25 Warehouse Management KPIs and Metrics to Monitor for Assessing and Enhancing Warehouse Performance in 2022 and Various Ways to Track Warehouse KPIs
Proper warehouse management is the first step in quick fulfilment since it affects how quickly you can acquire, track, and store goods to fulfil client orders.
However, how can you tell if a warehouse is operating efficiently?
Warehouse management KPIs and metrics should be closely monitored by tracking warehouse and supply chain KPIs for receipt, inventory control, and fulfilment.
Optimizing your warehouse and making changes will be challenging due to failing to monitor critical KPIs.
This post will let you learn what and how to monitor warehouse KPIs.
- What Exactly do Warehouse Key Performance Indicators (KPIs) Signify?
- What Makes Monitoring Warehouse KPIs Important?
- 25 Warehouse KPIs and Management Metrics To Monitor For Assessing and Enhancing Performance
- INVENTORY KPIs
- RECEIVING KPIs
- Put-Away KPIs-
- Order Management & Processing KPIs-
- Workforce and Safety KPIs-
- How Do You Track Warehouse Key Performance Indicators?
- 7 Best Practices While Monitoring Warehouse Management KPIs and Metrics
- Utilize WareIQ to Outsource Your Warehouse and Fulfillment Operations
- Frequently Asked Questions
What Exactly do Warehouse Key Performance Indicators (KPIs) Signify?
Warehouse KPIs are performance metrics that aid managers and executives in determining how well a team, project, or even an entire business performs. It is not the aim; instead, it is a means of measuring objectives as part of a larger plan or as a tool to bring everyone together behind an exact target. KPIs may concentrate on more general operations or be more targeted at specific measures or procedures.
By analyzing the effectiveness of an eCommerce warehouse, warehouse KPIs simplify monitoring. They also help to identify possible issues, manage risks, and find ways to improve operations.
Since many factors are involved in warehouse management, including inventory management and fulfilment, warehouse KPIs are frequently divided into many categories.
Examples of Warehouse KPIs include-
- Inventory KPIs – Inventory needs to be maintained in a delicate balance; too much or too little might result in too much money being linked to unsold inventory or a stockout risk. KPIs for inventory tracking might aid in maintaining the balance.
- Receiving KPIs is the first stage in the warehousing process since it ensures that companies get what they paid for and that it comes when required. However, if precautions are not taken, a lot can go wrong.
- Put-Away KPIs- These metrics measure how quickly and where items can be stored in a warehouse when they are received. This is crucial for perishable goods with shorter shelf life in particular.
- Order Management & Processing KPIs- When an order is placed, it is up to the picking and processing teams to choose the appropriate product quickly. Picking and processing KPIs may be monitored to identify possible obstacles in this process.
- Workforce and Safety KPIs- Measuring employee satisfaction, injury rates, types, overtime hours, the proportion of part-time workers in the workforce, yearly turnover rates, or labour expenses. Also, by keeping an eye on safety, firms may lessen the number of workplace accidents before they occur.
WareIQ, an eCommerce fulfillment company, empowers online brands with a superior-tech platform to compete with Amazon like service levels by bringing their average delivery timelines from 5-10 days to 1-2 days.
What Makes Monitoring Warehouse KPIs Important?
Managing an effective supply chain requires careful attention to measuring warehouse KPIs. Additionally, it offers tips on what to look for while performing a warehouse audit.
The significance of tracking warehouse KPIs are discussed down below-
Warehouse KPIs Increase Its Productivity
Monitoring warehouse KPIs enhances warehouse productivity.
You can pinpoint areas to concentrate on, improve, and invest in by monitoring performance. Various elements influence a warehouse’s efficiency; therefore, it’s crucial to identify any weak points so you can enhance and optimize them.
For instance, several developments in digital warehousing have made it possible to automate repetitive processes, which removes the need for time-consuming manual labour and saves thousands of man-hours.
However, it’s possible that your existing warehouse arrangement, rather than inefficiencies in how your team works, is the real culprit. The technology could assist you in improving your storage and simplifying orders if you’re monitoring the correct warehouse KPIs.
Overall, monitoring warehouse KPIs may help you figure out how to become more efficient by using technology or improving internal procedures.
Retailers May Save Money by Monitoring Warehouse KPIs
Along with increasing efficiency, addressing the parts of your warehouse operations that require improvement can reduce logistics expenses.
Most e-commerce enterprises prioritize cost-cutting, but it’s never been more crucial. Due to the increased demand for warehouse development and construction, logistics warehouse tenants have already seen a 10% rate increase in 2021 alone. As a result, the price of renting a warehouse alone might significantly reduce business margins.
You can benefit from taking the time to figure out how to improve processes and efficiency; even better, determine how much warehouse space you require. This can also entail investigating ways to optimize inventory levels to satisfy demand while reducing holding expenses.
Increases Client Satisfaction
How your e-commerce warehouse runs influences customer happiness, enhancing workflows for accurate delivery or identifying methods to speed up the returns management process.
Because of this, it’s crucial to monitor specific e-commerce KPIs, including order accuracy and shipment timeframes, that show how your warehouse operation affects the consumer experience.
To set up your warehouse or warehouses to satisfy client expectations, warehouse location is crucial. You could discover, for instance, that shifting your warehouse to a more central and accessible place to a more significant number of your clients will permit quicker and cheaper shipment.
Improve Workplace Safety and Happiness.
Your warehouse will run more efficiently if your crew feels engaged and protected.
The US Bureau of Labor Statistics reports that in 2019, there were 4.4 injuries for every 100 full-time employees working in transportation and warehousing. Unfortunately, the incidence of fatalities and injuries in warehouses is going up.
While efficiency is crucial, a dangerous workplace will make your team move more slowly. By looking at the safety KPIs, you can tell whether your internal procedures provide a safe atmosphere for your employees, increasing productivity.
For instance, it’s safe and simpler to manoeuvre a forklift if garbage or other items aren’t left in the middle of the floor. Additionally, setting up warehouse workstations with a one-way workflow can be effective since it promotes safety and reduces congestion.
25 Warehouse KPIs and Management Metrics To Monitor For Assessing and Enhancing Performance
You must understand how important it is to gauge your warehouse’s success as a manager. Measurement is the step that connects all of your other processes and enables you to monitor performance trends, assess how effectively you are working, identify possible issues, control risks, and do a lot more.
You may assess your company’s financial accounts, conduct performance evaluations, and utilize business metrics to analyze warehouse KPIs, among other methods. Nevertheless, one of the most often used approaches is to create warehouse KPIs (Key Performance Indicators), which assess how successfully your procedures are achieving their aims and objectives—sort of like a report card for your warehouse. Warehouse KPIs examine a particular operation or process and provide a result that illustrates how well that process performs by contrasting it with previous figures and standards.
Even though every warehouse operates differently, most warehouse management KPIs may be used in most warehouses to achieve your company objectives. However, you might not need to employ every KPI. Instead, you might narrow your selection to those that you believe are most pertinent to your present objectives. How then can you locate the warehouse KPIs that you genuinely require? The following frequently used warehouse KPIs will be covered in this post, along with their benefits to you-
The stock of goods you have on hand and kept in your warehouse is the focus of inventory KPIs. They are ideal if you want to track how your inventory is moving. Inventory accuracy, shrinkage, carrying cost of inventory, inventory turnover, and inventory to sales ratio are standard inventory KPIs.
1. Inventory Precision
Goods accuracy is the agreement between the monitored quantity of inventory and the quantity present in a warehouse. The warehouse stock amount may not always match the amount usually tracked automatically by a warehouse or inventory management system. This may result from theft, damage, errors in judgement, shortages on the provider’s part, etc. By dividing the stock monitored by the system by the stock present in the warehouse, the inventory accuracy KPI will demonstrate whether there is a discrepancy between the two figures.
Formula For Inventory Accuracy- Physically present inventory / System-tracked inventory
One type of inaccuracy in your inventory is shrinkage. This KPI will show you the value of inventory missing from your warehouse due to those circumstances. It is defined as excess inventory documented in accounting but no longer physically available owing to variables like theft, damage, or errors in computation.
Use the formula for calculating shrinkage value- (Cost of recorded inventory – Cost of physically present inventory) / Cost of recorded inventory.
3. Inventory Carrying Cost
The overall cost incurred by a company to own, store, and maintain inventory is known as the carrying cost of the stock. It shows the time your company can keep its goods in storage before it starts to lose money, and you have to find another way to deal with slow-moving inventory and dead stock. You may compute your carrying costs by dividing your overall expenses by the typical cost of your merchandise.
Formula- Overall inventory expenses / total carrying costs
4. Inventory Turnover
Inventory turnover measures how frequently your stock is sold. More robust sales are indicated by higher values, whereas lower values characterize poorer sales. Two methods may be used to determine inventory turnover: dividing the sales volume by the average inventory or dividing the cost of products sold by the average inventory.
To determine your inventory turnover ratio, use the formula-
The number of sales / the typical inventory or Product cost / Average Inventory
5. Ratio of Inventory to Sales
The inventory to sales KPI provides you with the proportion of sales to the remaining list at the end of the month. Anyone in charge of a warehouse will find this value to be very helpful because it:
You may anticipate future cash flow problems before they arise by demonstrating when increasing inventory levels and declining sales occur together.
This ratio informs you how many things you’ve sold and how many are still in your warehouse at the end of the month. In addition, this might assist you in figuring out how much stock you need to buy to maintain your sales without experiencing any backorders comfortably.
By dividing your leftover inventory at the end of the month by the sales you generated during that same month, you can establish your inventory to sales ratio.
Formula- End of Month Inventory Balance / Sales for the month
Receiving is the process through which a warehouse takes delivery of inventory, which it must subsequently process, sort, and ultimately store. The efficiency of the operations at this step is gauged using receiving KPIs such as receiving efficiency, cost of receiving per line and receiving cycle time.
6. Effective Receiving
Receiving efficiency measures how productively your staff are working in your warehouse’s receiving section. This will assist you in determining whether to introduce new training sessions or improved procedures.
Formula- Volume of merchandise received / Hours worked by personnel.
7. Receiving Charges Per Line
The overall cost for receiving a line of merchandise your suppliers have sent to your warehouse is the cost of receiving per line. This also covers the operations that occur upon receipts, such as handling and item accounting. With time, this cost should decrease due to more productive work.
The total receiving expense is divided by the whole number of items in each receiving line.
8. Time For a Receiving Cycle
Receiving cycle time is a measurement of the typical amount of time needed to handle incoming stock, which includes accounting for it, categorizing it, and storing it.
Formula- Total amount of time spent sorting received inventory / Total quantity of things received
Putaway is the process of storing a delivery of goods in your warehouse, typically in the most practical and acceptable area. You may gauge how well these procedures are working by using putaway KPIs like accuracy rate, cost per line, and cycle time.
9. Precision Rate
Your accuracy rating determines the percentage of things appropriately arranged the first time. A rating of 1 denotes the absence of any faults or blunders. This rate is determined by dividing the amount of inventory that has been properly stored by the entire amount of inventory that has been stored.
Formula- Total inventory put away / Correctly put away inventory.
10. Putaway Price For Each Line
This KPI relates to the price associated with storing a whole line of goods. This indication can assist you in cutting costs related to your overall putaway procedures. You may figure it out by dividing the total putaway expense by the number of line items.
Formula- Total line items / Total putaway costs
11. Putaway Cycle Time
The average time needed to store one item from your inventory is the putaway cycle time. Better warehouse efficiency comes from shorter putaway cycle times. Rearranging things in your warehouse and raising worker productivity can reduce this time.
Order Management & Processing KPIs-
The operations between when your company receives a client order and when your customer receives their order are collectively referred to as order management. These include receiving the order, choosing the right items, selecting the proper packaging, sending the products to the appropriate delivery address, and managing post-sales procedures like returns and reimbursements. As a result, order management KPIs evaluate how well each process performs.
12. Accurate Product Selection
To increase the overall warehouse efficiency of your order management procedures, this KPI shows you how correctly things are being chosen from your warehouse for client orders. Your picking accuracy should be as near to 1, which indicates no errors, as feasible.
The formula for picking accuracy- (Total Number of orders – returned incorrect items) / Total Number of orders
13. Total Time for The Order Cycle
Total order cycle time is the time it typically takes from when a client makes an order until it is dispatched. This comprises all intermediate steps, such as receiving the order, choosing the required products, packaging them, and preparing them for shipping. Therefore, increase your chances of keeping your consumers by shortening this period.
14. Order Lead Time
Order lead time is the typical time it takes for a client to receive their order after they have placed it. Your order cycle time plus shipment time is essentially the order lead time. Similar to total order cycle time, shorter order lead times are preferable for your company.
15. Rate of Backorders
Backorder rates relate how many backorders you’ve placed to how many orders you’ve placed overall. Therefore, if your backorder rate is significant, you should improve your forecasting, planning, and inventory tracking.
Formula- Overall backorders / Overall orders
16. Accuracy of the fulfilment Rate
Out of the total number of client orders received, this KPI determines the number of orders that have been entirely completed. This includes accurately filled orders, shipped on schedule, and containing the appropriate goods. You should review and update your order management procedure if this rate is low.
Formula- Total orders received / Orders fulfilled without problems
17. Rate of Timely Shipping
You may use this indicator to determine how effective your shipping procedures are. To keep customers happy, a high on-time shipment rate must be maintained.
Formula- Total Number of orders shipped / number of orders dispatched on time or early.
18. Order Cost
This KPI reveals the expenses associated with completing a client order from when it is placed until it reaches the consumer. By dividing the amount spent on order fulfilment by the total number of client orders you’ve received, you may calculate the cost per order.
Formula- Total cost of orders filled / Total cost of fulfilment
19. Returns Percentage
The rate of returns lets you know what proportion of consumers have returned their purchases due to things you could have prevented (such as broken goods, the wrong item being provided, or late delivery) or things you had no control over (such as fraud or problems with the product after delivery). Divide the number of products returned by the total number of items sold to obtain this rate, which you can then convert to a percentage.
Formula- (Items Sold / Items Returned)*100
Workforce and Safety KPIs-
Massive equipment is typically utilized in the operations of large warehouses. Even while equipments are helpful, there are hazards involved. To aid in their future prevention, monitoring warehouse KPIs connected to warehouse accidents is essential.
20. Annual Accidents
This KPI measures the number of significant mishaps that cost people time and money in a given year. Ideally, the number should be zero, but even if it is not, it can still help determine the scope of the issue.
21. Time Since Last Accident-
Despite the desire to avoid accidents, they occasionally occur for no apparent reason. But ideally, accidents happen seldom and after long gaps.
22. Accident Rate
Despite the physical demands of warehouse work, skilled management may lower injury rates and improve warehouse safety. Examples of what not to do include Amazon fulfilment centres, notorious for imposing strict quotas and pressuring workers to work harder. It should be no surprise that Amazon has an injury rate 80% higher than the industry standard.
23. Employee Retention
One important KPI for warehouses is turnover. Employees with more experience will be better able to handle issues as they develop and offer better fulfilling services. One of the critical reasons for providing such high-quality satisfaction is the knowledgeable team. One of the primary factors in employee retention is making warehouses enjoyable places to work.
24. Time Lost as a Result of Injuries-
Time lost due to injuries: A company’s first concern should always be employee safety. Even though it’s not common knowledge that accidents are quantified in terms of time, keeping track of time missed due to injuries sheds more light on the influence of injuries on workplace productivity, employee happiness, and total expenses.
25. Total Recordable Incident Rate-
TRIR is the ratio of work-related accidents per 100 full-time employees over a year. This warehouse management statistic is used to evaluate a company’s performance in terms of safety and to keep an eye on high-risk sectors.
How Do You Track Warehouse Key Performance Indicators?
It might be difficult to handle other aspects of your organization, such as product development, marketing, and customer support while keeping track of all these warehouse KPIs. But, again, automation and technology have a role in this.
Due to the reduction in time, effort, and mistakes brought on by manual, variable operations, warehouse automation is a crucial component of supply chain optimization. Additionally, data is automatically collected and aggregated using warehouse technology, which makes it simple to monitor performance and make adjustments as necessary.
However, automation and technology for warehouses may be expensive expenditures (on top of the high cost of leasing a warehouse or purchasing land).
Tech-enabled Without having to manage your warehouse or spend money on expensive fulfilment systems, 3PLs provide the fulfilment infrastructure, technology, knowledge, and customer service required to build a successful online business.
Warehouse Management System to Track Warehouse KPIs
You need the appropriate technology in place to monitor and enhance warehouse KPIs. Brands with their warehouses who want assistance managing inventory in real-time, lowering picking, packaging, and shipping mistakes, and growing quickly have the finest possible warehouse management system (WMS).
While retailers and brands may also use fulfilment services to enhance international shipping, save costs, and expedite delivery.
7 Best Practices While Monitoring Warehouse Management KPIs and Metrics
1- Concentrate On a Small Number of KPIs
Choosing those that are vital to you or your company is more significant than selecting a list that could be useful to someone else. You may base your KPIs, for instance, on a certain section of your production or warehousing. Instead, monitor more high-level KPIs to assist you in identifying any flaws or areas of your operations that might use some improvement. Concentrating on a small number of critical warehouse KPIs will give you more value and be better able to take action to increase warehouse efficiency.
2- Set Goals for Each KPI and Be Specific About the Expected Result
Find out why you are measuring them and what your goals are. KPIs are tactical. You should concentrate on what is necessary and quantifiable. For instance, are you carrying out this exercise to save costs, make the environment safer, or shorten the lead time for production? Getting in touch with coworkers or employees might assist you in choosing what to focus on. Do you need to confirm that your intuition is correct because you are worried about something? Or perhaps you want to calculate the ROI of new equipment you just bought? Whatever the motivation, keep track of what is pertinent to you.
3. Specify What Success Entails
Define success for each KPI by setting your own goals or benchmarking your warehouse against industry best practices. Ask your peers or other attendees at an industry event what they measure in their warehouse the next time you are chatting with them. Be clear when describing your expected results and understand that a warehouse KPIs is an indicator rather than a goal.
4- List Your Warehouse KPIs and Choose Your Measurement Method
Prepare your KPI dashboard for your warehouse and decide how you will monitor the intended result. For each, a single, brief statement will do. Due to the range of tools being utilized, the data extraction process may differ from company to firm, and what you have available will always impact how you measure. For instance, if you use a warehouse management system (WMS), specific data can already be available or built into your programme. You will have more control over the precise metrics you want to measure if you employ a manual system, but data entry will take more time on the warehouse floor.
Automated technologies ought to make tracking your KPIs and gathering data simpler. For instance, automating inventory management will allow you to have a more accurate supply on hand.
5. Set a Time Limit
You’ll have a sharper perspective of your business if your objectives and warehouse KPIs are time-bound and have deadlines. Tracking your progress along the way, though, can help you determine how successful you were in creating the KPIs in the first place. So keep a close eye on your warehouse KPIs dashboard data in relation to your goals and make any required adjustments.
6. Choose How You Will Monitor Your KPIs
You might require assistance or struggle to get the data you need to create your indicators. For appropriate tracking in a warehouse operation, data acquisition is crucial. Utilizing technology in a warehouse will provide the essential information you require. A warehouse management system (WMS) delivers accurate information. It gives limitless reporting options for data collection and automation, including barcodes and scanning, voice technologies, mobile devices and computers, and radio frequency identification (RFID). An ERP is also regarded as serving as a hub for data.
7. Reporting and Analysis
Create stunning visualizations with spreadsheets. Once your measurements are complete, a visualization tool, like the one offered in this racking assets management software, may help you understand and convey the information you’ve gathered to your team or senior management. Data visualization may alter how we view the data and how quickly and efficiently we draw conclusions.
Which of the 25 warehouses KPIs listed above are the most crucial? That relies entirely on where you think your warehouse may perform better and what you must demonstrate to management. Tracking pick accuracy and the number of things picked per hour can be more crucial if you need to support acquiring a new warehouse inventory management system. Get a grip on your rate of return and overall order cycle time if you are just starting. Whatever depends.
Which metrics are the simplest to measure also matter? For example, measuring the backorder rate and inventory turnover will be simple if you have warehouse management software that keeps track of inventory levels automatically. Likewise, integrating your sales and ordering software and calculating your sales-to-inventory ratio can be as simple. Nevertheless, obtaining these warehouse KPIs will be more difficult if your programme doesn’t have these measures or if you don’t utilize any software.
Utilize WareIQ to Outsource Your Warehouse and Fulfillment Operations
Online merchants have a lot, from product development to attracting new clients. Fast-growing direct-to-consumer (DTC) brands do this by using WareIQ fulfilment services.
You may maintain operational control by outsourcing fulfilment services to WareIQ, so you don’t have to run your warehouse. In addition, WareIQ provides complete insight into your logistics operations, from receiving inventory to orders leaving the warehouse.
The best-in-class technology is used throughout all of WareIQ’s distribution networks, making it simple to monitor warehouse KPIs, real-time inventory levels, and fulfilment and shipping activities all in one location.
Our data and analytics reports provide all the information you want to track warehouse KPIs more effectively and other supply chain analytics.
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