Warehouse KPIs: Who’s In Your “Fav Five?”

As a distribution professional, you have several key performance indicators you are always aware of. The operations and fulfillment field includes many KPIs–quantifiable measurements that reflect the success factors of an organization.

But which warehouse KPIs are in your “Fav Five?” Here are mine, in descending order.

5. Returns processed
By this I mean returns processed as a result of incorrect product being shipped, or that the warehouse made a mistake. If you do not accurately track this metric, how do you know the effectiveness of your warehouse staff? You don’t!

4. Inventory movement
When was the last time you took a long, hard look at where your product is located within your warehouse? Most organizations don’t do this regularly—and they should. Did you know that 20% of your product is picked for 80% of your orders? And 55% of your pickers’ and receivers’ time is spent traveling to and from your locations? That’s why this metric is on my list.

3. Employee turnover
From recent studies, 40% of employees polled said they were actively looking to change jobs. The average employee will be with your organization for four years or less. A warehouse employee will leave your company for less than 50 cents more an hour–less than $4 more a day. How do you reduce turnover? That’s a whole other article, but keep in mind that “employees don’t leave bad companies, they leave bad managers.”

2. Inventory accuracy
If your pickers and receivers spend 55% of their time traveling to and from your locations, and the product is wrong when they get there, what does that do to the productivity in your warehouse? Several things—all of them bad.

For one, it prevents receiving from being received and put away the day it arrives. It also means that returns may not be processed for weeks, and that orders will not be shipped 100% on-time. It can even prevent your warehouse from being cleaned.

When it comes to inventory accuracy, your KPI cannot be based on the results of your annual physical. The value of your inventory can be as high as 20% of your annual sales revenue. If this metric isn’t in your Fav-Five, what you are measuring is irrelevant.

1. Profitability
There are a lot of things organizations measure, but let’s face it, the most important metric we all track is profitability. Without profit there will be no cash to grow.

We all know we measure what we value. And that is why we place such an emphasis on sales metrics.

Now that you have my distribution center Fav-Five, it’s time to think about your own. I’ll leave you with one more thought:

In a rising tide, no one notices the rocks on the bottom of the river. But when the water recedes and the rocks begin tearing up the bottom of the boat, everyone wants to know how those rocks got there. By then, it’s too late.

The water is definitely receding—are there rocks under your boat?

Rene’ Jones is the founder of Total Logistics Solutions (www.logisticsociety.com), a warehouse efficiency company.

Related Articles:
Reduce Shipping Errors with a Quality Assurance Program
Twelve Trends in Fulfillment
Common Errors in Measuring System Performance

Partner Content

Hincapie Sportswear Finds Omnichannel Success in the Cloud - Netsuite
For more and more companies, a cloud-based unified data solution is the way to make this happen. Custom cycling apparel maker Hincapie Sportswear has leveraged this capability to gain greater visibility into revenue streams, turning opportunities into sales more quickly while gaining overall operating efficiency. Download this ecommerce special report from Multichannel Merchant to more.
The Gift of Wow: Preparing your store for the holiday season - Netsuite
Being prepared for the holiday rush used to mean stocking shelves and making sure your associates were ready for the long hours. But the digital revolution has changed everything, most importantly, customer expectations. Retailers with a physical store presence should be asking themselves—what am I doing to wow the customer?
3 Critical Components to Achieving the Perfect Order - NetSuite
Explore the 3 critical components to delivering the perfect order.
Streamlining Unified Commerce Complexity - NetSuite
Explore how consolidating multiple systems through a cloud-based commerce platform provides a seamless experience for both you, and your customer.