Learn how to track the warehousing process from receiving to shipping. Find a template of a strategy map with trending improvement initiatives and performance metrics.
In this article, we analyze warehouse effectiveness challenge on two levels:
- Process level with the focus on efficiency and effectiveness metrics
- Strategy level that helps to align warehouse activities with the company’s overall goals
Warehouse Process KPIs
Warehouse activity is associated with certain established process steps [1]. These steps are an excellent base for the process-oriented performance metrics.
Possible measurement points in this case are:
- Financial metrics
- Effectiveness (productivity) metrics
- Utilization metrics for equipment and storage
- Quality metrics
- Cycle time metrics
Respectively on each step, these evaluation parameters are adjusted to the process step.
Receiving
- Financial metric: Cost of Receiving (Total Cost of Receiving / Total Line Items).
- Effectiveness metric: Receiving Labor Productivity (Volume of goods received per warehouse employee per hour).
- Effectiveness metric: Receiving Efficiency (Inventory received per hour).
- Utilization metric: Dock Utilization.
- Quality metric: Receiving Accuracy.
- Cycle time metric: Receiving Cycle Time (Time for Delivery / Total Number of Deliveries).
Put-away
- Financial: Putaway Cost Per Line (Total Cost of Put Away / Total Line Items).
- Effectiveness: Putaway Productivity (Stock per warehouse employee per hour).
- Utilization: Putaway Space Utilization (Equipment and space utilization).
- Quality: Putaway Accuracy (Inventory Put Away Correctly / Total Put Away).
- Cycle time: Putaway Cycle Time.
Storage
- Financial: Storage Costs (as index of Service costs, Damage costs, Obsolescence Costs).
- Financial: Cost of Inventory
- Financial: Cost of Carrying (Cents per dollar spent on inventory overhead).
- Effectiveness: Storage Productivity. Volume of inventory per m2
- Utilization: Space Utilization (Space occupied / total space available).
- Quality: Inventory Shrinkage ( (Recorded Inventory Cost – Physical Inventory Cost) / Recorded Inventory Cost).
- Quality: Inventory Accuracy ((Inventory According to Records / Physical Inventory) * 100).
- Cycle time: Inventory Turnover.
Preparation (Pick & Pack)
- Financial: Pick and Pack Cost.
- Financial: Cost of returns.
- Effectiveness: Picking Productivity (Order lines per hour).
- Utilization: Use of Packaging Materials.
- Utilization: Equipment Dock Utilization.
- Quality: Picking Accuracy (Total orders – Returns due Wrong Item) / (Total orders).
- Quality. Returns rate (Units returned / Units sold)
- Cycle time: Pick and Pack Cycle Time (Travel time for pickers).
Shipping
- Financial: Shipping Cost Per Line
- Effectiveness: Back Order Rate (Orders unfulfilled immediately / Total orders).
- Utilization: Dock Utilization
- Quality: Shipping Accuracy (% of orders delivered without errors).
- Cycle time: Average Time to Customer (Lead Time, Average time to deliver once the order was placed).
Warehouse Scorecard online - sign-up with a free account for immediate access to 23 scorecard templates. Benchmark Data
The scorecard template includes some benchmarking data obtained from:
- “2015 Warehousing Education and Research Council (WERC) DC Measures Report” [2]
- fcbco.com
- Warehousing 2020
Use this data as a starting point for your research. The final numbers depend a lot on your market conditions.
When finding benchmarks for your indicators, make sure that you follow the same approach to measurement and the compared organization.
A starting point for any benchmark is your own historical data.
Quality Metrics
Quality metrics are implemented on each step of the warehousing process. A general formula is focused on finding the number of correctly served items compared to the total number of items.
An interesting question is how the warehouse manager could estimate the number of correctly served items. The two possible control points are:
- Customer complaints (for example, as measured by returns)
- Random checks of the items
In the Quality KPIs article, we have discussed various approaches that organizations can use to measure and improve quality.
Warehouse Scorecard online - sign-up with a free account for immediate access to 23 scorecard templates. Safety Metrics
The classical process-oriented approach doesn´t include safety metrics explicitly, but it is obvious that safety should be a main priority of warehouse managers.
For this reason, on the strategy map below, we have a separate “Safety” theme.
We can track safety efforts with these leading metrics:
- Safety standards awareness
- Near-miss reporting awareness
- Safety equipment used
The results can be validated in this way:
- Time lost due to injury
- Accidents per year
- Near-miss issues reported
Warehouse Scorecard online - sign-up with a free account for immediate access to 23 scorecard templates. The performance function for the “Safety equipment used” should be binary. This means that the metrics can be in the green zone (have 100% performance) only if 100% of the used equipment is adjusted to the current safety standards.
The Safety standards awareness metric should have a specific performance function as well. It allows a certain margin between 100% awareness due to the normal fluctuations in staff and standards change, but the scale should be much more aggressive compared to a standard line growth function.
Strategy Scorecard
I see several reasons why the warehouse should have a properly designed strategy scorecard.
- It helps to describe a warehouse strategy, have a big picture view and know growth points.
- It allows to align supply chain strategy with overall company strategy.
- It focuses performance measurement efforts beyond simple process metrics.
Below, I’m following the logic of the Balanced Scorecard framework to create a strategy map template for the warehouse. If you want to learn more about the framework, I recommend this article to you.
Warehouse Scorecard online - sign-up with a free account for immediate access to 23 scorecard templates. Finance Perspective
The financial goals of the warehouse are related to optimizing running costs.
Business goal: Optimize Costs
Lagging metrics:
- Shipping Cost Per Line
- Errors cost per type of error
Customer Perspective
The stakeholders of the warehouse can include suppliers, clients, warehouse team, logistic personnel. Respectively, the goals of the customer perspective can be formulated around the needs of these stakeholders.
Warehouse Scorecard online - sign-up with a free account for immediate access to 23 scorecard templates. There are two goals to map in the Customer perspective:
- Improve Efficiency and Productivity
- Improve Safety
Business goal: Improve Efficiency and Productivity
Metrics:
- Receiving Efficiency
- Inventory Turnover
- Receiving Labor Productivity
Possible initiatives:
- Omni-channel fulfillment centers
