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KPIs Your Warehouse Should Track

One of the most valuable resources that businesses have is data. Data if analyzed correctly can provide valuable feedback and insights to companies about the areas where they are succeeding, where they may need improvement, and be a major driver for change. This is equally true of warehouse operations and in the management of inventory.

Of course, to put warehouse data to good use we need to know what we’re trying to focus in on. That’s where key point indicators come in (KPI for short). By understanding what you want to track you can then use the right data points to draw the insights and conclusions you’re looking for. In this article we’ll discuss some of the KPIs your warehouse should be tracking and how it can benefit your warehouse and inventory management.

1. Inventory Accuracy

One of the biggest challenges that warehouses face is with reliable and accurate inventory information. With incorrect inventory information you cannot run your warehouse reliably and it can have impacts on your entire supply chain. So, tracking your inventory accuracy is a critical KPI. One of the reasons inventory data becomes unreliable is due to the tools used. Many businesses still use spreadsheets to do so which can be fraught with errors. To track inventory accurately look at technology like a WMS with reporting functionality to do so. As well, introduce barcode tracking both for inventory and for warehouse locations. These types of technology solutions will help to accurately track inventory from the moment it is received by your warehouse to the moment it is shipped out. Furthermore, the WMS will allow you to run cycle counts and reports to verify that what you have in storage matches your data, indicating how you’re doing in this area, and increasing the reliability of your inventory accuracy.

2. Receiving Efficiency

The receiving process is the first stage at which your warehouse comes into physical contact with your inventory. It’s important then that the efficiency of this process is well tracked and managed. To get a sense of how efficient your receiving is, make sure to track time stamps for when trucks arrive, when the initial receiving is finished (unloading), and the final putaway to a storage location. You can then do a comparison of these figures and see where adjustments can be made. Is there a significant time lapse of when inventory is unloaded to when it’s putaway? This could be due to several reasons: peak periods, type of inventory, inefficiency of the putaway process, resources on hand, warehouse receiving layout, and so forth. Whatever the case may be, the tracking of this KPI will guide you to the root cause which will help you take the correct actions.

3. Order Accuracy

Getting the right products to your customers is what your warehouse is all about. Understanding how you’re warehouse operations are doing in this area is important as it will help improve customer satisfaction which will reinforce your service and brand trust. Order accuracy involves all parts of the fulfilment process right up until the time of delivery. This includes: your order fill rate which tracks the percentage of your orders that you are filling, order fulfilment times which tracks from the time you received an order to the time it is dispatched from the warehouse, picking accuracy which indicates how accurately your staff are picking items for orders, and on-time in full rate (OTIF) which tracks your delivery goals and if there are arriving on time based on pre-determined timelines. Any one of these areas can have an impact on order accuracy, so it’s important to track order accuracy as a whole and in parts to be able to know if there are any deficiencies and how they can be improved.

4. Replenishment

Businesses and warehouses that have a high volume of orders for many products that they sell or manage, especially those that do B2C and where most orders are from e-commerce, need to track replenishment as a KPI. Warehouse pickers can’t be expected to go to palettes, open boxes, and start picking from them to fulfil orders. It’s highly inefficient and disorganized. Instead, warehouses hold product in reserve (usually in larger formats like palettes) and then stock locations reserved for picking as inventory from these locations are depleted. This is known as the replenishment process and is critical so that no downtime occurs with your order fulfilment process. Metrics associated to your replenishment KPI would be tracking the time it takes to replenish pick locations, organizing replenishment during slower periods so as not to interfere with picking, and how often you’re replenishing certain products. By tracking this KPI warehouses can optimize replenishment activities, ensure order fulfilment and delivery times, as well as avoid inventory shortages or overstock, and rotate product in an organized fashion.

5. Inventory Associated Costs

Understanding the actual cost of your inventory is especially important. Known wholesale, or production costs of a product is quite easily definable, “I paid this much for this product.” Yet there are many more costs that are associated to inventory that can drive up its actual cost. Picking and packing times as well as the materials used are just one such factor. The more time it takes to pick and pack adds labor costs to each order, as well as inefficient packing materials or methods. Another is storage time. The longer a product sits on a shelf the more expensive to the business it becomes. Ensuring that items move out of your warehouse in a timely fashion thus becomes important. Furthermore, the cost of one product one day may not be the same in the future. Thus, it’s important to track purchase prices and cost average your inventory or time. Tracking inventory associated costs will help you to better understand your true costs, as well as the profitability of your inventory, and if need be, to make adjustments so savings can be realized.

As we’ve seen keeping track of KPIs for your warehouse and inventory is an important part of improving the way you manage your warehouse. By putting your data to good use and by using the right technology and methods you can gain insights that will help you to find better ways of working and help your business to succeed.

If you’re looking to improve your warehouse and inventory management, click the link below to get in contact with us. We’d be happy to speak with you.


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