SME

By FedEx | First published: May 17, 2024  Updated: March 28, 2025

From order fulfilment to inventory and delivery time, discover the key logistics metrics for evaluating business success.
 

• Small business owners must understand how to assess supply chain efficiency to improve the overall customer experience.
• Various logistics metrics, ranging from inventory-based to delivery-based performance indicators, can be used to measure efficiency and customer satisfaction.
• Start by focusing on the metrics most relevant to your business using our glossary of key terms.

Effective logistics management impacts businesses of all kinds, especially e-commerce businesses, but the formula for success can be tricky to nail.

Developing the right supply chain strategy takes time and depends on your specific role. Whether you’re a buyer, seller, e-tailer or manufacturer, your logistics priorities will differ. 

Other factors influencing your logistics strategy include the type of goods you sell, your sector, chosen logistics provider, and how far your company has gone to adopt digital-first operations.

To enhance the overall customer experience, small business owners need to understand how to measure efficiency across their supply chains. For those new to logistics, navigating supply chain performance metrics, terms, processes, shipping formulas and calculations can be confusing. 

Understanding them properly allows for smoother shipping and better equips you to assess the full capabilities of potential logistics providers.

Read on for our guide to some key logistics metrics, as well as shipping and delivery performance indicators to help evaluate your supply chain strategy.

Useful logistics metrics for small businesses that ship 

When it comes to supply chain, there’s a wide range of metrics to measure efficiency and customer satisfaction. To get started, focus on those most relevant to your business operations. 

This includes metrics spanning inventory, order fulfilment, delivery experience and cost efficiency. By tracking these areas, you’ll gain valuable insights into how your overall approach to logistics is impacting your business.

1. Inventory-based metrics

Regular data on inventory is critical for understanding if your business is operating correctly: are you holding and buying the right stock?

Inventory turnover rate

Inventory turnover rate measures how quickly you sell stock of a certain product over a set period of time. It’s calculated by dividing the cost of goods sold by the average cost of inventory during a certain period.

Higher inventory turnover rates can indicate high sales. However, high turnover rates can also indicate mismanagement of inventory ordering, so it’s important to analyze the source of a turnover rate. 

Cost of goods sold (COGS)

Knowing your cost of goods sold and average inventory value are key performance indicators of how your inventory is operating. COGS is calculated by subtracting ending inventory (the value of all unsold products) from the total sum of beginning inventory (which should equate to the ending inventory from the previous accounting period) and the cost of purchases.

Average inventory value

To calculate the average inventory value, add the value of beginning inventory and ending inventory, and divide the total by two.

Inventory to sales ratio

Another useful logistics metric to measure is the inventory to sales ratio. Also known as the stock to sales ratio, it’s calculated by dividing the average inventory value by your net sales (gross sales minus any discounts, allowances and returns).

2. Order fulfilment metrics

These metrics help you quickly assess whether you’re delivering a consistently high customer experience when you make a sale. You can also use them to evaluate your wholesalers or suppliers.

Lead time

Lead time is the time between a customer placing an order with you and receiving it. The simplest way to calculate lead time is by subtracting the order request date from the order delivery date. Small businesses can calculate the percentage of deliveries that reach customers on time.

Customer backorder rate

Metrics like customer backorder rate and order error rate track supply chain slip-ups, alerting you to areas of logistics to improve. The backorder rate (total backorders divided by total orders, multiplied by 100) shows how many orders you’re unable to fulfil at the time a customer places them. 

Reasons typically include a lack of stock, miscalculated inventory, gaps in your supply chain, being under-resourced, or technical blips. To avoid backorder issues, consider proper forecasting, better adoption of digital tools for more precision and accuracy, and diversifying your supply chain to address shortages and bottlenecks as soon as they occur.

Order error rate

Order error rates track how many times you got an order wrong. This metric can highlight human error or issues with your order processing platforms and systems. To calculate the percentage of order errors, divide the number of orders fulfilled incorrectly by the total number of orders, and multiply that by 100. The order accuracy rate is the inverse of the order error rate.

Manufacturing cycle time

If you rely on a manufacturer directly or make your own products, tracking the manufacturing cycle time can tell you if goods are taking too long to manufacture, from factory to final sale.

3. Delivery-based metrics

Particularly useful for suppliers and e-tailers, calculating how often deliveries are made on time and without error is an important indicator of how your business is doing.

On-time delivery rate

The on-time delivery rate tells you if you’re meeting delivery targets and reaching customers within the promised window. This often depends on the reliability of your logistics provider and the accuracy of their delivery forecasting. 

One way to measure it is to divide the number of orders delivered on time by the total number of orders delivered, multiplied by 100. 

To check if you’re preparing shipments quickly enough, you can substitute orders delivered on time with orders packed on time.

Perfect order rate or index

The perfect order rate reflects how error-free your deliveries are. When orders are fulfilled correctly and precisely (right products, quantity, quality, shipping details, etc.) in all aspects of the supply chain, it can be scored as a perfect order. 

One calculation formula divides the number of perfect orders (total orders minus orders with errors) by total orders, and multiplies that by 100.

Damage-free delivery rate

Some businesses measure the damage-free delivery rate, or the number of orders delivered free of any damage. This is useful for businesses that ship fragile items. Tt’s calculated by dividing the number of damage-free deliveries by the total number of deliveries, multiplied by 100.

4. Cost-efficiency metrics

Freight cost per unit

If you’re shipping volume, freight cost per unit (total freight cost divided by total units) helps you optimize shipping costs. Shipping prices for freight can rise and fall depending on supply chain contraction, time of year, destination, origin and supplier.

Established global logistics players often commit to standardizing service costs even if they experience supply chain disruptions. One major benefit of using a third-party logistics provider is that they can absorb higher operating costs on your behalf. For last-minute shipments, you can often get discounts on bulk shipping, which helps bring your freight cost per unit down overall.

5. Sustainability-based metrics

Shipping emissions

Small businesses and e-tailers can minimize supply chain carbon by tracking metrics like carbon emissions, generated waste, energy use and supplier sustainability. As well as keeping up with regulatory compliance, this information can be shared with customers who want to know more about the environmental impact of their orders.

For emissions, our FedEx Sustainability Insights tool offers customers near-real-time data on their shipments. Each company’s shipping emissions look different, even within the same industry. The best baseline is your own emissions. 

You can track your results by mode of transport, service type, and country or territory, and look for ways to help them trend lower. If you’re reducing emissions over time, you can share that data with customers to demonstrate your environmental commitments.

Tapping the logistics efficiency strategies that matter

Tracking supply chain performance metrics was once done manually, but these days, digital-first tools and advanced technology provide the automation to gain insights in seconds. 

Ultimately, identifying the right logistics provider is key. With access to innovative solutions for speed, reliability and guaranteed delivery times, your business can focus on other areas of growth.

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