15 Types Of Operations Metrics And Their Use In Business
Updated 30 September 2022
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Improving a business often requires evaluating data about different business aspects and gathering insights from it. The company obtains this data from various operations metrics that measure the capability of its business functions. Knowing these metrics can help a business understand what is going well, what can improve and what can stay the same. In this article, we discuss 15 types of operations metrics and advise how to use them efficiently to enhance business outcomes.
Related: A Quick Guide To Operations Management Responsibilities
15 Types Of Operations Metrics
There are 15 types of operations metrics that measure various aspects of a company, including human resources, information technology, logistics, sales, marketing, retail and manufacturing:
1. Absenteeism rate
The absenteeism rate is a metric that the human resources (HR) department of an organisation calculates by creating a chart measuring absenteeism over a few years. This chart reflects the average rate of absenteeism compared with a target rate. If the current rate is more than the target rate, the business could check if there are employee concerns causing the high absentee rate. The number of people calling in sick or missing work for other reasons tells the HR department if changing policies would reduce absenteeism. Knowing the number of employees consistently attending work also helps the business plan resources for the future.
2. Overtime hours
Another human resource metric is overtime hours. HR departments measure overtime hours by age, and this helps to understand which age group is working more hours and for what reason. Some reasons for overtime include a shortage of resources, economic growth and an increase in sales. A deeper understanding of this metric can help the business restructure some of the benefits and investigate streamlining the processes causing an excessive workload. The department can also determine what demographic to focus on to solve internal employee issues.
Related: Human Resource Planning: Meaning, Importance And Key Steps
3. Total tickets
An organisation's information technology (IT) department usually utilises a total tickets metric to determine customer engagement and satisfaction by measuring the number of tickets, or requests for IT assistance. It helps even more if the IT department compares total tickets with open tickets. This metric helps identify problems in a system or a product, especially after a new launch or an upgrade. The IT department also measures this metric internally to identify problems in a product before launch. In this case, the internal departments can create tickets that relevant teams resolve as the business goes through the various steps of the project.
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4. Average handling time
Another metric the IT department uses is average handling time. This metric measures the time each employee takes to manage a task or work on an open ticket. Depending on the nature of the job, the IT department measures the average handling time over minutes, hours or days. Analysing this metric can tell the business more about which issues are challenging or which tasks require more time. It can help prepare or modify a plan for product development or release and design more efficient timelines for future projects.
5. Delivery time
The logistics department of an organisation usually uses operations metrics to evaluate customer satisfaction and retention. This department calculates the delivery time as the time that elapses between placing an order and the final delivery of the product. It charts this metric over a map to determine how average delivery times vary between zones. If the metric is high in some zones, the you may evaluate the reasons and set a target to reduce the time. This may help improve customer return and standardise the scheduled delivery system.
6. Transportation costs
This is another logistics metric that helps identify high-cost areas throughout a product's supply chain. The logistics department plots transportation costs as a pie chart consisting of order processing costs, inventory carrying costs, administrative costs, final transportation costs and other warehousing costs. Through this chart, the business can identify which parts of the supply chain incur costs it can reduce or eliminate. The average costs help the organisation maintain low expenses throughout all forms of transportation without compromising customer loyalty, delivery times or the product quality.
Related: What Is Supply Chain Management? (Benefits And Examples)
7. Packing cycle time
This logistics metric enables a business to improve efficiency in the packing lines. To measure packing cycle time, the department identifies multiple lines where it can measure the time it takes to pick an item from the shelf and prepare it for shipping. The advantage of measuring this metric across multiple lines is if one line performs better than the others, the business can find the parameters behind its efficiency and replicate them along the other lines. The logistics department generally measures the average packing cycle time over a month.
8. Lead-to-opportunity ratio
The lead-to-opportunity ratio helps the sales department of a business to identify the number of unqualified leads that became qualified ones, also called opportunities. Typically, every salesperson or manager has targets to identify those leads that might turn into opportunities. These targets usually align with the revenue goals of the entire organisation. By targeting the sources of qualified leads, sales professionals may understand more about which customer groups or areas it can focus on to further improve revenues.
Related: How To Increase Sales Volume (With Tips And Steps)
9. Lead conversion rate
An important sales metric is the lead conversion rate, which helps identify the number of leads, measured as a ratio or percentage, resulting in paying customers. Every sales professional has a sales pipeline target that grows as the business expands. For a healthy sales pipeline, a high lead conversion rate is essential. If the conversion rate is high, the business can evaluate the parameters that led to it and use them to gauge low-performing pipelines. Often, businesses can decide which customer niches to target by analysing the lead conversion rate.
10. Cost per click
In the marketing department, cost per click determines the cost of online marketing campaigns. This metric also includes the click-through rate (CTR), which determines how many links a customer clicks through to reach a relevant page. To utilise the cost per click metric better, the marketing department often tries to analyse the sources of the clicks. When charting the number of clicks according to their sources, it becomes easy to identify which websites the business could focus on during its future campaigns. Cost per click can also identify the low-price sources of traffic that you can use to save on marketing costs.
Related: What Is Internet Marketing? (Definition And Types)
11. Cost per acquisition
Cost per acquisition helps determine the cost of acquiring a customer, with the cost calculated when customer clicks result in a purchase. Marketing teams use this metric to ascertain the customer acquisition costs and devise ways to lower them by modifying campaigns and marketing strategies. Cost per acquisition also shows which sources lead to a successful customer purchase. A business may use this information to target those sources in future campaigns to increase the acquisition rate while maintaining a low cost.
Related: What Is Strategic Marketing? (With Benefits And Tips)
12. Order status
This operations metric concerns the retail section of a business. When a customer places an order, the retail department uses order status to evaluate the various stages of shipment, for example, shipped, cancelled or received. The time each of these steps takes helps identify whether order processing is on time. In the case of slow order processing, the retail department decides whether to improve the supply chain or engage more resources to increase customer satisfaction.
13. Sales by region
Retail departments can measure sales by region to understand the consumer preferences of specific locations. A popular way to chart this metric is by plotting sales amounts on a map denoting different states or cities and by date, such as daily or weekly. This measurement helps identify those regions where turnovers are low. The department can compare these numbers with those of high-sales regions to find the cause for the difference. These charts help formulate various marketing campaigns to improve the revenue from the low-sales regions.
14. Production volume
The manufacturing department of a business measures production volume to evaluate whether the production machines are running as expected. They chart this metric over a certain timeframe to measure production volume during that time. Another way to chart production volume is to measure the volume of goods each machine produces to identify the more efficient machines. Measuring production volume helps build strategies around inventory management and the maintenance of equipment.
Related: What Is Lean Manufacturing? (With Objectives, Pros And Cons)
15. Production downtime
Production downtime happens when machines cease production due to scheduled service, missing parts, malfunction or other reasons. The department can chart downtime by machine and the reason for the downtime. Observing this metric gives the organisation valuable input on whether the downtimes are causing revenue loss. Identifying the causes of downtime helps the business devise solutions, such as replacing the equipment, hiring more resources or reorganising inventory strategies.
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