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Warehouse Key Performance Indicators

 |  added by Apprise Consulting

There is an old adage which says if you don’t measure you can’t manage. This is true up to a point. The fact is that these measures have to be SMARTER – Specific, Measurable, Achievable, Relevant, Time related, Evaluated and Reviewed regularly. (Yemm 2013).

There is no point in measuring areas which you can’t do anything about or where the cost of measuring is going to be greater than the likely savings to be achieved.

The measures also have to be in line with the company’s strategy going forward – hence Relevant.

Although Deming (2000) was initially credited with the quote about measuring and managing he actually states that “managing by results is like looking in the rear-view mirror”. He states that many important things that must be managed cannot be measured. However we do need to know where we are before we can improve on performance to get where we want to be. He also stated that be improving quality you automatically improve productivity.

Table 1 below shows some examples of key performance indicators that can be applied in a warehouse. It is not suggested that all of these measures are introduced. Choose the ones which are important to you as a company and those of which are important to your customers.

Table 1 – Examples of Warehouse related key performance indicators

Key performance indicator Description
Cost indicators
Average cost per unit shipped (£) Total cost of warehouse operations / total units shipped
Warehouse costs as a percentage of cost of goods sold Total cost of warehouse operations / Cost of Goods sold (as per the P & L statement
Warehouse costs as a percentage of sales Total cost of warehouse operations / Total sales (as per P & L Statement)
Cost per order shipped Total cost of warehouse operation / Total orders shipped from warehouse
Actual cost per activity Actual cost by activity / Expected (budget) cost
Productivity indicators
Orders picked per hour Orders picked and packed / Total warehouse labour hours
Product Lines picked per hour Lines picked and packed / Total warehouse labour hours
Items picked per hour items picked and packed / Total warehouse labour hours
Pallets picked per hour Pallets picked per hour / Total warehouse hours worked
Cases picked per hour Cases picked per hour / Total warehouse hours worked
Service indicators
On time despatch Total orders shipped on time / total orders shipped
Order fill rate Orders filled completely / Total orders shipped
On time in full first time Orders filled completely first time and delivered on time / total orders
Damage free shipments Damage free items shipped / Total items shipped
Paperwork accuracy Orders shipped with correct paperwork / Total orders shipped
Order accuracy Orders shipped without errors / total orders shipped
Line accuracy Lines shipped without errors / Total lines shipped
Order cycle time Actual ship date – customer order date
Internal order cycle time Actual order ready time – customer order receipt time (hours)
Perfect order completion Orders shipped on time, in full, damage free, with correct paperwork / total orders shipped
Dock to stock time Time taken from vehicle arrival to input onto sales system
Utilisation Percentage
Operator hours 100 x Labour hour used / Labour hours available
MHE utilisation 100 x MHE hours used / MHE hours available
Picker utilisation 100 x Actual case pick rate achieved / expected cases to be picked
Pallet locations 100 x Pallet locations occupied / Pallet locations available
Environment
Total CO2 Total CO2 emissions produced by the warehouse over a period
Safety indicators
Accident record Time lost through incidents as a % of total working days
Accident record Number of days since last reportable incident
Other measures
Workforce turnover Number of operatives leaving / total number of operatives
Inventory days on hand Average inventory value by item / Average daily item usage
Inventory count accuracy Items in correct locations in correct quantity / total number of locations
Inventory days of supply Current total inventory value / (Total annual cost of goods sold / 365)
Inventory shrinkage Items lost and damaged / total items in stock (in quantity or value)


References

Deming W E, (2000) The New Economics 2nd Edition MIT Press Cambridge Massachusetts

Yemm, Graham (2013). Essential Guide to Leading Your Team : How to Set Goals, Measure Performance and Reward Talent. Pearson Education. pp. 37–39. Retrieved 04/11/2014

This is an extract from The Logistics and Supply Chain Toolkit (2014) by Gwynne Richards and Susan Grinsted, Kogan Page, London.


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