What Are the Top Warehouse Management KPIs Every Supply Chain Exec Should Measure
Warehouse managers face many challenges. Customers need to get the products they order. Employees deserve an enjoyable, rewarding work environment. Vendors need to have access to the latest inbound freight routing guides and more. These challenges can be overwhelming, but supply chain executives and managers can simplify the process by tracking these top warehouse management KPIs (key performance indicators).
The Key Steps to Selecting the BestWarehouse Management System
The Top Warehouse Management KPIs:
Receiving and Put-Away KPIs
Workforce Utilization, volume per employee, cost per item, accuracy and timeliness of delivery, labor costs. Back order rate.
The first set of warehouse management KPIs supply chain executives need to understand revolve around receiving and put-away rates in a warehouse. Incoming freight should be tracked in terms of volume put away per employee per hour. Managers should also track the cost per line item, the accuracy and timeliness of inbound freight and the labor costs associated with receiving. These KPIs can be leveraged to improve vendor relationships and increase productivity among your staff.
The simplest warehouse management KPIs are based on storage. You need to monitor inventory turnover, the carrying cost of inventory and the average inventory value, explains Paul Trujillo of Business 2 Community. The dependent values in these KPIs are derived from the following formulas:
- Inventory Turnover = The Cost of Total Goods Sold During a Period / Average Inventory Value
- Carrying Cost of Inventory = Inventory Carrying Rate (How Long a Product Stays in the Warehouse) * Average Inventory Value
Picking and Packing KPIs
Picking and packing KPIs include the average number of items picked per employee, the total value of picks and their average, the cost per line item, labor costs, the cost of packaging and order cycle times.
Shipping KPIs are comparable to picking and packing KPIs. However, they focus on the total number of items shipped versus the projected number of items shipped. For example, if you ship 100 items, and 150 items were scheduled to be shipped, you have a deficit KPI, indicating delays or possible issues within the warehouse. This KPI is derived by dividing the total number of shipped orders by the number of planned shipments. An ideal result in one. As the result increases, it represents increased operations. Decreasing results indicate problems and decreased productivity.
Reverse Logistics KPIs
Reverse logistics KPIs are those revolving around returns and recycled products coming back from consumers. Although several reverse KPIs exist, the most important one is the rate of return. It is calculated by dividing the number of units returned by the total number of units sold. As the result increases, it alludes to a possible problem with a product.
Inventory accuracy is a measure of database inventory versus actual inventory. It is calculated by divided the database inventory count by physical inventory count. If both counts are accurate and identical, the result should be one.
Any warehouse manager understands the value of working equipment. Equipment should be tracked for adherence to maintenance and uptime until the next scheduled maintenance. This is calculated by dividing the current time used since last maintenance by the average time between maintenance. The result shows managers how long existing equipment can function before maintenance is required. An average of all such KPIs revolving around equipment provides insight into overall predicted uptime for equipment, asserts Karl Friesenbichler via Cerasis.
The Big Picture
Warehouse managers and supply chain executives should also track replenishment rates and values for average number of late deliveries by vendors. By tracking all these KPIs, supply chain executives can successfully manage warehouse operations and stay ready for the next omni-channel shopping rush.
The following graphic, published by New Castle Systems, showcases a few other KPIs supply chain executives may consider tracking to improve operations as well.