Knowing the right warehouse metrics to track to improve profitability and operations is key to the success of your organization. Unfortunately, key performance indicators (KPIs) and metrics can be confusing. As explained by Legacy Supply Chain Services, successful metric tracking benchmarking procedures, including identifying areas that need to be assessed, monitored, researched, compared and acted upon, are essential to setting up a metric system. In addition, your organization needs to know what factors impact metrics and which metrics can have the greatest impact.

A Few Things First About KPIs and Warehouse Metrics

Before thinking about which metrics your organization needs to track, it is important to understand and distinguish between internal and external KPIs and metrics. These values vary depending on the type of information used in their creation, such as internal, supplier or customer KPIs. A quick overview of these KPIs are shown in the following graphic, created by Newcastle Systems.

While these values can help your warehouse improve overall profitability, it is important to understand which metrics have the greatest actionability.

Detailed Warehouse Metrics to Start Tracking Today

Detailed, actionable metrics are those that allow your organization immediately alter operations to achieve better profitability. The industrial averages for these metrics, reports the Warehousing Education and Research Council, include the following:

• Carrying Cost of Inventory. (Industrial Average: 20%)
• Distribution Cost per Unit Shipped. (Industry Average: $0.86)
• Distribution Costs as a Percent of Sales. (Industry Average: 4%)
• On-Time Shipments. (Industry Average: Between 98.3 and 99.5%)
• Lost Sales, or the Percent of SKUs Stocked Out. (Industry Average: 2 and 3.2%)
• Dock-to-Stock Cycle Time in Hours. (Industry Average: Between 2 and 3.2%)
• Order Fill Rate. (Industry Average: Varies). This metric should always aim for 100%. Any deviation is lost opportunities.
• Pallets Picked and Shipped Per Hour. (Industry Average: Varies 12.9 and 33.2%)
• Peak Warehousing Capacity Used. (Industry Average: 97%)
• Material Handling Damage. (Industry Average: Between 1 and 2%)
• Percent of On-Time Delivery From Suppliers. (Industry Average: Between 94.6 and 96.5%)
• Lines Picked and Shipped Per Hour for Inbound and Outbound Operations. (Industry Average: Between 16 and 25)
• Backorders as a Percent of Total Orders, Total Lines and Total Dollars or Units. (Industry Average: Between 1.2 and 4%) (Industry Average: Between 1 and 2%) & (Industry Average: Between 1 and 2.5%)
• Percentage Supplier Orders Received with Correct Documentation. (Industry Average: Between 95 and 98%)
• Order Picking Accuracy. (Industry Average: 91.1 and 98%)
• Total Order Cycle Time. (Industry Average: 24 and 28.9 Hours)

What Else?

This list is not all-inclusive. In other words, your organization can add other metrics as necessary to improve operations. For example, other warehouse metrics include ship to promise, customer retention and new customer statistics. Ultimately, metrics should be easily understood and have an actionable characteristic, like increasing the number of accurate orders picked through better picker training procedures. To learn more about other ways to improve profitability in your warehouse, speak with a Veridian representative by filling out this contact form today.