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When it comes to managing a warehouse, there are certain warehouse management metrics that you should be paying close attention to in order to measure the success of your operations. From stock levels to turnover and labour costs, these metrics will help you identify potential areas for improvement and measure the overall efficiency of your warehouse.

How to Measure Your Warehouse Performance

Measuring the performance of your warehouse is essential for ensuring that it runs smoothly and efficiently. By monitoring key metrics such as stock levels, turnover rate, labour costs, and other relevant factors, you can identify areas for improvement and gain insight into how well your operations are functioning.

Additionally, tracking these metrics will allow you to measure the success of any changes or updates you make to your warehouse processes. With an accurate understanding of how well your warehouse is performing, you’ll be able to ensure maximum efficiency and productivity in all aspects of your business.

Stock Levels

Keeping track of stock levels is one of the most important metrics when it comes to warehouse management. In order to ensure that you have sufficient stock on hand at all times, you need to be able to accurately measure your inventory levels. This involves tracking the quantity of goods that are both stored in the warehouse and sold through your supply chain.

An example of a stock level metric is the Average Days of Inventory (ADI). This metric measures the average number of days that a warehouse has inventory on hand. By monitoring this metric, you can ensure that your stock levels remain sufficient to meet demand without overstocking.

Turnover Metrics

Turnover is another important metric to monitor when it comes to warehouse efficiency. This metric allows you to assess the effectiveness of your processes and identify any opportunities for improvement. By tracking the amount of time stock sits on your shelf, you can ensure that you’re keeping up with customer orders and reduce the likelihood of stock becoming obsolete.

An example of a turnover metric is the Average Time to Ship (ATS). This metric measures the average amount of time it takes for an order to be shipped out from your warehouse. It’s important to monitor this metric as it can help you identify any potential bottlenecks or delays in your processes.

Labour Cost Metrics

Labour costs are a significant expense for any warehouse, so it’s important to stay on top of this metric in order to ensure maximum efficiency. By tracking labour costs over time, you can identify areas where your team can be more efficient and even explore ways to automate certain processes.

An example of a labour cost metric is the Average Labour Cost per Order (ALCO). This metric allows you to measure the average amount of money spent on labour for each order. By monitoring this metric closely, you can identify any areas where your team could be using their time more efficiently and make adjustments accordingly.

Delivery Performance Metrics

When it comes to customer satisfaction, delivery performance is key. By tracking this metric on a regular basis, you can ensure that your warehouse is meeting the demands of your customers in terms of both speed and accuracy. This will help to build trust with your customers and support the long-term success of your business.

An example of a delivery performance metric is the On-Time Delivery Rate (OTDR). This metric measures the percentage of orders that are delivered to customers on time. It’s important to monitor this metric closely in order to ensure that your warehouse is performing at its best and meeting customer expectations.

Inventory Accuracy Metrics

This metric measures the accuracy of your inventory records, such as the actual physical count of items in your warehouse compared to the records in your inventory management system. This helps to identify any discrepancies and improve the overall accuracy of your stock control processes. High inventory accuracy is essential for ensuring that you have the right amount of stock available to meet customer demand and avoid stock shortages.

An example of an inventory accuracy metric is the Inventory Accuracy Rate (IAR). This metric measures the percentage of orders that are accurate and in line with your records. By monitoring this metric, you can identify any discrepancies in items ordered vs what was actually sent.

Order Fulfilment Metrics

This metric tracks the time it takes to fulfil customer orders, from receipt to shipment. It is an indicator of the efficiency of your warehouse operations and helps to identify areas for improvement. By monitoring order fulfilment times, you can ensure that you are meeting customer expectations for delivery speed and accuracy.

An example of an order fulfilment metric is the Average Fulfilment Time per Order (AFTPO). This metric measures the average amount of time it takes to process an order. By monitoring this metric closely, you can identify any areas where your warehouse could be more efficient and ensure that customer orders are fulfilled in a timely and accurate way.

Space Utilisation Metrics

Space utilisation measures how effectively you are using the available space in your warehouse. This metric is important for understanding your storage capacity and making decisions about storage layouts. By tracking space utilisation, you can determine if you are using your space effectively and identify areas for improvement, such as implementing more efficient storage methods or rearranging the layout to optimise storage space.

An example of a space utilisation metric is the Utilised Space per Order (USPO). This metric measures the average amount of storage space used for each order. By monitoring this metric, you can identify any areas where your warehouse could be more efficient in terms of utilising space and make adjustments accordingly.

Equipment Utilisation Metrics

This metric monitors the usage of your warehouse equipment, such as forklifts and pallet jacks. It helps to determine if you have the right amount of equipment for your operations and identify areas for improvement. By monitoring equipment utilisation, you can make informed decisions about purchasing or leasing additional equipment or improving the maintenance and repair processes to increase the lifespan of existing equipment.

An example of an equipment utilisation metric is the Equipment Utilisation Rate (EUR). This metric measures the percentage of time that your warehouse equipment is in use. By monitoring this metric, you can identify any areas where additional equipment may be needed or maintenance and repair processes could be improved.

Returned Goods Metrics

This metric keeps track of goods that are returned by customers. Understanding why customers are returning items can help you improve your processes and reduce the likelihood of returns in the future. By monitoring this metric, you can gain insight into customer satisfaction and identify areas for improvement in your product offerings or delivery processes.

An example of a returned goods metric is the Returned Goods Rate (RGR). This metric measures the percentage of orders that are returned to your warehouse. By monitoring this metric, you can identify any areas where improvements could be made and work to reduce customer returns in the future.

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Using Warehouse Management Metrics to Manage Your Warehouse with Maximum Efficiency

With these key metrics in mind, you can begin to monitor and measure the performance of your warehouse operations. By tracking these warehouse management metrics regularly, you can identify areas for improvement and ensure that your warehouse is operating optimally. In addition to the above-mentioned metrics, there are other indicators that you should be monitoring such as customer satisfaction, on-time delivery, and turnaround times.

By managing your warehouse with maximum efficiency, you can ensure that it is running smoothly and delivering optimal results. This means faster order fulfilment times, reduced stock levels, improved customer satisfaction, and increased profitability. Additionally, regular monitoring of key metrics can help to identify potential problems before they arise and allow you to take corrective action quickly and efficiently. Overall, efficient warehouse management is key for any successful business.

Consider Adding These KPIs to Your Warehouse Performance Dashboard

Inventory KPIs

Inventory Turnover

This KPI is used to measure how efficiently a company is managing its inventory. A high inventory turnover indicates that a company is selling its inventory quickly, while a low inventory turnover indicates that the company is not managing its inventory efficiently. The calculation involves dividing the cost of goods sold by the average inventory.

Inventory to sales ratio

This KPI is used to measure how much inventory a company has on hand relative to its sales volume. A high inventory-to-sales ratio may indicate that a company has overstocked inventory, which ties up cash and warehouse space. The calculation involves dividing the average inventory by the total sales.

Carrying cost of inventory

This KPI is used to measure the cost of holding inventory over a period. The carrying cost includes storage, insurance, and other expenses related to inventory. The calculation involves multiplying the average inventory by the carrying cost percentage.

Shrinkage

This KPI measures the difference between the expected inventory levels and the actual inventory levels. A high shrinkage rate indicates that there may be theft or inaccurate tracking. The calculation involves dividing the difference between the expected and actual inventory levels by the expected inventory level.

Inventory accuracy

This KPI measures the accuracy of inventory levels recorded in the warehouse management system. A high inventory accuracy rate ensures that a company has the correct inventory levels for fulfilling customer orders.

Gross margin return on investment (GMROI)

This KPI measures the amount of profit generated by a company’s inventory investment. The calculation involves dividing the gross margin by the average inventory investment. A high GMROI indicates that a company is generating a high return on its inventory investment.

Stockout rate

This KPI measures the percentage of times that a company runs out of stock before fulfilling a customer order. A high stockout rate can result in lost sales and dissatisfied customers.

Order lead time

This KPI measures the time taken from the moment an order is placed to the time it is delivered. A shorter order lead time indicates that a company can fulfil customer orders quickly.

Receiving KPIs

Receiving efficiency

This KPI measures the efficiency of the receiving process in terms of the time taken to receive and process goods. A high receiving efficiency ensures that goods are received and processed quickly, which can reduce delays in order fulfilment.

Receiving cycle time

This KPI measures the time taken to receive goods from a supplier. A shorter receiving cycle time indicates that a company is able to process goods quickly.

Cost of receiving per line: This KPI measures the cost of receiving goods per line item. A lower cost of receiving per line indicates that a company is able to receive goods more efficiently and at a lower cost.

Goods received without a purchase order (GRWOP)

This KPI measures the percentage of goods that are received without a purchase order. A high GRWOP may indicate poor inventory management and control, as goods may be received without proper documentation.

Purchase order accuracy

This KPI measures the percentage of purchase orders that are received without errors. A high purchase order accuracy ensures that goods are received and processed correctly, which can reduce delays in order fulfilment.

Dock-to-stock cycle time

This KPI measures the time taken to move goods from the dock to inventory. A shorter dock-to-stock cycle time indicates that a company is able to process goods quickly, which can reduce delays in order fulfilment.

Put-away KPIs

Accuracy rate

This KPI measures the accuracy of putting away items in the warehouse. A high accuracy rate ensures that items are placed in the correct location, which can reduce delays in order fulfilment.

Put-away cycle time

This KPI measures the time taken to put away items in the warehouse. A shorter put-away cycle time indicates that a company is able to process items quickly, which can reduce delays in order fulfilment.

Put-away cost per line

This KPI measures the cost of putting away items in the warehouse per line item. A lower cost of put-away per line indicates that a company is able to put away items more efficiently and at a lower cost.

Travel distance

This KPI measures the distance that a worker has to travel to put away items in the warehouse. A shorter travel distance indicates that a company is able to put away items more efficiently and at a lower cost.

Pick-location accuracy

This KPI measures the percentage of items that are put away in the correct pick location. A high pick-location accuracy ensures that items are stored in the most efficient and effective way possible, which can reduce delays in order fulfilment.

Space utilisation

This KPI measures the percentage of space used for storage in the warehouse. A high space utilisation rate indicates that a company is using its warehouse space efficiently and effectively.

Order management KPIs

Picking accuracy

This KPI measures the accuracy of the picking process in terms of the items picked for a customer order. A high picking accuracy ensures that the correct items are picked for customer orders, which can reduce errors and improve customer satisfaction.

Total order cycle time

This KPI measures the time taken to process an order from start to finish. A shorter order cycle time indicates that a company is able to fulfils customer orders quickly, which can improve customer satisfaction.

Backorder rate

This KPI measures the percentage of orders that cannot be fulfilled immediately due to lack of inventory. A high backorder rate may indicate that a company needs to improve its inventory management.

Fulfilment accuracy rate

This KPI measures the accuracy of the fulfilment process in terms of delivering the correct items to customers. A high fulfilment accuracy rate ensures that the correct items are delivered to customers, which can improve customer satisfaction.

On-time shipping rate

This KPI measures the percentage of orders that are shipped on time. A high on-time shipping rate ensures that customer orders are delivered when expected, which can improve customer satisfaction.

Cost per order

This KPI measures the cost of fulfilling an order. A lower cost per order indicates that a company is able to fulfil orders more efficiently and at a lower cost.

Rate of returns

This KPI measures the percentage of orders that are returned by customers. A high rate of returns may indicate that a company needs to improve its order fulfilment processes.

Perfect order rate

This KPI measures the percentage of orders that are delivered without errors or delays. A high perfect order rate indicates that a company is able to fulfils orders efficiently and effectively, which can improve customer satisfaction.

Order picking productivity

This KPI measures the number of orders picked per hour by a worker. A higher order picking productivity indicates that a worker is able to pick more orders in a shorter amount of time, which can improve order fulfilment efficiency.

Order fill rate

This KPI measures the percentage of customer orders that are fulfilled from available inventory. A high order fill rate ensures that customer orders are fulfilled quickly and efficiently, which can improve customer satisfaction.

Safety KPIs

Accidents per year

This KPI measures the number of accidents that occur in the warehouse in a year. A lower number of accidents indicates that a company is prioritising the safety of its workers.

Time since last accident

This KPI measures the amount of time that has passed since the last accident in the warehouse. A longer time since the last accident indicates that a company is taking steps to prevent accidents and maintain a safe work environment.

Lost time injury frequency rate (LTIFR)

This KPI measures the number of lost time injuries per million hours worked. A lower LTIFR indicates that a company is taking steps to prevent workplace injuries and maintain a safe work environment.

Near-miss reporting rate

This KPI measures the number of near-miss incidents reported per month. A higher near-miss reporting rate indicates that workers are encouraged to report potential safety hazards before accidents occur, which can help prevent workplace injuries.

Safety training hours per employee

This KPI measures the number of hours of safety training provided to each employee per year. A higher number of safety training hours indicates that a company is prioritising the safety of its workers and taking steps to prevent workplace injuries.

Safety audit score

This KPI measures how well a warehouse complies with safety regulations and best practices. A higher safety audit score indicates that a company is taking steps to maintain a safe work environment for its workers and prevent workplace injuries.

Quick Calculations

KPI Formula
Inventory turnover Cost of goods sold / Average inventory
Inventory to sales ratio Average inventory / Total sales
Carrying cost of inventory Average inventory * Carrying cost percentage
Shrinkage (Expected inventory – Actual inventory) / Expected inventory
Inventory accuracy (Total inventory count – Number of errors) / Total inventory count
GMROI Gross margin / Average inventory investment
Stockout rate Number of stock-outs / Total orders
Order lead time Date order shipped – Date order received
Receiving efficiency (Number of items received / Total time spent receiving) * 60
Receiving cycle time Date goods received – Date goods ordered
Cost of receiving per line Total cost of receiving / Number of lines received
GRWOP Number of items received without a purchase order / Total number of items received
Purchase order accuracy Number of accurate purchase orders / Total number of purchase orders
Dock-to-stock cycle time Date goods placed in inventory – Date goods received
Put-away accuracy rate Number of items put away accurately / Total number of items put away
Put-away cycle time Date items put away – Date items received
Put-away cost per line Total cost of put-away / Number of lines put away
Travel distance Total distance traveled / Number of items put away
Pick-location accuracy Number of items put away in the correct location / Total number of items put away
Space utilisation (Total space used for storage / Total warehouse space) * 100
Picking accuracy Number of correct picks / Total number of picks
Total order cycle time Date order shipped – Date order received
Backorder rate Number of backorders / Total number of orders
Fulfilment accuracy rate Number of accurate deliveries / Total number of deliveries
On-time shipping rate Number of orders shipped on time / Total number of orders
Cost per order Total cost of fulfilment / Total number of orders
Rate of returns Number of returned items / Total number of items sold
Perfect order rate Number of perfect orders / Total number of orders
Order picking productivity Number of orders picked / Hours worked
Order fill rate Number of customer orders fulfilled from available inventory / Total number of customer orders
Accidents per year Total number of accidents / Time period
Time since last accident Date of last accident – Current date
LTIFR (Total number of lost time injuries / Total hours worked) * 1,000,000
Near-miss reporting rate Number of near-miss incidents reported / Time period
Safety training hours per employee Total number of safety training hours / Number of employees
Safety audit score Total score for safety audit / Maximum possible score for safety audit

 

In Summary

Good warehouse management is essential for any business or organisation that distributes goods. By monitoring key metrics such as stock levels, turnover, labour costs and delivery performance, you can gain valuable insight into the current performance of your warehouse operations and make informed decisions on future strategies. Doing so will help to ensure maximum efficiency and support the long-term success of your organisation.

About DWR

At DWR, we specialise in implementing smart warehouse management solutions, like NetSuite, that help you to optimise your operations and stay ahead of the competition. Our experienced team is dedicated to helping you maximise efficiency, reduce costs and achieve maximum customer satisfaction. Contact us today to learn more about our innovative solutions or to get a free consultation from one of our NetSuite experts.

Tiernan OConnor

Tiernan O'Connor is an accomplished Sales Director and NetSuite expert at DWR Consulting, a top-tier NetSuite Solution Provider and Implementation Partner. With over 25 years of experience in Sales, Marketing, Cloud ERP and technology, Tiernan has become a trusted authority in the NetSuite Partner community, helping businesses of all sizes streamline their operations and achieve success. Tiernan's in-depth understanding of NetSuite's capabilities and his extensive experience in implementing cloud-based ERP solutions have positioned him as a thought leader in the industry. He is known for his ability to identify and execute tailored strategies that meet each client's unique needs, ensuring they unlock the full potential of NetSuite's powerful features. Connect with Tiernan on LinkedIn

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