How do you measure your warehouse performance? Maybe your goal is to run an operation that maximises product flow, with a smooth receipt and putaway process and an efficient picking system. But how do you measure that? While these may be laudable objectives, they are too intangible to measure.
Instead, it’s vital to use meaningful KPIs in your distribution operation so that you can accurately track your performance and subsequently act on the findings. Quantifiable metrics provide factual testimony to the success – or otherwise – of your warehouse operation. And give you accountability for your actions.
7 KPIs for Warehouse Improvement
At Balloon One, we recommend using a set of seven specific KPIs that allow our clients to monitor their performance across the warehouse and to target areas for improvement. Where there are issues, in most instances clients will further drill down into influencing factors, and here the creation of complimentary KPIs is sometimes needed. But the seven main KPIs we track are a great start for any company wanting to improve its distribution business.
The seven metrics we choose are spread across the warehouse: inbound, outbound and inventory.
KPI 1: Receipt Accuracy (Inbound)
Receipt accuracy measures the percentage of supplier purchase orders that are received in full. It’s an area that impacts forecasting, planning and shorted customer orders. It helps to identify performance in a variety of areas, such as supplier, receipt, and putaway.
KPI 2: Receipt Performance (Inbound)
Receipt performance quantifies the number of lines or the quantities received per person per hour. This measurement identifies individual performance issues, as well as where process improvements might be possible. It also helps with assigning labour most productively.
KPI 3: Shipped On Time In Full (Outbound)
The shipped on time in full (OTIF) KPI assesses the percentage of sales orders that are shipped on time in full. It identifies where there are stock issues and where process improvements are needed. Plus, it’s a great indicator of customer satisfaction.
KPI 4: Pick Performance (Outbound)
The pick performance metric determines the number of lines or quantities picked per person per hour. As with receipt performance, it identifies performance issues and process improvements, but this time to do with outbound aspects of distribution.
KPI 5: Cycle Count Accuracy (Inventory)
Cycle count accuracy evaluates the number of cycle counts that are completed with zero adjustments. It demonstrates how closely official records match the actual stock, and identifies issues with supplier accuracy too.
KPI 6: Space Utilisation (Inventory)
Space utilisation shows the percentage of bins containing stock. Some empty space in a warehouse is good as it allows for optimisation, that is for moving products around more easily. But it’s important not to waste space and too many empty bins take up much-needed space and mean that a certain product is out of stock, meaning no revenue from that SKU. Utilisation improvements can be identified so that optimal stock is held across the warehouse.
KPI 7: Stock Turn (Inventory)
Stock turn – or stock turnover – measures the average number of days that stock is turning over. It identifies excess inventory in comparison to sales levels, showing where utilisation improvements can be made and evaluating sales performance.
The benefits of measuring KPIs
Tracking and measuring KPIs allows you to quantify your business performance so that you can improve it. So rather than saying, “we want more streamlined processes”, you can precisely identify where they can be improved and by how much.
From our own point of view, it’s important to track KPIs so that we can understand the impact of our software for our customers. It helps if we can show what ROI our systems provide, not only for the verification that gives to our customers, but also to provide benchmarking for all our customers. Our benchmarking allows our customers to compare with others in their industry, showing them where they can improve.
We’ll be looking at each of these KPIs in far greater depth over the remainder of the year, so look out for our future blog posts about them.
If you want to implement a KPI system that gives daily performance monitoring, identifies areas for improvement and provides an insight into the overall profitability of your business, then call us to find out more on 020 8819 9071 or get in touch for a quote.