Today’s warehouse managers often accrue massive amounts of performance data, but sometimes find they can apply little of it toward making productivity gains or customer service improvements. Instead of becoming overwhelmed with data, managers should identify and focus on the most useful warehouse metrics to gather, report, and apply.
We continue our series on the most important metrics as it relates to manufacturing metrics, logistics metrics, and more by covering some of the top warehouse metrics to track. Make sure you check out the other two posts on metrics that matter so you too can stay ahead of your supply chain and make a difference on affecting your bottom line and business performance.
Tools or modules often found in warehouse management systems (WMS) can automatically capture key data over a specified time period (such as one month) and display and report it as graphs and trends supported by the underlying data. This capability should make it easy to quickly identify problems.
When implementing new measurement tools and best practices, consider starting with what your customers care about most—the Perfect Order. Every warehouse strives for Perfect Orders, in which customers consistently receive the right product, on time, undamaged, and with the correct documentation. With virtually error-free shipments, customer satisfaction increases and customer support costs decrease. This is the backbone of the reasons why tracking metrics, and in this case, warehouse metrics, is so vital….to have more control and affect change.
The Perfect Order is a calculation of the error-free rate of each stage of a purchase order. When customers have a problem with an order received, they notify their distributor. The distributor then tracks the error in the WMS with “reason codes” assigned to categories such as warehouse pick accuracy, on-time delivery, and invoice accuracy.
This data is then calculated to determine the Perfect Order metric. If, for example, five warehouse pick accuracy errors are flagged on 10,000 lines, total warehouse pick accuracy rate is 99.95 percent. If on-time delivery rate is 99.2 percent, invoice accuracy rate is 96 percent, shipped without damage rate is 99 percent, and order entry accuracy rate is 99.2 percent, then the total Perfect Order metric is 94.04 percent.
Additional recommended warehouse metrics to consider when evaluating a warehouse’s order performance include the following:
Once these order metrics are well in place, consider key warehouse metrics for tracking and managing inventory. With the right inventory tools, distributors and wholesalers know at all times exactly what product is in the warehouse, where it’s located, and when it needs to be replenished. Greater inventory accuracy and control results in less overstock/dead stock, higher turnover, and better data for financial planning.
Key inventory warehouse metrics include:
Once enough warehouse metrics and transaction data points have been accrued, it is easy to establish some realistic productivity standards. Consider benchmarking the warehouse cost structure and productivity per person against other distributors. Or, benchmark against industry survey results such as the annual research survey conducted by Georgia Southern University and other major reports such as from various consultants.
Measuring progress against the warehouse’s own targets is more useful, however, because performance depends on a variety of unique factors such as processes, specific customer expectations, and automated materials handling infrastructure.
Over time, consider leveraging these key warehouse metrics by applying new variables. For example, a warehouse employee incentive might spark a dramatic improvement in Perfect Order numbers. Chart the impact. And continue to seek only those key data points that truly demonstrate the warehouse’s contribution to the company.
What warehouse metrics are you tracking? Let us know in the comments section below.
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