Warehouse KPIs (Key Performance Indicators) can be vital to the efficiency of any warehouse operation because they permit you to track and establish benchmarks for your business. This is the way to create an efficient warehouse. They also aid in identifying areas in need of improvement, particularly those that have an impact on the overall cost of operations and the customer’s satisfaction.
Warehouse KPIs are typically unique to a particular operation however, they are not applicable to all businesses. In our opinion, there are some essential warehouse KPIs that must be monitored regardless of how big the business is for an efficiently managed warehouse. They include:
Order Fulfillment
Order Fulfillment begins with the placing of the order and ends with the delivery of the items to the customer for distribution. There are a variety of metrics that can be analyzed in the process of fulfilling orders, including:
- order fill rate: Fill rate is the measure of the proportion of the order that was filled. An acceptable fill rate should be between 97 and 99 percent of the total amount. Anything less than 94% could be due to inefficiencies within the processing of the warehouse and replenishment process. A fill rate of 100 percent is believed to be the highest of its kind in the industry.
- Order Fulfillment Timeliness: A 100% fill rate has no significance to the customer when the order isn’t delivered in time. The most common timeframe for order fulfillment is between 1-2 days, with the best in category being no more than 24 hours from the date of the order’s placement until the time of dispatch to the distribution center.
- Picks per hour are the main outbound metric that allows you to analyze and identify the effectiveness of your group of pickers as well as their performance on a daily basis. A typical picker will select between 120-180 pieces/ cases per hour. The top pickers get more than 250 picks an hour. Utilizing the latest technology, such as Voice Picking could increase the rate of picks by 30% when the conditions are right.
- On Time, In Full: If all of the above is achieved at the top of the line but if the products are not received on time this will have a negative impact on the business. On-time deliveries should typically be in the range of 98 to 99 percent. Anything that is higher than this is considered exceptional.
Inventory Accuracy
Your inventory should be in line with the one shown in your database, but it’s not always the case. an unbalance between the two at any big distribution center. A high percentage of inaccuracy in inventory can lead to unexpected delays in orders, unsatisfied customers, and eventually more expensive overall costs. Improve your accuracy in inventory by performing regular checks against your database and using cycles as a method of continuously verifying your database’s records.
Physical Inventory Count ÷ Database Inventory Count Percentage of Accuracy in Inventory
Also read: 10 Inventory Management KPIs for Better Performance
Overall Throughput
Warehouse throughput is the number of units handled and moved around your warehouse every day. To determine your throughput rate be sure to monitor the flow of goods through your warehouse over the duration of. For instance, if you would like to know the number of orders processed by your warehouse in the eight-hour period You can monitor the quantity of orders processed in the time frame and the time it takes for each item to be moved from the pick stage to packing and labeling. If your warehouse can process 400 orders in just eight hours, this means that employees are processing about 50 orders every hour.
Replenishment
Replenishment refers to the movement of inventory from the reserve or central storage space to the primary storage bins to allow for moving downstream into picking faces to perform pick/pack operations. This is a crucial metric for warehouses that deal with many products in large quantities, especially in e-commerce settings. The replenishment metric evaluates the processes employed to execute the movement and also how efficient it is. By utilizing effective replenishment strategies warehouses/companies will:
- Avoid dead stock and overstocked
- Check for shortages
- Ensure on-time deliveries
- Ensure proper product rotation
- Make sure you have a safe stock
- Accuracy in Picking and Shipping
The main purpose of a warehouse’s operation is to make sure that customers receive the items they requested within the time frame they want them to be delivered. So, order accuracy is among the most crucial metrics warehouses must track daily. The best warehouse operations aim for order accuracy between 99.5 percent to 99.9 percent.
Turning Inventory
The ratio of stock turnover is a measure used to measure how often and when a specific item of stock is received processed and shipped within a certain timeframe. This is a crucial gauge of a company’s quality of inventory and its order processing. Turns in inventory (also known as “speed category” for an object could be tracked within a WMS. This allows you to manage inventory in an organization in a different way. For instance, using counting inventory cycles it is possible to count those who move faster more often than slow movers, which gives you the capability to put your labor effort directly where it could have a direct impact instead of taking all items of inventory by using the same processes for managing inventory.
Dead Stock
Dead stock refers to inventory that isn’t moving due to a lack of demand. It is stored in warehouses in a warehouse, taking up capacity. It is comprised of stock that has been damaged and/or expired or not sellable due to reasons of any kind. The metrics for dead stock are vital to track because dead stock can cause costs for inventory and block space for more profitable products. The best practice is to monitor dead stock and send reports to the management team that provides sales incentives to get these items out.
Supplier KPIs
The measurement of the supplier’s KPI is crucial to establishing top-of-the-line procurement. It will help improve communication, improve spend and order visibility, enhance process efficiency, and identify savings opportunities in cost and more. Supplier KPI measures to be considered include performance, reliability compliance, as well as customer service.
Also read: 7 Key Steps To Developing A Winning Customer Experience Strategy
Customer Satisfaction
Customer satisfaction is heavily dependent on the overall performance of the entire warehouse operations. The customer satisfaction scores reflect all the performance you can get from your outbound and inbound operations, the overall management of inventory, and communication protocols. The level of satisfaction with your customers can be assessed by looking at:
- On-time delivery
- Shipping accuracy
- Stock accuracy
- Inventory turnover
- Activity reporting, like shorts and returns
Conclusion
If you’re not keeping track of what works and what does not, it’s hard to tell the things your business requires to succeed and if you’ve got a well-managed warehouse. Selecting the best warehouse KPIs to monitor in line with your business goals will be the initial step to making your business profitable and having satisfied customers. Once the warehouse KPIs which best fit your business are determined take a regular look at them and adjust them according to the lessons you’ve learned. You may discover that you require additional space, more workers, or even new technology, such as the latest WMS system. Whatever your requirements you have, proper KPI monitoring will allow you to identify them.