Key Performance Indicators (KPIs) are the metrics used to measure the performance of a business. Similarly, ecommerce metrics are the KPIs that can help online businesses evaluate their performance, set benchmarks, and take corrective measures to steer the business in the right direction.

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In this ecommerce metric refresher, you will learn what is order accuracy rate, how to calculate order accuracy rate, why should businesses calculate order accuracy rate, benefits of increasing order accuracy rate, and the strategies to increase order accuracy rate.

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What is order accuracy rate?

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Order accuracy rate is an ecommerce metric used to determine how many orders are fulfiled and shipped to the customers with no errors.  These errors include, mis-pick of an item, wrong item quantity, damaged or malfunctioning item, and more. Order accuracy rate is an important metric as it highly impacts the customer experience.

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The following illustration shows the order accuracy rate formula:

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Let's see how to calculate order accuracy rate with an example,

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You fulfiled 100 orders from your warehouse, and 4 of them had processing errors.

Therefore, your order accuracy rate = (96 / 100) X 100 = 96%

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Note: Achieving a 100% order accuracy rate is not a realistic expectation, but you should strive to maintain your accuracy rate closest to 100%. Most successful ecommerce brands have an order accuracy rate between 96%-98%. If your online business falls within that range, improving your accuracy rate can give you a competitive edge.

However, if your order accuracy is 95% or less, you must take action-oriented steps to improve it as you don't want to discourage customers from purchasing from you again.

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Why should businesses calculate order accuracy rate?

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There are many reasons for businesses to calculate order accuracy rate, such as:

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• Measure the effectiveness of your fulfilment operation
• Identify error-prone processes
• Take corrective actions and improve order accuracy
• Enhance customer experience and customer retention

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Benefits of increasing order accuracy rate

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1. Less returns, more profitability

By delivering more orders accurately, you can lower the chances of returns. Moreover, CNBC says the average cost of a return is 30% of the order value. This means you could lose money processing inaccurate order returns. Additionally, to satisfy unhappy customers, you need to go the extra mile, which means free or discounted products. Thus, increasing order accuracy can help you minimise returns and handling costs and ultimately, drive greater profitability.

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2. Reduces errors, increases efficiency

By improving order accuracy rate, you can avoid unnecessary errors. Mistakes while picking, packing, and shipping can lead to incorrect deliveries of orders. This creates inefficiencies in warehouse operations and forces you to bear additional expenses. With a higher order accuracy rate, you can minimise errors and avoid such inefficiencies.

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3. Improves customer retention, builds creditable brand image

Modern-day customers have little or no tolerance for errors. By delivering orders accurately consistently, you can build customer trust. This leads to higher customer retention and improved NPS.

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How to increase order accuracy rate?

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There are multiple strategies to improve your order accuracy rate, but it is essentially done in one of the two ways:

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1. Leveraging powerful workflows to reducing the number of errors
2. Incorporating error-free automation using the next-gen technology

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Strategies to increase order accuracy rate

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1. Set order accuracy rate goals

You can succeed when you have a direction. You can succeed when you have a direction. To achieve a set goal, you need to find your current order accuracy rate and set a realistic goal and a time frame. Make sure that you communicate the goal and how each member of the team can help to improve the order accuracy rate. Thus, you can drive it by taking actionable steps.

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2. Optimise the warehouse layout

When it comes to picking orders, the organisation of a warehouse’s inventory can make or break efficiency. One of the simplest ways to organise your inventory is to segment items using the ABC analysis, grouping items based on historical purchase data and patterns.

Group A - Most frequently purchased products

Group B - Less frequently purchased products

Group C - Rarely purchased products (deadstock or excess inventory)

This allows the picker to retrieve items faster and more accurately—whether it is a human or a machine.

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3. Optimise the picking and packing process

You can reduce common errors, such as choosing the wrong colour or size of a product by ensuring— you are using the right barcodes and your picking lists are descriptive enough. You can also use warehouse slotting, the process of storing the inventory that makes the most sense for the picker (such as by type, size, weight, location). It can improve picking accuracy and functionality by eliminating any possible confusion for the picker.

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4. Incorporate smart automation

Since humans are directly involved in the picking process, errors are most likely to occur. Moreover, order pickers spend most of their time moving from one point to another within the warehouse, which creates many wasteful overheads. Fortunately, you can now automate traditional warehouse operations by leveraging powerful technology, such as barcode scanners, conveyor belts, intelligent robots, and more. This can help you to reduce the workload and time spent picking orders.

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5. Incentivise employees to improve rates

Incentive programs can boost employee performance by 44%. Such programs also increase employees’ interest in work and help reduce errors. You can start incentivising employees by setting an internal order accuracy goal and rewarding them when they meet the set target.

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6. Perform quality checks

You can perform a quality check at the time of order processing to ensure that the items shipped to the customers are correct and in the right condition.

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7. Use appropriate packaging material

You don’t want your products to get damaged in-transit. For that you need to ensure appropriate materials are used in the packaging of the product. For instance, for shipping a glassware, you need to ensure secure dunnage, i.e. right packaging of bubble wrap so that your customer doesn’t receive a damaged product.

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8. Place the correct shipping labels

A small manual error, such as using an incorrect shipping label can lead to delivering wrong items at the wrong location. Make sure that you use the correct shipping label so that the shipping provider can deliver the package accurately to your customers.

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Bottom line

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Accurately delivering orders to the customers is one of the most critical measures of ecommerce success which enhances customer satisfaction and creates an astute brand image. By calculating the order accuracy rate and applying it, you can determine how prone to errors your fulfilment process is. You can either incorporate these strategies into warehouse operations to improve your order accuracy rate or delegate the fulfilment process to an experienced expert. The latter will not only improve your order accuracy rate but also help you streamline the fulfilment processes and enhance overall operational efficiency.