For small businesses, the supply chain can be a growth engine or a hidden bottleneck. When inventory runs late, costs creep up, or customers don’t get what they expect, the root cause often comes down to visibility. That’s where Key Performance Indicators (KPIs) come in.
At L&M Distribution and Logistics, we work with small and growing businesses every day, and one thing is consistent: the companies that track the right KPIs make faster decisions, avoid costly surprises, and scale with confidence.
Below are the most important supply chain KPIs every small business should track and why they matter.
1. Order Fulfillment Rate
What it measures:
The percentage of customer orders delivered accurately and on time.
Why it matters:
Your fulfillment rate directly impacts customer satisfaction and repeat business. Even small errors, wrong quantities, late deliveries, missing items add up quickly.
What to watch for:
If this number dips below 95%, it’s time to review picking, packing, inventory accuracy, or carrier performance.
2. Inventory Turnover
What it measures:
How often your inventory is sold and replaced over a given period.
Why it matters:
Low turnover ties up cash in slow-moving stock. High turnover means you’re selling efficiently, but it can also signal risk of stockouts if not managed carefully.
What to watch for:
Balanced turnover varies by industry, but sudden drops or spikes usually indicate forecasting or purchasing issues.
3. Order Cycle Time
What it measures:
The total time from when a customer places an order to when it’s delivered.
Why it matters:
Speed matters especially for e-commerce and B2B customers with tight timelines. Shorter cycle times improve customer experience and competitive advantage.
What to watch for:
Break this KPI into stages (order processing, picking, shipping) to identify where delays are happening.
4. On-Time Delivery Rate
What it measures:
The percentage of orders delivered by the promised date.
Why it matters:
Reliability builds trust. Even if your prices are competitive, missed delivery windows can cost you long-term customers.
What to watch for:
If performance varies by carrier, region, or product type, logistics partners and routing strategies may need adjustment.
5. Inventory Accuracy
What it measures:
How closely your recorded inventory matches what’s physically in your warehouse.
Why it matters:
Inaccurate inventory leads to stockouts, overselling, rush shipping, and frustrated customers.
What to watch for:
Accuracy below 98% often points to issues with receiving, cycle counting, or warehouse processes.
6. Cost Per Order
What it measures:
The total cost to fulfill a single order, including storage, labor, packaging, and transportation.
Why it matters:
Small increases in fulfillment costs can quietly erode margins, especially as order volume grows.
What to watch for:
Track this over time, not just as a snapshot. Rising costs may indicate inefficiencies or the need for better automation or outsourcing.
7. Stockout Rate
What it measures:
How often items are unavailable when customers want to buy them.
Why it matters:
Stockouts lead directly to lost sales and damaged brand reputation.
What to watch for:
Frequent stockouts usually mean forecasting errors, long supplier lead times, or insufficient safety stock.
8. Return Rate
What it measures:
The percentage of orders returned by customers.
Why it matters:
Returns increase handling costs and often signal issues with product quality, picking accuracy, or shipping damage.
What to watch for:
High return rates tied to specific SKUs or customers can help pinpoint root causes quickly.
Turning KPIs Into Action
Tracking KPIs is only valuable if you act on them. Start by:
- Choosing 5–7 KPIs most relevant to your business model
- Reviewing them monthly (or weekly for fast-moving operations)
- Setting realistic benchmarks and improvement goals
Most importantly, use KPI trends, not just single data points, to guide decisions.
How L&M Distribution and Logistics Can Help
At L&M Distribution and Logistics, we help small businesses gain real visibility into their supply chains. From warehousing and fulfillment to transportation and inventory management, our systems are designed to support the KPIs that matter most, so you can focus on growth, not guesswork.
If you’re ready to streamline operations, reduce costs, and improve customer satisfaction, we’re here to help.
Let’s build a smarter supply chain together.
