Which warehouse KPIs matter the most? Warehousing is evolving and changing at a rapid pace thanks to booming ecommerce and omnichannel operations. It’s therefore taking on an ever-bigger role in a company’s overall success, so managing it effectively has never been more important. To improve efficiencies and competitive advantage, then, you must collect accurate data and measure performance through key performance indicators (KPIs).
While warehouse KPIs will vary from one company to the next, and one warehouse to the next, there are some common and universal metrics to track. In general, most warehouses should be tracking order fulfillment, inventory accuracy, shipping and picking accuracy, inventory turns, overall throughput, and replenishment. To better manage these KPIs, you can categorize them into specific areas of the warehouse.
In the inbound area, for instance, you can focus your warehouse KPIs on line items per hour, loads per hour, and receipts per hour. Since inbound also serves as the receiving point for returns, that’s another metric to lump in here. In the outbound space, you should be measuring KPIs like order fill rate, timeliness, picks per hour, and delivery timing and completion. This will give you a good indication of your picking operations efficiency.
As you move toward the center of the warehouse, you should focus on effective inventory management. Here your KPIs should include inventory accuracy and how quickly/efficiently you move orders—detect the latter by measuring order turnaround and dock-to-stock time.
You should also be on top of your replenishment and order accuracy rates. When you’re not managing replenishment effectively, you’re susceptible to overstocks, shortages and delivery delays. Track your order accuracy and returns so that can ensure customers remain satisfied. Additionally, measuring your stock turnover ratio to see how quickly customers receive their orders after processing. This can also serve as a good overview of your inventory health and order processing.
Taking a look at storage metrics is also essential. Here, your KPIs should include storage utilization so that you know the average space occupied versus the overall capacity. In this area, you also want to measure “dead stock,” which helps you identify items that are sitting and not moving. When products take up valuable real estate in your storage area, you’re losing out on potential income from items that would otherwise turn quickly. It’s important to know your supplier KPIs, like performance, compliance, and reliability because your partners’ behaviors can impact your customer’s ultimate satisfaction.
Have a good look, too, at customer satisfaction metrics. These should focus on delivery rates, shipping accuracy, and activity reporting.
Knowing which warehouse KPIs to measure is a key first step to improved efficiencies, but the process shouldn’t stop there. All of the warehouse KPIs mentioned here are reliant on data and tracking, which makes it essential to put in place robust tools for capture and analysis. End-to-end warehouse management systems that provide real-time visibility into your operations can help you attain that high-level measurement.
Here is a list of warehouse KPIs you may wish to consider:
• Order Cycle Time
• Perfect Order Index
• Lost sales – Stock Out Percentage
• Backorders as a % of total orders
• Backorders as a % of total lines
• Backorders as a % of total dollars/units
• Dock to Stock Cycle Time Hours
• Lines Received and Put Away per Hour
• % of supplier orders received with correct documents
• % of supplier orders received damage free
• On time receipts from supplier
• Fill Rate – Line
• Fill Rate – Order
• Lines Picked/Shipped Per Hour
• Orders Picked/Shipped Per Hour
• Cases Picked/Shipped Per Hour
• Pallets Picked/Shipped Per Hour
• Distribution costs as a % of Sales
• Distribution Costs as a Percentage of COGS
• Distribution Costs Per Unit Shipped
• Days on Hand Raw Materials Inventory
• Days on Hand Finished Goods Inventory
• Inventory shrinkage as a % of Total Inventory
• Average/Peak Warehouse Capacity Used
• Honeycombing %
• Inventory Accuracy by Dollars/Units
• Inventory Accuracy by Location
• Order picking Accuracy Percent/Order
• Annual Direct Labor Turnover % by Role/Dept.
• Productive Hours to Total Hours
• Percent of Orders with On-Time Delivery
• Percent of Orders Shipped Complete
• Percent of Orders Shipped Damaged Free
• Percent of Orders Shipped with Correct Documentation
• Inventory Days of Supply
