Warehouse the most important links of your supply chain.
It’s crucial to optimize warehouse management operations in order to compete with other businesses.
Key performance indicators (KPIs) give you a means to measure how well you are doing and make the right adjustments. They allow you to set benchmarks and improve your business practices. The better you can quantify warehouse functions, the more you can increase output and improve the bottom line. Below are five KPIs to closely monitor in your warehouse:
- Accuracy of Inventory Records
Your capacity to meet customer demands hinges on your ability to accurately report inventory. Are you backlogged? Do you have a space-wasting surplus? When you can account for inventory down to the item, you can better respond to customer needs.
An accurate inventory accounting gives you the ability to fulfil orders in a timely manner and improve customer relationships. Further, the whole warehouse management team can reduce man hours spent hunting for inventory that isn’t there. This helps to cut overhead costs and improve profit margins. Fortunately, inventory accuracy is measurable. Inventory tracking software is an excellent way to keep a close eye on inventory and measure it as a KPI. To meet your KPI goal, do periodic inventory audits to see how they measure against routine tracking. Your goal should be to have the two numbers match.
Similarly, storage itself is an important KPI for improving warehouse management practices. This KPI is specific to actual storage systems. In general, the storage KPI covers the types of storage you currently use and have access to.
For example, a warehouse manager can measure available block stacking and rack storage, as well as the types in use. KPIs can also measure the amount of pallet storage, carousels, container storage and others. As part of your storage KPI, storage cost per item should be tracked, as well as exact storage per square foot. A specific useful KPI for inventory is the “carrying cost of inventory,” which is used to calculate the costs for storage for a certain amount of time. Calculate this by looking at hard costs for labour, freight, storage and insurance. Once determined, set your KPI target lower than where you currently are.
Naturally, receiving is prime for KPIs in warehouse management. It is the first step toward ensuring all subsequent warehouse-related activities are as they should be. Receiving operations should coordinate with all purchase orders — including advanced-shipping-notice orders — so that all items are properly received and stored for appropriate access.
There are many specific KPIs associated with the receiving end of the warehouse chain. A warehouse manager should take note of cost of receiving per product, the manpower associated with each product received, the quality of incoming products, and the exact amount of time it takes to process and store each incoming shipment. Your KPI goal should be to reduce receiving costs (labor, etc.) and reducing the number of damaged incoming products.
Equally important to proper warehouse management is shipping. It is important to thoroughly track KPIs at this stage in order to ensure you are meeting customer demands while staying within a reasonable budget.
In short, how efficient are you at moving products from your own facility to where they need to be? What exactly should you be measuring? The KPIs for shipping can include cost per shipment, quality (such as damages incurred), the required man-hours to keep procedures moving, and the total time it takes to get merchandise out of your facility and to the customer. Your goal should be to reduce shipping costs and increase shipping speed.
- Employee Turnover
Manpower is often the overlooked KPI in warehouse management. While warehouses might keep close count of hours as they relate to productivity, they might not consider actual employee turnover. In fact, turnover can be a crucial indicator for how well you are doing as a warehouse.
To get specific KPIs, make a note of the training costs you incur in a given time period, and track the number of employees coming and going. Measure it against actual productivity on the floor. You can use that information to improve the work atmosphere in order to retain employees and ensure quality operations. A good benchmark is to reduce turnover, thus lowering training costs.