There are different ways to compute the result for a performance indicator. What you include, exclude, or the time period covered could have different implications.
Let’s take a look at three ways an online retailer could measure delivery performance.
First, use a ratio of the number of full orders shipped within 24 hours to the total number of orders received. The ratio indicates how efficient the warehouse team is with picking and packing. A high ratio reflects that it is able to meet an internal policy on getting orders ready for delivery within 24 hours.
Second, use a ratio of the number of items shipped within 24 hours to the total number of items ordered. Thinking that it is better to ship a partial order than to hold up the entire order when a single item is out-of-stock, the number of items shipped is used instead. Similar to the first ratio using the number of full orders shipped, it uses the internal policy as a benchmark for performance.
Third, use a ratio of the number of orders customers received by the committed delivery date to the total number of orders received. This ratio measures delivery performance from the customer’s perspective. Customers don’t care about internal policies. They care when their orders don’t arrive by the commit date. Performance of logistics, the actual delivery of the order, is included in this ratio.
When you look at the three ratios, it is easier to attain a higher performance ratio using the number of items shipped versus the number of full orders shipped. Because when you look at the number of items only, the warehouse simply processes what is in stock.
When you look at the number of full orders shipped, it requires sound inventory management across all products.
The third ratio is based on delivery to the commit date. It is customer-centric. It is the most meaningful way to measure delivery performance because that is what counts with the customers.
In reporting any result, it is important to look at what is most important to your stakeholder because when you do so, you focus on what matters most.