distribution performance depends on many factors, some within the organisation's control (internal factors) and others outside it (external factors). Understanding them helps managers explain the results shown by the performance measures, set realistic targets…
🔒5.6 Best practices to improve distribution performance
Best practices are proven ways of working that consistently raise the service level and lower the cost of distribution. They act on the factors that affect performance and are chosen from what the performance measures show: an organisation with low vehicle uti…
🔒5.7 Challenges in measurement of distribution performance
Measuring distribution performance is harder in practice than in theory. Data may be missing or unreliable, measures may be defined differently by different people, and some important parts of performance are difficult to put into numbers. If these challenges…
