Most important warehousing KPIs you should be measuring

by Michael Kotendzhi | Warehousing
A photo of an organized warehouse, symbolizing the most important KPIs you should be measuring.

Anyone who works in a warehouse knows that data measurement is crucial for improving business efficiency. KPIs or key performance indicators are those critical metrics that tell managers whether the business performance is declining or improving. KPIs are often used as benchmarks for running a successful company, not just for the CEO but also for all performing teams. They define and track your goals and business requirements. With that in mind, let's take a look at the most important warehousing KPIs you should be measuring.

Different types of KPIs to follow

An effective and organized storage facility can only make a profit if it meets its goals. With the help of KPIs, it is possible to track the efficiency of processes that lead to fulfilling those goals.

We can split KPIs into a couple of categories:

  • receiving KPIs;
  • put-away KPIs;
  • storage KPIs;
  • fulfillment KPIs;
  • pick and pack KPIs;
  • returns KPIs.

Receiving efficiency KPI

Running a successful warehouse starts from receiving a shipment. Receiving efficiency metric observes the throughput of received material compared to the amount of work per employee. If we were to put this into a formula, it would look like this:

Receiving efficiency = Volume of inventory received / Total number of staff hours

Put-away efficiency KPI

When you divide the Volume of stock put away by the Number of worker hours, you get put-away efficiency. It gives you a precise measure of the stock moved compared to the number of total working hours. It is also known as put-away productivity.

Put-away cycle time KPI

You get your put-away cycle time metric when you measure the total time required to do all put-aways. It measures process efficiency and helps you set a benchmark for future improvement.

Inventory accuracy KPI

Storage space is used in warehousing, the moving industry, and many other business areas. Per Four Winds KSA, one of the more important storage KPIs to track is inventory accuracy. You should compare the inventory management system count with the physical inventory count and see if they match. That is how you can catch errors and get actual inventory in your storage.

Inventory turnover KPI

Another crucial KPI that tells you how quickly shipments are moving through the warehouse is inventory turnover KPI. You will get it when you divide the number of sales by the average inventory level. This is crucial to know because the company's profit depends on this, and we all know it varies over the year. For example, holiday seasons always bring changes in working processes. This KPI can help you to track and optimize your warehouse operations during that time.

Cost per order KPI

Completing orders costs money. It is imperative to calculate the total costs required to complete orders in a warehouse because that also affects the company's profit. You should divide the Total fulfillment cost by the Total number of orders, which will get you your metric.

Order cycle time KPI

Fulfilling orders also takes time. Use the order cycle time KPI to measure how much time it takes from the order entry to shipment delivery. This is a crucial KPI because it aids the automation of the warehouse processes. Use it to boost the digital transformation of the business operations.

Order accuracy rate KPI

It is crucial to know how efficient your business is. There are often mistakes made during deliveries, and the order accuracy rate KPI should give you a percentage of all the accurate orders. Divide the Total orders delivered correctly by the total number of orders and multiply the result by 100.

Picking accuracy KPI

Picking is the most expensive warehouse activity that requires a considerable amount of employee effort. You should be able to reduce the costs and improve the efficiency with the picking accuracy KPI. You will get the metric by dividing Total orders picked error-free by the Total order number and multiplying the result by 100.

Return rate KPI

The last one on the list is the return rate KPI. Returns are common in the warehousing business, and this KPI will help return rate reduction. You need to divide the total number of returned items by the total items shipped.

The list of the most important warehousing KPIs you should be measuring - delivered!

We hope that this list of the most important warehousing KPIs you should be measuring will help you to improve your business. Best of luck with running a more organized and efficient warehouse!

For over 30 years, 18 Wheels Logistics has strived to be the most customer-centric trucking, warehousing, and logistics company around. Based in Vancouver, British Columbia, Canada, 18 Wheels relies on experience and integrity to make customers happy and remain on the cutting edge of shipping and logistics management.

If you have any questions about this article or you would like to talk to us about your shipping needs, please call us at (604) 439-8938.

Michael Kotendzhi is President of Operations & Transportation and a partner at 18 Wheels. Michael has over 15 years of experience and is equipped with a degree in Logistics from the University of British Columbia Sauder School of Business. As well as a background in logistics from XPO Logistics (formally Kelron Logistics), North America's largest contract warehousing provider.

Michael's experience includes supply chain management, reverse logistics, & domestic transportation. He has developed 18 Wheels' trucking solutions, effectively utilizing the sister company's vehicle fleet and building a transportation supply-chain network across North America.