Effectively measuring your warehouse KPIs (key performance indicators) is a vital way to keep track of your warehouse performance and efficiency.
Understanding which KPIs are most important for your warehouse and using them to help identify key operational areas that directly impact the organisational processes and costs helps create a solid benchmark, providing you with a clear picture of the success of your warehouse processes and operations.
Each warehouse operates differently, as such it’s important you choose the right KPIs that align with your business goals and objectives.
How do you find the KPIs you need? Here are 7 warehouse KPIs that you should be tracking.
The top warehouse KPIs
Inventory
Inventory accuracy
Inventory accuracy is typically carried out automatically by a warehouse management system but occasionally, discrepancies in the tracked numbers can occur – be this through damage, theft, supplier shortages etc. Inventory accuracy measures the value of inventory tracked by the system against the physically-present inventory number, highlighting any discrepancies.
Inventory accuracy = inventory as tracked by system/physically-present inventory
Inventory to sales ratio
An inventory-to-sales ratio KPI gives you a clearer picture of monthly remaining stock numbers compared to the number of monthly sales, allowing you to calculate the need for any additional stock purchases without unnecessary backorders. It also helps you to foresee any potential cash flow issues due to rising inventory levels due to a downward fluctuation in sales.
Inventory to sales ratio = EOM inventory balance/sales for the month
Receiving
Receiving efficiency
Receiving efficiency KPIs help calculate the productivity of the receiving department within your warehouse, flagging any potential area issues, including a need for additional training or more refined processes.
Receiving accuracy = volume of inventory received/number of staff hours worked
Picking
Perfect order rate
Perfect order KPIs help measure how many orders your warehouse has processed and delivered without incident. This is a good indication of process effectiveness, particularly when using lean practices.
Perfect order rate = orders completed without incident/total orders placed
Back-order rate
Used to indicate successful forecasting of purchases and inventory supplies, back-order rate KPIs are a useful way to identify any areas of poor planning or responsiveness that are not caused by temporary high back-order rates thanks to periodic spikes in demand.
Back-order rate = orders unfulfilled a time of purchase/total orders placed
Distribution
Rate of return
An incredibly useful distribution KPI, rate of return can be used to segment and identify key factors that are causes for return such as damages, incorrectly shipped items, late delivery etc. This can be used to address any recurring issues and make any necessary improvements to the distribution service.
Rate of return = number of units returned/number of units sold
Putaway
Putaway cycle time
Putaway cycle time KPIs measure the average time it takes to put away a single item of inventory in your warehouse. A shorter putaway time indicated more efficient warehouse operations, whereas longer putaway times may signal a requirement for item repositioning or improved employee productivity.
KPIs can be introduced into areas across your warehouse operations, from fulfilment and distribution to safety and employee culture. Choosing the ones that align with your organisational goals can help paint a clearer picture of how your warehouse processes match up to industry standards, and how you can improve efficiency and cash flow.
Optima WS warehouse management solutions can aid in reporting and improving priority KPIs, optimising your warehouse logistics and operational processes.
Get in touch today to find out more.
