How retailer KPIs and analytics indicate supplier performance

by | Jan 3, 2017

The product a supplier is able to offer a retailer is important, but it’s only part of the equation – especially if the supplier performs drop shipping for the retailer. How quickly and efficiently the supplier can get the product directly to a consumer, or even delivered for them to pick up at a retail store, are also extremely important parts of the equation.

Retailers can scorecard the performance of suppliers using analytics and key performance indicators (KPIs) that are aligned with their supply chain goals. How retailers judge the quality their trading partners is measured by their unique definition of the “perfect order” and how well suppliers are hitting their marks.

Inventory Accuracy

To maintain a continuous supply chain and satisfy customers who place online orders, retailers depend on their suppliers to have accurate inventory information. Inventory Accuracy means that when the supplier says it has something in-stock, they mean it. If a customer places an order with the retailer, but the supplier can’t deliver, it’s the retailer who has to deal with the fallout from the unsatisfied customer.

Fill Rates

To retailers, an extremely important KPI is how well the vendor fulfills orders in the first place, called the Fill Rate. Are they on time? Are they shipped complete? When they look at Fill Rates, they want to see if the vendor fulfilled everything they asked for in one or multiple shipments.

That’s important because if a retailer orders a certain quantity of products, they expect the freight to cost a set dollar amount. The bigger the shipment, the lower the rate per parcel. But if there are back orders, and the order has to be broken up into several smaller shipments, the shipping rate goes up, which eats into the retailer’s profits.

Order Accuracy

Retailers should also consider Order Accuracy, which measures the quality of the order picks. Order accuracy is important because the retailer needs to ensure the vendor shipped exactly what they asked for. The retailer has to receive the shipments into its warehouse, and do a quick inventory check to determine the quantities are right, so they can put them away quickly without causing bottlenecks in the warehouse or retail receiving docks.

Order Completion

Order Completion is like Fill Rate but it includes the timeliness of a shipment. If a retailer places an order, but the vendor doesn’t tell them when it’s shipped, expected delivery date, whether it’s going to be delayed or backordered (using a purchase order acknowledgement or POA), and if it’s running even a day late, that’s a problem. The retailer was trusting the vendor would fulfill when it was asked for, its lead times and safety stock counts are relying on timely deliveries. Retailers know how long it takes vendors to fulfill orders and they base their orders around that schedule, with little time for delays.

Using analytics to scorecard vendors

Retailers regularly evaluate these KPIs to scorecard vendors, and if the supplier is underperforming, they’ll negotiate to fix the problem or seek out a vendor who can fulfill all of the retailers needs. Today, many retailers look to the cloud to connect with vendors and jointly access data analytics to discuss where the relationship is working or falling short. Visibility to supplier performance across the supply chain is critical with both parties needing to track KPIs to stay aligned.

As orders are generated, they’re loaded into a cloud-based analytics solution. Then, as the vendors send the purchase order acknowledgement (POA) and advance shipping notifications (ASN), the retailers can compare the details such as ship dates, SKUs and quantities to assess the vendor’s fill rates and shipment timeliness.

Retailers can quickly identify vendors who have chronic issues with fill rates, timeliness, and so on. They can even use analytics to drill down and discover more insight. For example, it may not be the vendor as a whole, but one of its “ship from” locations is having problems. This way, the retailer and vendor can identify the issue, figure out what is going wrong, and how to solve for it.

If you would like to learn more about how we use our different cloud-based analytics solutions to provide retailers with visibility to these KPIs, please visit the SPS Commerce website and request a free analytics demonstration.

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Brandon Pierre

Senior Director for Customer Success - Community & Analytics at SPS Commerce at SPS Commerce
As a Senior Director for Customer Success at SPS, Brandon Pierre’s team works alongside many retailers and suppliers to develop strategies that involve technology along with the people and process around it to address their merchandising and supply chain business objectives. With more than 15 years in the buying organizations including large and small, he has experienced first-hand the opportunities of the digital era and how technology can transform the consumer experience through improved retailer and supplier connections.
Brandon Pierre

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