Metrics & Unit Economics
The formulas logistics teams use to measure speed, accuracy, cost, and inventory efficiency, each with a worked example.
Average Order ValueAOVThe average amount of revenue per customer order over a period, calculated by dividing total order revenue by the number of orders.Backorder RateThe percentage of orders, or order lines, that contain at least one item that could not ship immediately because it was out of stock and was placed on backorder.Carrying CostThe total cost of holding inventory over time, including capital, storage, insurance, shrinkage, and obsolescence.Cash Conversion CycleCCCThe number of days between paying suppliers for inventory and collecting cash from customers for the sale of that inventory.Click-to-Door TimeThe total elapsed time from when a customer places an order online to when the package is delivered, combining warehouse processing time and carrier transit time.Contribution MarginRevenue minus all variable costs of a sale, such as product cost, shipping, fulfillment, payment processing, and often marketing, showing what each order contributes toward fixed costs and profit.Cost of Goods SoldCOGSThe direct cost of the inventory a business sold during a period, typically including product cost, inbound freight, duties, and other landed costs, but not outbound shipping or marketing.Cost per OrderCPOThe total cost to fulfill and ship one customer order.Cost per Unit ShippedThe total fulfillment and shipping cost for a period divided by the number of units shipped in that period.Cost to ServeThe total cost of fulfilling and supporting a specific customer, channel, or order type, including fulfillment, shipping, returns, customer service, and channel fees.Damage RateThe percentage of orders or units that arrive damaged or are found damaged in the warehouse, usually measured from customer claims and return reason codes.Days of InventoryDOIThe number of days current inventory will last at the expected sales rate. Also called days of supply or days inventory outstanding.Dock-to-Stock TimeThe time between a shipment arriving at the warehouse dock and its inventory being available to sell.Fill RateThe percentage of customer demand shipped from available stock on the first shipment, measured by units, order lines, or whole orders.Forecast AccuracyA measure of how close forecast demand was to actual demand, commonly expressed as 100% minus the mean absolute percentage error (MAPE) across SKUs or periods.Fulfillment Cost as Percent of RevenueThe share of net revenue spent on warehousing and order fulfillment, including storage, receiving, pick and pack, and packaging, with outbound postage either included or reported separately.Gross MarginRevenue minus cost of goods sold, expressed in dollars or as a percentage of revenue, showing what is left from sales after the direct cost of the products.Gross Margin Return on InvestmentGMROIA ratio showing how many dollars of gross margin a business earns for each dollar invested in inventory, measured at cost over a period.Inventory AccuracyHow closely the inventory quantities in the system match what is physically in the warehouse.Inventory TurnoverHow many times a brand sells through its average inventory in a period.Inventory-to-Sales RatioThe value of inventory on hand at the end of a period divided by sales for that period, showing how many months of sales current inventory represents.Landed CostThe total cost of getting a product to your warehouse ready to sell: purchase price plus freight, insurance, duties, tariffs, brokerage, and handling.Lines per OrderThe average number of distinct SKUs, or order lines, in each customer order, regardless of the quantity ordered on each line.On-Time DeliveryOTDThe percentage of orders delivered by the date promised to the customer.Order AccuracyThe percentage of orders shipped with the correct items and quantities.Perfect Order RateThe share of orders delivered on time, complete, undamaged, and with correct documentation.Return RateThe percentage of items or orders sold that customers send back.Sell-Through RateThe share of received inventory that sold during a period.Ship-on-Time RateThe percentage of orders shipped by their required ship date or within the agreed handling time, measured at carrier handoff.Shipping Cost as Percent of RevenueThe share of net revenue spent on outbound postage to customers, before or after subtracting shipping fees collected from customers.Stockout RateThe percentage of active SKUs, or SKU-days, with zero available inventory during a period, sometimes measured instead as the share of orders affected.Storage UtilizationThe percentage of a warehouse's usable storage capacity that is currently occupied, measured by locations, pallet positions, or cubic volume.Time to ShipThe elapsed time between an order being placed or released to the warehouse and the package receiving its first carrier scan or ship confirmation.Units per HourUPHA labor productivity measure equal to the number of units a worker or team processes in one labor hour for a task such as picking, packing, or receiving.Units per OrderUPOThe average number of individual items in each customer order over a period, also called units per transaction.WISMO RateThe share of orders that generate a customer contact asking about order status, where WISMO stands for "Where is my order?"