Are you tracking these 5 warehouse KPIs?

 Key Takeaways

• Minor Adjustments Yield Big Results: Small changes in warehouse operations, like relocating items or automating processes, can significantly save time and reduce costs.

• Importance of KPIs: Key Performance Indicators (KPIs) are critical for identifying areas of success and those needing improvement in warehouse management, impacting efficiency and profitability.

• Inventory and Order Accuracy: Accurate inventory management and order picking are vital for customer satisfaction and cost management, with technology playing a key role in enhancing accuracy.

• On-Time Shipments and Space Utilization: Timely shipments and efficient use of warehouse space are crucial metrics for customer satisfaction and operational cost-effectiveness.

• Labor Productivity: The efficiency of the warehouse workforce directly affects operational costs and order processing speed, with improvements possible through training and automation.

In the logistics industry, success hinges on being both highly efficient and detail-oriented. Keeping up with the competition means not just working hard, but also working smart. That doesn’t mean measuring absolutely every minute thing. It all comes down to understanding and tracking the right Key Performance Indicators (KPIs) that are truly impactful and aligned with your organization’s goals and objectives.

In this article, we break down some key warehouse performance metrics you may want to consider tracking in pursuance of operational excellence.

Inventory Accuracy

Inventory accuracy is the linchpin for maintaining reliable stock levels, minimizing losses, and ensuring customer satisfaction. Accurate inventory management helps in avoiding overstocking and understocking, leading to optimized inventory levels.

Inventory accuracy is a KPI that can be tracked by regularly conducting cycle counts and reconciling these counts with inventory records you keep in a warehouse management system (WMS) like Magaya Supply Chain. You can also perform spot checks, selecting a small subset of your inventory to audit on a daily or weekly basis. Modern inventory management systems and technologies like RFID and barcode scanning can greatly enhance the accuracy and efficiency of these counts.

Order Picking Accuracy

Order picking accuracy is a crucial KPI for both customer satisfaction and improving reverse logistics costs (put simply, reducing returns). Incorrectly filled orders not only lead to customer dissatisfaction but also additional costs in processing returns and reshipping.

Order picking accuracy is measured by comparing the number of orders picked accurately against the total orders. Implementing quality control checks and using automated picking systems can help improve this important metric. Mobile WMS systems like Flow WMS by Magaya can also help improve order picking accuracy with handheld barcode scanning, avoiding manual errors. Over time, better order picking accuracy can improve customer loyalty and reduce reverse logistics costs.

On-Time Shipments

For freight forwarders and warehouse operators, the ability to ship orders on time is a key metric for customer satisfaction and maintaining a competitive edge. It reflects the efficiency of the warehouse’s processes from receiving to shipping.

How can you effectively measure on-time shipments? Simply track the percentage of orders shipped by the promised date. Improvement can be achieved by optimizing labor scheduling, streamlining processes, and using warehouse management systems like Magaya Supply Chain for better coordination.

Warehouse Capacity Utilization

In the warehouse, space is money. Effective use of warehouse space is crucial for maximizing storage and reducing costs. Poor space utilization leads to increased operational costs and inefficiencies.

At its simplest, warehouse capacity utilization is measured with the following formula: used space/total available space×100. This gives you the percentage of the warehouse space currently being used. However, capacity utilization isn’t just about how much space is filled; it’s also about how efficiently that space is used. Overfilled shelves or inaccessible areas can decrease operational efficiency. Ensure that the layout allows for easy access and efficient movement of goods. Metrics such as weeks on hand are also important to maximize use of storage for the cargo that truly merits it. Regularly reviewing layout and storage methods, and using data-driven approaches for inventory placement contribute to optimizing space usage.

Labor Productivity

Labor productivity measures the efficiency of the workforce in the warehouse. High labor productivity means lower operational costs and faster order processing.

There are various formulas for calculating labor productivity in the warehouse. Examples include measuring metrics such as orders picked per hour or units moved per labor hour. The best KPI for your business will align with your unique objectives. Improvements can be made through training, better scheduling, and introducing automation where appropriate.

By tracking these KPIs using modern warehouse management software, warehouse managers can gain insights into their operations, identify areas needing improvement, and make informed decisions to enhance efficiency, reduce costs, and improve customer satisfaction.