Distribution Expense as a Percentage of Total Revenue

Distribution Expense as a Percentage of Total Revenue

KPI Details

Distribution Expense as a Percentage of Total Revenue measures the investment in distribution that is utilized by the company to generate its stated revenue. A high value for this KPI may suggest small order sizes, excessive equipment maintenance costs, ineffective inventory management, costly vendor selection, poor materials handling, expensive warehouse facilities, overstaffed Distribution functions or slow shipment/delivery cycle times. Companies that incur high distribution costs may pass those expenses on to customers in the form of shipping charges, which may cause customer dissatisfaction. Companies can reduce their distribution expenses by consolidating customer orders, setting productivity goals, optimizing packaging materials for different types of shipments, minimizing order errors, etc.

KPI Definition

Total distribution expense incurred by the company divided by the total amount of revenue generated by the company over the same time period, as a percentage.

KPI Best Practices

• Cross-train employees to handle various duties around the warehouse (picking, receiving, stocking, etc.)
• Reduce stocking levels where possible to minimize inventory carrying costs
• Perform preventative maintenance to minimize costly equipment breakdowns and injuries to workers
• Conduct cycle counts regularly to reduce shrinkage and improve inventory accuracy

KPI Calculation Instructions Distribution Expense as a Percentage of Total Revenue?

Two values are used to calculate this KPI: (1) the total distribution expense incurred by the company, and (2) the total revenue generated by the company during the same measurement period. Distribution expenses should include management activities, receiving and warehousing inbound deliveries, monitoring product availability, picking and shipping products for delivery, inventory storage, and shipping/ transportation. Do not include procurement expenses in this calculation. Only include non-interest income in the denominator of this calculation.

KPI Formula :

(Total Distribution Expense / Total Revenue) * 100