Case Study – How One Company Started Its Internal Benchmarking Program

A multichannel business-to-business client with annual sales of $150 million approached us to perform an operational assessment of how to make their two east coast facilities more efficient. The company fulfills e-commerce as well as wholesale orders through industrial supply and home centers with a high average order of over $400 with 9 cartons shipped per order. The strategic plan is to add a west coast facility and to select a new ERP system to replace their 20 year old legacy system.

The company has effective cost controls and expense reporting. The controller’s office produces an elaborate historical management report which summarizes at a high level the company’s transactions, average order, fulfillment expenses, etc. While the company has years of data, analysis did not show them any actionable areas to investigate and improve. To improve insights gained from reporting, one of the longer-term objectives is to detail report work by department and employee upon installation of the new ERP.

 This is a mini-case study of how F. Curtis Barry & Company assisted their company to research and establish their initial benchmarks to measure fulfillment center productivity. Here are process steps used to collect and analyze the initial data:

Metrics to Analyze

Establish study group

The study group was comprised of several people, including the CEO and VP of Operations to select and implement metrics. The Controller provided confidential detail and summarized expenses (from expense reporting) and hours worked (from payroll). Additionally, an experienced data analyst and IT person helped understand data availability and sources as well as prepare the new analysis.


We initially focused on the 14 fulfillment metrics every e-commerce company should monitor. If you’re starting to measure e-commerce productivity, these are good place to start. Once you have these metrics in place, you can then drill down and identify ways to increase productivity with new procedures, processes and layout.

The chart below - Comparison of Two Analytical Approaches - shows some of the basic differences in the level of detail between the existing management analysis (Green Book) and the new analysis (Red Book) to be developed.

Data Comparison of Two Analytical Approaches


Old Green Book

New Red Book

Total fulfillment costs including Freight, Profit Sharing, Benefits & Taxes

Total fulfillment costs excluding Freight, Profit Sharing, Benefits, Taxes


Direct labor pay $ and hours


Indirect labor pay $ and hours


Facilities $


Packing materials $


Cartons shipped and avg. fulfillment cost per carton shipped

Order profile analysis


Other costs


Total fulfillment cost per order

Fulfillment cost per order $ breakdown by expense category



Map expense data to analysis

We took the metrics outlined in the 14 fulfillment metrics and defined what expense centers on the profit & loss statement should be included in each of these metrics. The Controller then mapped the data from the expense system to the new analysis. For example, the facilities expense category was made up of lease costs, utilities, amortization and depreciation of material handling equipment.

When completing this exercise, start by looking at 12 months of data. Once you implement reporting and are confident of the accuracy, move to quarterly and monthly reporting. We recommend restating multiple years’ expenses by month to allow insights into high level trends. This client restated three year’s expenses by month to the new format, which provided high level trends to review.

In the earlier blog many of the metrics use total fulfillment expenses to calculate cost per order and cost per carton shipped. The new analysis calculates total fulfillment costs two ways. The existing analysis (Green Book) included freight expenses and benefits including profit-sharing, health care and payroll taxes. This obstructed the more direct costs in fulfillment.

The new analysis (Red Book) calculates and graphs cost per order and cost per shipped carton both ways. Our rationale is that these expenses vary widely between companies if comparison is ever desired.

Red Book Highlights

The benefits of switching to the new analysis are too great to discuss in a single blog post. But, here are a few initial financial observations which were used as the operational assessment continued:

Cost per order

Total fulfillment costs with freight, profit sharing, benefits and taxes increased 30% in three years. When freight, profit sharing, benefits and taxes were excluded, the cost per order increased 25%. This gives an improved focus on where to concentrate operational assessment activities.


For the first time, management calculated the direct and indirect payroll expense and hours worked for all fulfillment activities. For this client, when freight, profit sharing, benefits and taxes were excluded, direct labor is 68% and indirect labor is 11.8%.

Freight costs

When all expenses including freight, profit sharing, benefits and taxes are considered, freight expenses are 28.1%. Most of the customer orders are shipped LTL. In contrast, consumer e-commerce businesses using small parcels might find their total freight costs are larger than all the other fulfillment expenses excluding profit sharing, benefits and taxes.

Facilities costs

This is a private company and the owner is also the landlord. Total facilities costs are 5.4% of total expenses excluding freight, profit sharing, benefits, taxes. These costs are very low as they are older buildings which are totally depreciated and the owner receives no rent. If and when the company needs to move into newer facilities, the occupancy costs will be 3 to 4 times higher, adding significant expenses to each customer order. This is significant as the company evaluates a potential west coast facility.

Profit sharing, benefits and payroll taxes

The total benefit rate is 32%. In the past, this was added to the cost per order analysis which obscured the direct cost per order.

Order profile

The client originally stated the average order is over $400 with an average of nine cartons on a shipped order. However, the new analysis showed 20% of the orders were actually very small orders valued at less than $50, consisting of less than 3 items per order and consolidated into one carton. Additional work is being done to understand the order profile further and ensure that the small orders are efficiently picked, packed and shipped.

In consumer e-commerce companies we often find the reverse order profiles. Up to 20% may represent very large orders which inflates the average order. Understanding order profiles further will bring further understanding of cost per order, hours worked, dunnage and freight.

Future objectives

With the legacy system, detail productivity data and reporting by department and employee is not possible. There is no easy way to accurately collect transactions and hours worked by department or employee. Where employees are cross trained and work multiple departments, the time recording system will need to be modified to sign in and out as the employee works in a different department during the day.

When combined with the operational analysis of the fulfillment processes and layout, these new approaches to understanding costs will yield new areas of investigation and potential cost reduction.

Click to download: Reduce Cost and Increase Productivity