What Your Startup Needs to Know About Supply Chain KPIs

— February 8, 2019

When you’re bootstrapping an ecommerce startup, there are so many details and moving parts it can make your head spin. Unfortunately, what often gets lost in the hectic early stages of development is how to best control your supply chain. Late or missed deliveries can potentially turn away early adopters who had faith in your product from day one. Excess inventory can become a sinking weight of inertia on your cash flow as you have more capital tied up in unsold products and storage cost.

While it may not be as sexy as plotting out your next influencer marketing campaign, managing your supply chain is just as important for the long term success of your startup. Let’s examine three of the most critical metrics for your business.

OTIF (Deliveries on time and in full)

Whether you’re a startup or fully established, there’s one question above all that should be asked: did you nail this delivery? Was the product:

  • On time?
  • Missing any components?
  • Exhibiting any broken packaging?
  • Missing personalized details?

It’s easy to fall into a trap when growth is coming quick and fast — you’re probably toasting your brand’s emergence after all the hard work you’ve put in. You can lose sight of the groundwork you’re supposed to be laying and rationalize that those first customers you get are okay with a sub-par experience. The truth is that they aren’t. Not focusing on delivering a first-rate experience from day one creates a weak foundation on which to build, and results in high customer churn. That can be harder to recognize earlier on, when you’ve made your first viral ad campaign or gotten your product featured on a popular YouTube channel. Don’t put growth ahead of building a stable foundation. Do keep OTIF in mind to ensure that the fundamental experience of delivery to arrival happens in shipshape fashion.

Inventory turns

“There’s a fine balance in a growing e-commerce business between having enough product on hand to fulfill extreme fluctuations in demand and not having so much product on hand that you rob the business of the cash needed to grow,” says Matt Cantatore, the Chief Operating Officer at direct-to-consumer healthy pet food brand Ollie. If you’re a small business you can’t afford to have excess inventory because that ties up cash.

There’s a simple solution to this problem: have less SKUs to sell in the first place. If more SKUs = more inventory inefficiency, then lowering the total number of items you sell means having greater control over the space you’re taking up with inventory. As you grow, it makes sense to invest in the infrastructure necessary, such as a first-class inventory management platform, to keep your operations running tightly. The bottom line is there’s simply no point in tying up valuable startup capital in products that aren’t moving fast enough.

Workforce turnover

For any business regardless of industry or size, workforce turnover is one of those bedrock metrics you should watch closely. From the supply chain perspective, if your startup manages its own fulfillment then you should especially be monitoring your warehouse crews. We all know this kind of work is tough and turnover is usually higher than cushy office jobs.

Think about it like this: warehouse employees are the engine room of fulfillment supply. They make or break the customer experience, because they’re the pair of hands that curate the placement and unboxing of your product. You’re betting the well-being of your business on those hands. Make sure their voices are heard when it comes to pay, amenities, and benefits. Find out what industry standards are, and make sure that turnover rate at your company beats everyone else’s. If not, the experience you think you are creating for customers may not actually be what they are receiving.

Building a solid supply chain for tomorrow

There’s nothing cool about watching your hard work amount to nothing. You already have to control for so many variables as your startup grows, and maybe pausing to think about your supply chain isn’t at the forefront of your attention. Just remember that in order to make it fto the unicorn stage, you need a solid foundation to grow on — your supply chain is the concrete that everything else is built on. Your future customers will never give it a moment’s thought that you weighed the cost of excess SKUs or OTIF, but you’ll be glad you did.

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Author: Jake Rheude

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