Warehouse management is a complex dance of efficiency, accuracy, and customer satisfaction. To orchestrate this dance, Key Performance Indicators (KPIs) serve as the choreography, guiding every step.
This blog post dives into the significance of KPIs in warehouse management and explores a variety of KPIs across different operational aspects. Whether you’re an industry veteran or just stepping into the world of warehousing, understanding and tracking these KPIs can make all the difference in optimizing your operations.
Importance of KPIs in Warehouse Management
Key performance indicators (KPIs) are metrics that measure the performance of a warehouse operation. KPIs can be used to track warehouse efficiency, identify areas for improvement, and make informed decisions about how to optimize the warehouse. KPIs metrics can also be used to improve customer satisfaction by ensuring order accuracy and processing speed.
KPIs play a dual role in optimizing warehouse operations and elevating customer service. By tracking and analyzing these warehouse metrics, businesses can identify bottlenecks, streamline processes, allocate resources effectively, ensure inventory accuracy, and enhance overall warehouse productivity. Simultaneously, customer satisfaction soars when products are accurately received, promptly delivered (last-mile logistics), and impeccably handled throughout the supply chain journey.
Receiving KPIs
The receiving process is the first step in the warehouse workflow. It is responsible for receiving goods from suppliers, inspecting them for damage, and putting them away in the warehouse.
There are a number of important KPIs that can be used to measure the warehouse performance of the receiving process.
Cost of Receiving Per Receiving Line
The cost of receiving per receiving line is a part of inbound logistics that measures the efficiency of the receiving process. It is calculated by dividing the total cost of receiving by the number of receiving lines. The total cost of receiving includes the cost of labor, equipment, and materials. A low cost of receiving per receiving line indicates that the receiving process is efficient. A high cost of receiving per receiving line indicates that the receiving process is inefficient and could be improved.
Receiving Productivity
Receiving productivity is a measure of the number of units that can be received per hour. It is calculated by dividing the total number of units received by the number of hours spent receiving. A high receiving productivity indicates that the receiving process is efficient. A low receiving productivity indicates that the receiving process is inefficient and could be improved.
Receiving Accuracy
Receiving accuracy is a measure of the percentage of goods received that are received correctly. It is calculated by dividing the number of goods received correctly by the total number of goods received. A high receiving accuracy indicates that the receiving process is accurate. A low receiving accuracy indicates that the receiving process is inaccurate and could be improved.
Dock Door Utilization
Dock door utilization is a measure of the efficiency of dock doors. It is calculated by dividing the total time that dock doors are used by the total time that dock doors are available. A high dock door utilization indicates that the dock doors are being used efficiently. A low dock door utilization indicates that the dock doors are not being used efficiently and could be improved.
Receiving Cycle Time
Receiving cycle time is a measure of the time it takes to receive goods into the warehouse. It is calculated by adding the time it takes to inspect goods, put them away, and complete paperwork. A short receiving cycle time indicates that the receiving process is efficient. A long receiving cycle time indicates that the receiving process is inefficient and could be improved.
Putaway KPIs
Putaway is the process of storing goods in a warehouse. It is a critical process that affects the efficiency and accuracy of the warehouse. By tracking warehouse KPIs like putaway, warehouse managers can identify areas for improvement and make informed decisions about how to optimize the putaway process.
Putaway Cost Per Line
The cost of putaway per line is a measure of the efficiency of the putaway process. It is calculated by dividing the total cost of putaway by the number of lines. The total cost of putaway includes the cost of labor, equipment, and materials. The number of lines is the number of places where goods can be put away at the same time. A low cost of putaway per line indicates that the putaway process is efficient. A high cost of putaway per line indicates that the putaway process is inefficient and could be improved.
Putaway Productivity
This inbound KPI measures the number of units that can be put away per hour. It is calculated by dividing the total number of units put away by the number of hours spent putaway. A high putaway productivity indicates that the putaway process is efficient. A low putaway productivity indicates that the putaway process is inefficient and could be improved.
Putaway Accuracy
Putaway accuracy is a measure of the percentage of goods that are put away correctly. It is calculated by dividing the number of goods put away correctly by the total number of goods put away. A high putaway accuracy indicates that the putaway process is accurate. A low putaway accuracy indicates that the putaway process is inaccurate and could be improved.
Labor and Equipment Utilization in Putaway
This warehouse KPI measures how efficiently labor and equipment are used in the putaway process. It is calculated by dividing the total time that labor and equipment are used in putaway by the total time that labor and equipment are available. A high labor and equipment utilization in putaway indicates that labor and equipment are being used efficiently. A low labor and equipment utilization in putaway indicates that labor and equipment are not being used efficiently and could be improved.
Putaway Cycle Time
Putaway cycle time is a measure of the time it takes to put away goods into the warehouse. It is calculated by adding the time it takes to receive goods, inspect them, and put them away. A short putaway cycle time indicates that the putaway process is efficient. A long putaway cycle time indicates that the putaway process is inefficient and could be improved. It’s not to be confused with cash-to-cash cycle time, which is how quickly a brand turns their resources into cash.
Storage KPIs
Storage is the process of keeping goods in a warehouse until they are needed. It is a critical process that affects the efficiency and cost of the warehouse. By tracking storage KPIs, a warehouse manager can identify areas in product inventory management for improvement and make informed decisions about how to optimize the storage process.
Carrying Cost of Inventory
The carrying cost of inventory is one of many inventory KPIs and is the total cost of holding inventory in the warehouse. It includes the cost of capital, insurance, taxes, and storage. The inventory carrying cost can be calculated by multiplying the average inventory value by the carrying cost percentage. The carrying cost percentage is typically between 20% and 30%. The higher the carrying cost percentage, the more expensive it is to hold inventory.
Storage Productivity
Storage productivity is another one of many inventory management KPIs, and it depicts the number of units that can be stored per square foot of warehouse space. It is a measure of how efficiently the warehouse space is being used. Storage productivity can be calculated by dividing the total number of units stored by the total warehouse space.
Space Utilization
Space utilization is the percentage of warehouse space that is used for storage. It is calculated by dividing the total warehouse space used for storage by the total warehouse space.
Inventory Turnover
Inventory turnover is an inventory KPI that reveals the number of times inventory is sold and replaced in a year. The inventory turnover ratio is calculated by dividing the total number of units sold by the average inventory value.
Inventory to Sales Ratio
The inventory to sales ratio is the number of days of inventory on hand. It is a measure of how much inventory is on hand compared to the amount of sales that are being generated. A high inventory to sales ratio indicates that there is a lot of inventory on hand.
Pick & Pack KPIs
Pick and pack is the process of selecting and assembling the items for an order. It is a critical process in the warehouse as it determines the speed and accuracy of order fulfillment. These KPIs can provide warehouse managers critical information to improve the pick and pack process.
Picking and Packing Cost
The picking and packing cost is the total cost of picking and packing goods. It includes the cost of labor, equipment, materials, and overhead. The picking and packing cost can be calculated by adding the cost of labor, equipment, materials, and overhead.
Picking Productivity
Picking productivity is the number of units that can be picked per hour. It is a measure of how efficiently the picking process is being conducted. Picking productivity can be calculated by dividing the total number of units picked by the total hours spent picking.
Picking Accuracy
Picking accuracy is the percentage of orders that are picked correctly. It is a measure of how accurate the picking process is being conducted. Order picking accuracy can be calculated by dividing the number of orders picked correctly by the total number of orders picked.
Labor and Equipment Utilization in Picking
Labor and equipment utilization in picking is a measure of how efficiently labor and equipment are being used in the picking process. It is calculated by dividing the total time that labor and equipment are used in picking by the total time that labor and equipment are available. A high labor and equipment utilization in picking indicates that labor and equipment are being used efficiently. A low labor and equipment utilization in picking indicates that labor and equipment are not being used efficiently and could be improved.
Picking Cycle Time
Picking cycle time is the time it takes to pick an order. It is calculated by adding the time it takes to receive an order, inspect it, and pick the goods. A short picking cycle time indicates that the picking process is efficient. A long picking cycle time indicates that the picking process is inefficient and could be improved.
Distribution KPIs
Distribution KPIs are metrics used to measure the performance of a distribution network. They can be used to track the efficiency, effectiveness, and reliability of the distribution process.
Order Lead Time
Order lead time is the time it takes for order fulfillment from the time the order is placed to the time the goods are delivered. It is a critical KPI for any distribution network, as order lead time directly impacts customer satisfaction.
Perfect Order Rate
Perfect order effectively measures the number of orders in which there were no errors. That means the correct item was shipped, the item was received on time, and the item was not damaged. Calculating this rate can also help brands identify weak spots in the supply chain. For example, if the rate of on-time delivery is low, brands would be wise to invest time into improving that metric.
Back Order Rate
The back order rate is the percentage of orders that are not shipped on time due to stockouts. It is a measure of the reliability of the distribution process.
Reverse Logistics KPIs
Reverse logistics is the process of returning goods from the point of sale to the point of manufacture. It’s important to understand how to improve reverse logistics, as it is a critical part of the supply chain and can have a significant impact on a business’s bottom line.
Rate of Return
The rate of return is a key performance indicator (KPI) that measures the percentage of products that are returned by customers. It is calculated by dividing the number of returned products by the total number of products sold. A low rate of return can indicate that a business is doing a good job of meeting customer expectations.
Warehouse Safety KPIs
Warehouse safety is critical to the success of any business. Measuring warehouse KPIs like these can help managers identify areas where safety can be improved and make informed decisions about how to reduce the risk of accidents.
Time Lost Due to Injury Rate
The time lost due to injury rate is a KPI that measures the number of hours lost due to injuries per 100 full-time employees. It is calculated by dividing the total number of hours lost due to injuries by the total number of full-time employees and multiplying by 100.
A high time lost due to injury rate can indicate that there are serious safety concerns in the warehouse. This can lead to increased costs, decreased productivity, and a negative impact on employee morale.
Time Since Last Accident
The time since last accident is a KPI that measures the number of days since the last accident in the warehouse. It is calculated by subtracting the date of the most recent accident from the current date.
Accidents per Year
The accidents per year KPI measures the number of accidents that occur in the warehouse per year. It is calculated by dividing the total number of accidents by the number of years that the warehouse has been in operation. A high accidents per year rate can indicate that there are serious safety concerns in the warehouse. This can lead to increased costs, decreased productivity, and a negative impact on employee morale.
How Flowspace Can Optimize Your Warehouse KPIs
Flowspace can help warehouse managers and operations optimize their warehouse KPIs. Flowspace’s Warehouse Management System provides a comprehensive suite of tools to improve fulfillment and warehouse management, while giving brands real-time visibility and the ability to track key supply chain KPIs and metrics.
Flowspace’s intuitive, cloud-based WMS enables the optimization of receiving, inventory management, order processing, and shipping activities, including parcel, freight, and retail.
The WMS empowers administrators to create flexible parcel billing accounts, generate reports, manage merchant accounts, manage product catalogs, establish marketplace integrations, monitor inventory levels, and proactively control operational costs. The system utilizes automatic rate-shopping functionality to compare multiple parcel carrier accounts.
Get in touch with Flowspace today to learn more about how the Flowspace can help you optimize your warehousing KPIs.
Written By:
Allison Champion
Allison Champion leads marketing communication at Flowspace, where she works to develop content that addresses the unique challenges facing modern brands in omnichannel eCommerce. She has more than a decade of experience in content development and marketing.
