Is Your Warehouse Operating Efficiently?
The KPIs You Should Be Monitoring
One of our most-requested professional services is warehouse optimization.
When a warehouse isn’t operating efficiently, there can be several underlying causes. When our team begins carrying out a warehouse optimization project, one of the first things we do is analyze some key performance indicators.
Key Takeaways:
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Warehouse KPIs we recommend tracking include: order accuracy, average and peak warehouse capacity, inventory count accuracy, and inventory turn.
- Tools like an inventory management system can help you get the data you need to measure and improve upon these KPIs.
- Other solutions to optimize a warehouse based on KPIs include motion process mapping, solution mapping, 3D modeling, and SOP analysis and creation.
This blog is part of our series on KPIs, which also includes:
Many growing operations find that day-to-day operations and warehouse management may hold up analysis and check-ins. “What we see is that often when an operation is growing fast, and launching new units, success is keeping them busy,” says Routeique VP Partnerships Kaitlin Mercier. In this case, monitoring KPIs might take some extra work and setup.
These KPIs give you a benchmark for how your warehouse is performing and can be the first step in spotting and preventing underlying barriers to success.
Note: Measuring Specific Warehouse KPIs
In this blog post, we won’t be posting exact benchmarks to strive towards. The reason for this is that each business is different. For example, while one organization might find it worthwhile to pull out all stops to achieve a 100% perfect order rate, another organization might be content with a benchmark in the mid-to-high 90s and have a robust customer service policy.
Warehouse KPIs to Monitor
We suggest starting with the following four KPIs. While it’s possible to calculate these KPIs manually, a warehouse and inventory management system makes it easier to monitor them accurately.
1. Order Accuracy
Is order accuracy low compared to industry benchmarks? Is it declining?
Potential Causes of Low Order Accuracy
If an organization consistently has difficulty fulfilling customer orders correctly, there are a few possible causes. If your orders are inaccurate due to a lack of product on hand, this could be an inventory issue resulting from a lack of insight into sales data. On the fulfillment side, order accuracy can be hampered by a team struggling to pick, pack, and select the right product. This could be a warehouse configuration issue.
Tips for Raising Order Accuracy
You can tackle order accuracy problems on multiple levels.
From the outset, you want to make sure that you have the right products on hand when needed, which means having visibility into inventory and being able to order the correct products at the right time.
When it comes to order entry, an online order management system can ensure accuracy at the moment of order capture.
Finally, if the issue arises at the moment of picking and packing, reorganizing your warehouse layout can be a possible solution.
2. Average and Peak Warehouse Capacity
Is there a difference in your warehouse’s capacity over the year? Is your warehouse handling these fluctuations well, or does your team find themselves struggling during “busy seasons”?
If your warehouse has extensive fluctuations in capacity, you may need to optimize its operation or layout to provide the best possible fulfillment during peak seasons.
Potential Causes of Capacity Issues
Capacity fluctuations can be a normal part of a business that sees seasonal variations in sales, but can also be a sign of demand planning.
Tips for Resolving Capacity Issues
If peak season leads to capacity issues, an operation in this situation may also need to optimize their current site, opt for temporary storage, or acquire a new location. If capacity issues are being caused by difficulties in demand planning, this is an area that can be addressed by tools that provide the data you need to plan effectively.
3. Inventory Count Accuracy
Inventory accuracy is vital because it provides an accurate lens into your stock and inventory levels. This is crucial in ensuring you’re ordering more of the right product, having the items on hand needed to fill customers’ orders, and more.
Potential Causes of Low Inventory Count Accuracy
Low inventory count accuracy can signify process and layout issues. For example, inconsistent placement of products through the warehouse or deep storage configurations prevent warehouse personnel from counting products. Manual or paper-based count processes can also result in human error and limit visibility.
Tips For Boosting Inventory Count Accuracy
There are numerous ways to boost inventory count accuracy. One can ensure that products are placed in the correct, consistent location within a warehouse. An Inventory Management System can enable your team to store and locate items consistently and helps to cut down on manual errors.
Additionally, many tech-forward companies of all sizes are beginning to use drones in the warehouse. They can save your team time on inventory management and make carrying out counts in difficult-to-reach locations easier.
4. Inventory Turn
On the one hand, supply chain disruptions have caused many businesses to feel the need to stock up on inventory to combat shortages. On the other, overly low inventory turn can raise your costs since these items cost your business up front and take up valuable space in your warehouse.
Potential Causes of Low Inventory Turn
Low turnover can be a sign of over-ordering certain items.
Tips for Remedying Low Inventory Turn
Problems associated with low inventory turn can usually be addressed by more accurate demand forecasting, negotiating smaller minimum orders with suppliers, or pruning slow-moving SKUs from the product portfolio. In some situations, it can also be possible for the warehouse team to free up additional space or coordinate with other teams to sell items faster.
Optimizing Your Warehouse
Once your team has an idea of where you are and where you want to be, you can use these KPIs to target your improvements.
Our team tailors our warehouse optimization consulting services to each of our clients.
We use a variety of solutions:
- motion process mapping
- 3D modeling
- SOP analysis and creation
…and more to help create the optimal solution for your warehouse.
To learn more, you can browse our other blogs on this topic, or get in touch with our team through the contact form above!
