Warehouse management is heavily reliant on managing two opposing demands: speed as well as precision. When you operate a warehouse, you usually want your employees to work as rapidly as feasible without harming themselves or inflicting product damage. Simultaneously, if you gain speed at the expense of precision, your company may face client grievances as well as expensive restocking and re-delivery processes.
Warehouse productivity, along with metrics like as on-time delivery and warehouse usage, is a metric of how successfully you handle this issue. The Warehousing Education and Research Council (WERC), the industry’s professional group, analyses this problem, as well as several others that impact distribution firms.
Order Picking Precision (percent by order)
This measure demonstrates how precisely warehouse personnel choose merchandise for orders. With multi-part orders, when the employee must choose goods from various bins, order picking accuracy might suffer. The measurement is also used to assess the accuracy of order choosing instructions. For instance, if the order specifies “Product X,” however the employee discovers two bins, each containing Product X in a different colour, this poses an issue. He or she can predict which hue is required and then make the corporation bear the repercussions of a return. Alternatively, the employee might send the order back for confirmation, causing attrition and lag.
Typical Warehouse Capacity Utilized
A warehouse is a monetary asset. As a consequence, its capacity utilisation rate is an essential figure for top management. It’s an issue if a corporation only uses 10% of its storage capacity. It implies they’re footing the bill for the rent as well as maintenance of unused premises. This may appear to be an obvious issue, but with various sites and fluctuating seasonal inventory, it might be hard to evaluate effectively without the proper tools and methods.
Maximum Warehouse Capacity Utilized
It is also beneficial to understand your maximum warehouse capability use. The number it might be telling, such as if it is too low. However, until it is 100 percent, there is potential for development. Peak warehouse capacity is a goal, a starting point for improvement. If the figure was 70 percent last year, it may be 75 percent this year.
Shipments made on schedule
On-time delivery of shipments to clients is an important success factor for warehouses. It’s significant on its own since it represents whether or not the warehouse is doing its function correctly. Delayed shipments, on the other hand, entail hidden expenses and challenges elsewhere in the firm. They are the source of customer service calls as well as grievances. They consume time by causing parcel tracking and other inefficiencies. Delayed shipments, in the end, might harm your brand and force consumers to defect.
Accuracy of Inventory Counting by Location
Are the inventory counts in each site correct? This is another covert issue that is more serious than it appears. If there are less things in a container than the system expects, this might suggest theft or undetected damage. Unexpected stockouts and fulfilment issues caused by miscounted inventory have a detrimental impact on consumer perceptions.
The inventory-to-sales ratio
The inventory to sales KPI calculates the ratio of your leftover inventory at the conclusion of the month to the sales you generated that month. This value is extremely useful to anyone in charge of a warehouse since it allows them to:
By demonstrating when increased inventory levels correlate with dropping sales, you may predict possible cash flow concerns prior to them becoming an issue.
This ratio informs you how many things you’ve sold by bringing out how many products you have left in your warehouse at the conclusion of the month. This might assist you in determining how much stock you need to acquire in order to easily maintain your sales without backorders.
Cycle time for receiving
Receiving cycle time is the average amount of time it takes to handle incoming stock, which involves registering for it, classifying it by class, and storing it.
Formula: Total time spent on sorting received stock / Total number of received items
Time for the putaway cycle
The putaway cycle time is the average amount of time it requires to store a single item in your inventory. Reduced putaway cycle times result in increased warehouse efficiency. This time may be cut by relocating things in your warehouse and increasing staff productivity.
Rate of fulfilment accuracy
Depending upon the overall number of client orders received, this KPI determines the percentage of orders that have been satisfactorily completed from start to end. This covers orders that were delivered accurately, on schedule, and with the correct items. If this rate is insufficient, your order management procedure should be reviewed and altered.
Formula: Orders completed without issues / Total orders received
Rate of on-time delivery
This metric indicates how effective your delivery methods are. To avoid client displeasure, it is critical to maintain a high on-time shipment rate.
Formula: Number of orders that have been shipped on time or in advance / Total number of orders shipped
Price per order
This KPI shows you how much it expenses to complete one of your customers’ orders from the time the order is made until it reaches the client. Cost per order is calculated by dividing your total order fulfilment expenditures by the total number of client orders received.
Formula: Total fulfillment costs / Total number of orders
Returns on investment
The rate of returns indicates the percentage of consumers who have returned their things, generally due to circumstances within your control (such as broken products, erroneous items provided, or late delivery) or variables beyond your influence (such as fraud or problems with the product after delivery). To calculate this rate, simply divide number of things sold by the overall number of items returned and transform to a percentage.
Formula: (Items returns / Items sold) * 100
Superior warehouse productivity indicators result from effective total management, however also from the usage of software. This is particularly relevant for companies with large product catalogues and high inventory turnover rates. Software and related technology, such as barcode scanners and RFID readers, aid in the accurate measurement and management of warehouse operations.