warehouse benchmark metrics
Distribution metrics vs. key performance indicators (KPIs) Though often used interchangeably, metrics and KPIs have both overlap and key differences. “Big data” has been a buzzword for a decade now. Gathering the right data and calculating the right KPIs is a no-brainer when it comes to improving warehouse operations. For a lot of warehouse executives and managers KPIs with the impact in the warehouse performance and the capability to display how productive and proper the warehouse performance management functions are. It usually indicates a failure to accurately forecast sales and plan ahead. One note before we get started: there are many, many articles out there describing key warehouse metrics. Knowing the right warehouse metrics to track to improve profitability and operations is keys to the success of your organization. And the list of perks goes on and on. You should calculate these costs in terms of the total number of feet an item moves—for example, a pallet of a given item might cost X cents to move per 10 feet. Productivity benchmarking metrics could include “lines picked per hour per full-time employee” (FTE) … Let’s be real for a second: Unless a customer’s entire order arrives on time in the right quantity, they are not going to be happy. In today’s fast-paced and competitive environment, setting benchmarks and goals for a company is essential, but it’s not enough to set lofty goals for the coming year in terms of revenue, profits, or production. There are many types of warehouse operational metrics you can use to measure the order throughput, inventory accuracy, cost of departmental operations and customer service. This is the total cost of picking an item, including the cost of labor for picking and labeling. Copyright © 2021 Logistics Bureau Pty Ltd. SEO by Online Marketing Whiz. The respondents in the WERC report listed a total of 34 metrics used to measure their performance levels. Here is the complete list of the most important logistics KPIs and metrics, that we will discuss in this article in every detail: But you probably won’t—at least, not at first. Learn more about what 3PLs ranked as their largest expenses by downloading the complete Third-Party Logistics Warehouse Benchmark … While many are good, few of them do the one important thing: Organize those metrics in a way that is meaningful. 1. On-time Dispatch: By comparing dispatch-timeliness across your warehouse operations, or with those of peers and competitors, you’ll be able to evaluate your picking and loading processes to determine how well they support your dispatchers in getting outbound vehicles away on time. Table 1 displays the top 10 metrics being managed in In order to have a 360o view of business investments in Warehouse Management, it is essential to develop a Key Performance Indicators (KPI) for effective business decision. Warehouse managers can use the Warehouse performancePower BI content to measure t… The performance function for the “Safety equipment used” should be binary.This means that the metrics can be in the green zone (have 100% performance) only if 100% of the used equipment is adjusted to the current safety standards. Some general metrics you keep aren’t tied to any particular area of the warehouse. Or it could be that you’ve hired a bunch of new labor but the real problem is inefficiency in the pick process itself. Packing any order requires packaging, boxes, and (not to be forgotten) filler. This is the number of orders picked completely accurately divided by the total number of orders. Below is a list of KPIs commonly used to measure performance … Warehouse DIFOT: This is an overall measurement of order lines delivered in full and on time. Warehouse activity is associated with certain established process steps . July 29, 2020. By tracking packing costs, a lot of warehouses make some startling discoveries. So out of the 20 metrics above, which is most important? You might need to talk to the sales team. With that in mind, we’ll break up the 19 most common metrics into general metrics for the warehouse as a whole, and the metrics for the main areas of a warehouse: receiving, storage, picking, and packing and shipping. Define your warehouse goals; Establish KPIs for your warehouse workers; Chart your fulfillment performance; As you can see, the key elements of efficiency measurement lie in a warehouse manager’s ability to look at a variety of indicators to see how they function together best. The APICS Dictionary, 15th edition, defines Balanced Scorecard as: ‘a list of financial… As a benchmark, consider best-in-class performance to be less than three hours, with median (middle of the road) performance … When discussing warehouse performance metrics, KPIs are vital. You can also subscribe without commenting. Adjusting your warehouse processes to help drive your warehouse KPI metrics. Backorder rates can spike with seasonal demand, rise and fall with consumer trends, or slowly creep up if forecasts consistently underestimate sales. • Start with what your customer values. KPIs, or key performance indicators, are measurable values typically used to highlight strengths and weaknesses of a warehouse or distribution center. If so, you need to hire more labor. Why Your Business’ 3PL Relationships Fail: Whose Fault is It? Defining and improving each of the warehouse KPIs on this list will put your warehouse on track to increase performance and drive cost savings at every level. But knowing what, exactly, is sitting there and for how long is essential for making purchasing decisions. They allow you to set a benchmark for month-on-month improvements. Perfect order can be defined as the percentage of orders…. Some warehouses include shipping time in this metric as well. When you know what to measure key performance indicators, or KPIs, can tell you a lot about the state of your supply chain and help track the performance of your pallet shipping company. For instance, the cost of carrying inventory tells you how much you will spend (as a percentage) to hold and store your inventory annually. They need to record not just the number but also the reason for return. Inventory management software allows businesses to more effectively manage their KPIs and outline the most effective behaviors for a supply chain operation in a quick, easy-to-understand way. Warehouse Performance Metrics are discussed in the APICS CLTD 2017 Learning System (Module 4, Section B, Topic 7). Benchmarking is recognised as the # 1 tool to boost Supply Chain performance. It uses Warehouse management, product, and other transactional data from your system, and provides both an aggregate view of warehouse performance and a breakdown for vendors, product groups and products, and site and warehouses. For instance, the cost of carrying inventory tells you how much you … Warehousing metrics are critical for C-suite decision making, as more than 35% of warehousing managers stated that they report directly to the top levels of management, with the … You can also try to benchmark warehouse productivity, but this tends to require careful peer-group selection if you are conducting external benchmarking. Warehouse DIFOT will differ from the full supply chain DIFOT results, since a warehouse-specific measurement should only include processes controlled by the warehouse, such as picking and dispatch. The top 10 metrics keeping warehouse managers up at night Unsurprisingly, different warehouses and distribution centres each employ a different set of metrics to monitor their performance. KPIs typically focus on external performances such … But there’s another reason to get the right KPIs in place: all that warehouse data boasts a fair amount of business intelligence. The following metrics should help you with this and (like the perfect order KPIs already discussed)are in common use among supply chain organisations: You can also try to benchmark warehouse productivity, but this tends to require careful peer-group selection if you are conducting external benchmarking. 7 Core Process Areas Benchmarking Best Practices • Excellence is a balancing act. Let’s discuss the metrics you should track for this area. While safety won’t necessarily increase profits or efficiency, it can reduce costs, create happier employees, and foster a healthy work environment. All other warehouse operations happen downstream from receiving, which means that if you have problems here, they will cascade down to the rest of the warehouse. There’s a lot of overlap between KPIs used in a warehouse with inventory and fulfillment focused KPIs, so be sure to check out those articles in detail here: Inventory management key performance indicators Labor productivity can be influenced by factors such as: If you need to justify the purchase of a new warehouse inventory management system, it might be more important for you to track pick accuracy and items picked per hour. In this post, you can discover some common-sense warehouse metrics that should probably be included in your project, regardless of whether you are benchmarking internally or externally. Improved performance is best measured by comparing metrics to other competitors, which is why studies such as WERC's are so valuable to warehousing managers. In addition, your organization needs to know […] This is the rate at which incoming orders come for out-of-stock items. The base of numerous measures applied in warehouse effectiveness will depend on just how much it is to do an ongoing activity. So it would be helpful to outline not just which metrics to use but also whyyou need each one and how those metrics line up with your warehouse layo… Or perhaps the time it takes to add coupons and a catalog to each shipment is not justified by the increase in re-orders. In short, good fulfillment starts with great receiving. The higher this total cost, the more your margin is eaten away. Once you do this, it will become obvious how important both an efficient warehouse layout and efficient picking procedures are. Simplicity and architectural integrations. That revenue should exceed the total amount that employee is paid (including benefits). Distribution metrics are the quantitative measures tracked throughout the inventory receiving, warehousing, picking, packing, ecommerce shipping, and delivering processes. Was the wrong item sent? Your customer service department should be keeping track of returns meticulously. (We’ve probably read them all). Changes in this number from shift to shift can tell you, for example, when there are problems with a given team or manager. The top warehouse key performance indicators impact the efficiency of both inbound and outbound warehouse operations. If you know your warehouse processes, then you know that most of the conditions described above depend on their effectiveness, with picking and dispatch processes probably being the most critical. 20 Important Warehouse Metrics and KPIs to Determine the Right Warehouse Setup, Warehouse Set-Up 101: How to Setup Small Warehouse Layout, Warehouse Labor KPI, Monitoring & Metrics, good fulfillment starts with great receiving, slow-moving inventory will need to be shelved differently, Warehouse Labor KPI, Monitoring and Metrics. While many are good, few of them do the one important thing: Organize those metrics in a way that is meaningful. The speed at which items are picked often determines the speed with which customers get their items, and picking accuracy can make or break the customer experience. Inefficiencies in your receiving area can have a ripple effect across warehouse operations, so … Did it arrive too late? Logistics Bureau. Inventory slips, ads, coupons, and other collateral might make their way into shipments, too. This is where having the right warehouse metrics and KPIs (Key Performance Indicators) comes in. … It is essential for you to measure warehouse productivity by applying standard measurements for operations occurring across the warehouse because warehouse workers do not perform the same repetitive tasks each shift. Was it damaged? Made to Order….Shaped by Tracking and Enacting Upon Insights Gleaned from Warehouse Metrics. These values vary depending on the type of information used in their creation, such as internal, supplier or customer KPIs. Metrics should not take the human element out of evaluating your personnel. You order accuracy is the percentage of incorrect orders that are not flagged. JULY 18, 2017. These steps are an excellent base for the process-oriented performance metrics. And help identify areas that (when combined with a solid procedure … Benchmarking, at the heart of it, is comparing your performance to others like you. (Some warehouses include packing and shipping time in this number, but we recommend keeping each stage separate, as it is more informative to do so). Tracking labor costs is important, as they are often the highest non-inventory cost for a warehouse. It’s also a performance elementin which warehouse operations play a central role. So the best way to measure order accuracy is to track the number of returns you have due to the wrong item being shipped. Warehouse operations begin with this process, and any inefficiencies here will snowball through all the … It also matters which metrics are easiest to measure. Measuring your performance is a key aspect of managing any business. Optimize the whole, not the parts. If you would like more advice on which KPIs are relevant to your operations and how to go about measuring them, contact us. The total time it takes to fulfill an order, including picking, packing, and shipping. Integrate with your sales and ordering software and sales-to-inventory ratio could be just as easy. Average days late helps you zero in on how big that problem is and where it might be happening. Employees in receiving should match what was ordered with what arrives. But they do tell us something important about how the warehouse is running (or how it needs to change). Warehouse managers need to know which items they sell, and which just take up shelf … Recording this number before and after a new technology for picking is introduced and noting the change can justify that technology purchase by demonstrating its efficiency. Believe it or not, order picking is one of the more complex activities that occurs in a warehouse. Perfect order is an ideal warehouse performance benchmarking metric, because as a fulfilment measurement, it’s tracked by a great many companies. With these indicators, you can benchmark your operations performance over time and against the industry average. We’re grouping it with timeliness indicators, but really it’s a pure indicator of the “pick-pack-ship” efficiency of a warehouse. This reality makes an annual benchmarking study conducted by the Warehousing Education and Research Council (WERC) all the more valuable. This is the average time taken for received stock to be counted, booked, and prepared for storage. But that doesn’t always happen. So it would be helpful to outline not just which metrics to use but also why you need each one and how those metrics line up with your warehouse layout. The objective: minimize order cycle time. Productivity benchmarking metrics could include “lines picked per hour per full-time employee” (FTE) and “number of orders processed per day per FTE”. Metrics that measure receiving performance are among the most critical warehouse KPIs. Key performance indicators (KPIs) help identify and define progress towards defined business goals. One note before we get started: there are many, many articles out there describing key warehouse metrics. Here’s what you need to know to put these strategies to use. After all, goods are just sitting there on their shelves or pallets. Financial metrics 2. To keep costs low and customer satisfaction high, your workers must be as productive as possible; thus, measuring the performance of your warehouse operations is a key metric. If you’ve heard about the opportunities and benefits that warehouse performance benchmarking can put within reach of your supply chain organisation, you might understandably be keen to get a benchmarking … Let’s be honest: It would be great if you tracked all of these metrics. After all, if you could detect incorrect picking, it would be fixed before packing and shipping, right? (See Rate of return above.) The 15 Supply Chain Metrics that Make or Break Warehouse Efficiency Maintaining an efficient warehouse means understanding the importance of your company’s supply chain – the sequence of processes involved in turning a customer’s order into a delivered product, from the procurement of raw materials to shipping and handling. In addition to the performance requirements, we had several system requirements that spanned the multiple stages that a modern data warehouse must accommodate: simplest architecture, scale, performance, reliability, interactive visualization, and cost. The warehouse manager should set KPIs (key performance indicators) that give you a gauge of the performance from each role. A logistics KPI or metric is a performance measurement that is used by logistics managers to track, visualize and optimize all relevant logistic processes in an efficient way. about performance metrics that are truly mission-critical versus those that are merely window dressing. Items are selling faster than you can restock them, which will lead to backorders. Please send me your fortnightly Email Bulletin. If this is not close to 100%, there’s an issue somewhere in your warehouse. With warehouse space making up the single largest expense for most 3PLs, adding space can take a toll on the bottom line—especially as rent costs have gone up an average of 2.5% in 2020. That all depends on where you suspect your warehouse could be doing better and what you need to prove to leadership. Here are the 5 most important warehouse productivity metrics: Order Processing Turnaround Time; Receiving Time; Days On-Hand; Rate of Return; Perfect Order Performance; Now that … If you’ve heard about the opportunities and benefits that warehouse performance benchmarking can put within reach of your supply chain organisation, you might understandably be keen to get a benchmarking project under way. An alternative measure is to see how much value is tied up in inventory vs. moving out the door. Dispatch In-full: This metric complements “on-time dispatch” and tells you how effectively your teams are managing inventory, picking, and dispatch, and preventing errors from hurting perfect order performance. Performance metrics are a universal way to measure a warehouse operation’s overall effectiveness, quality, and productivity. Effectiveness (productivity) metrics 3. When you know what to measure key performance indicators, or KPIs, can tell you a lot about the state of your supply chain and help track the performance of your pallet shipping company. Warehouse Safety KPIs Safety first is a good methodology to follow. If you are just starting out, you might need to get a handle on your rate of return and total order cycle time. Losing Money on Customer Orders and Supply Chain Profit Leak, The Best KPI: The Probability of a Perfect Order, Common Sense Warehouse Performance Metrics for Supply Chain Benchmarking, Delivered to the right location at the right time, Containing the right products, received in the right condition, by the right customer, Accompanied by the right documentationand last, but not least, correctly invoiced, Total labour costs as percentage of total facility costs, Total property/occupancy costs as percentage of total facility costs, Warehouse costs as percentage of gross sales, Cost per unit throughput (pallets, tonnes, cases or any other unit). In addition to perfect order metrics, warehouse performance benchmarking should ideally include a comparison of warehouse running costs. If your percentage drops, you might need to upgrade your ordering system or consider switching vendors. If this is taking too long, it could be throwing off other key metrics. Possible measurement points in this case are: 1. Email: [email protected]Phone: 04 1741 7307. It’s usually expressed as a percentage. At the very least, slow-moving inventory will need to be shelved differently. Additional recommended warehouse metrics to consider when evaluating a warehouse’s order … If revenue per employee drops too low, it means your overall warehouse efficiency is at dangerous levels. Labor productivity can be influenced by factors such as: But if your software lacks these metrics or you don’t use software at all, getting these KPIs will be that much harder. ideal warehouse performance benchmarking metric. This is the frequency with which you sell out your entire inventory. The best warehouse managers will track key performance indicators relentlessly, and use them to iterate and improve their operations. Measuring your performance is a key aspect of managing any business. Metrics for receiving are often the most overlooked. Subtract these returns from the total orders to get the number of accurate orders picked. If you have any questions while visiting the site, just send them in to the team using the short form provided. Ideally, yes. Too high? Among others, these measurements refer to transportation, warehouse and supply chain aspects. Percentage on-time full delivery is the percentage you get right (i.e., not late) over total number of orders delivered. A quick overview of these KPIs are shown in the following graphic, created by Newcastle Systems. Want the latest content delivered direct to your inbox? If your orders picked per hour are increasing but your order cycle time is steady, you might be overworking your warehouse staff. This is the total cost of having items in inventory. A 100% pick accuracy means that there are no returns due to wrong orders being fulfilled. But every situation is different: you can’t know what works until you actually measure. A warehouse is designed to deliver 2,000 order boxes per hour containing 26,000 lines holding 52,000 pieces. It includes things like warehouse space leased (if you are leasing), insurance costs, climate control costs, utilities, security, and so on. This is the amount of time it takes to pick an order from the shelf and start the packing process. Warehouse KPIs (key performance indicators) are the answer. You've got it - sign up below! Many of these warehouse safety metrics are trailing indicators … “Business analytics” has buzzed for even longer. Before embarking on such a project though, you’ll need to be very clear about exactly what you will measure. Common Sense Warehouse Performance Metrics for Supply Chain Benchmarking. Keywords: warehouse, performance measurement, indicator, metrics. Yes! This measures the amount of money “leaking out” as your items sit on the shelf or pallet. If you’d like some help getting your head around supply chain benchmarking and performance measurement, our consultants at Benchmarking Success (a specialised business division of Logistics Bureau) are ready and waiting to lend their expertise to your cause. Moving inventory around your warehouse costs money. Inventory turnover measures how often inventory is sold and leaves the warehouse in a given period. That could be carelessness at the packing station. Utilization metrics for equipment and storage 4. We’ll cover those here. Tracking orders picked per hour over time gives you a rough idea of how efficient your pickers are, which is useful for a number of things. Better KPI Benchmarking = Better Warehouse Performance = Higher Profit Margins: Logiwa syncs accurate data across your entire interface so the inventory numbers you see on your dashboard are what your employees see on their devices. The top warehouse key performance indicators impact the efficiency of both inbound and outbound warehouse operations. Percentage on-time delivery tells you that there’s a problem. Better KPI Benchmarking = Better Warehouse Performance = Higher Profit Margins: Logiwa syncs accurate data across your entire interface so the inventory numbers you see on your dashboard are … To find out more about Benchmarking Success and the services we provide, please stop by at our website. If there is a problem, they should flag it on the spot. Add these to the overall labor cost of packing (and any assembly required) to get your full packing costs. Sometimes it’s better to have a set of plain boxes of predetermined standard sizes and fill any excess space with air packs or filler. Benchmarking, at the heart of it, is comparing your performance to others like you. For warehouse operations, tracking key performance indicators (KPIs) helps determine warehouse performance, from total number of orders picked to labor costs to order cycle time. (We’ve probably read them all). To do this, you divide the cost of goods sold by the average value of your inventory. You’ll need to dive into other metrics to see if it was a carrier issue or an issue internal to your warehouse. We think these are the top 10 inventory metrics that you need to know right now . But since the shipment itself is usually out of your hands, it makes sense to focus on a KPI that you can do something about. Required fields are marked *. 2 Performance metrics are a universal way to measure a warehouse operation’s overall effectiveness, quality, and productivity. Warehouse productivity management uses various metrics which management is going to research to observe performance of all their warehouse processes. Jul 19, 2017 | Articles, Benchmarking, Warehouse | 0 comments. Unfortunately, key performance indicators (KPIs) and metrics can be confusing. So unless that happens, the order should be considered late. The objective: minimize order cycle time. Notify me of followup comments via e-mail. The Warehouse performance Power BI content was created so that warehouse and operations managers can monitor important inbound, outbound, and inventory metrics. Now in its 15th year, the “DC Measures” study polls warehouses and DCs on their performance on 35 operational metrics, or key performance indicators … Without metrics, there really is no way to know what is and isn't working in a warehouse…