Essential Metrics and KPIs for Warehouse Operations

essential metrics and kpis of warehouse operations
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Warehouse management is like breathing. Air passes through the different arteries of the warehouse to keep the supply chain alive. To keep it moving and running, air must be properly inhaled and exhaled at the right moments. The flow of air — the movement of people, resources, business processes, and workflows — needs to be monitored to prevent pressure from building up.

Tracking, measuring, and analyzing metrics and key performance indicators (KPIs) are crucial to improving warehouse operations. However, not all metrics and KPIs matter. Every business has its own circumstances and faces unique challenges. Setting relevant and meaningful KPIs mean having a clear line of sight to their purpose in operations, value to the business, and benefit to customers.

We compiled a list of essential KPIs for warehouse operations that should be tracked and measured. It’s not a definitive list, but it serves as a springboard that companies that adapt for their warehouse. Our guide covers metrics for productivity, inventory, and processes or workflows. Analytics, which builds on advanced techniques and technologies, can be the much-needed push for breathing deeply and more easily.

 

Productivity and inventory KPIs for warehouse operations

Many conventional metrics that measure productivity and efficiency involve labor, space, and equipment, and their entailing costs. Metrics for inventory not only gives a glimpse into the movement of goods — they also reveal, for example, insights on the supply and demand of products and relationships with vendors and suppliers:

Productivity and Costs Inventory
  • Utilization of labor, warehouse area, and material handling equipment

  • Cost of goods sold and cost per order dispatched

  • Lines and units picked per hour

  • Dock-to-stock time

  • Order accuracy and on-time shipments

  • Stock cover in days

  • Stock turn

  • Stock/inventory accuracy

  • Damaged inventory

 

Internal, inbound, and outbound KPIs

There’s a host of other KPIs that reveal the performance of the warehouse’s operations. They are typically categorized into the following:

  • Internal: Processes and workflows that are unique to the warehouse and are closely aligned with the business’s strategic goals

  • Inbound: Processes and workflows for the movement of resources from an external channel to the warehouse, including the sourcing, purchase, and acquisition of materials or products, and their delivery, reception, and storage

  • Outbound: Processes and workflows related to the shipment of materials or products from the warehouse to a designated destination

 

The inherent nature and life cycle of warehouse operations mean these KPIs will inevitably cross paths and sometimes overlap, so it’s up to warehouse manager to disperse gray areas:

Internal Inbound Outbound
  • Putaway efficiency

  • Storage (warehouse filling)

  • Inventory turnover and accuracy

  • Workforce usage

  • Plan realization and order picking accuracy and productivity

  • Cost of service

  • Outbound order turnaround

  • Packing and shipping accuracy

  • Order cost and value

  • On-time delivery (OTD)

  • Packing slip accuracy

  • Order turnaround and refill rate

  • Return rate and issues

  • Customer service

  • Distribution

  • Warehouse preparation for shipment

  • Profitable orders

  • Sales volume and order frequency

  • Order cycles

  • Payment issues

  • Orders refunded

  • Breakage and return rate

 

How analytics figure into the equation

Analytics gives warehouse managers and decision-makers foresight into what is happening, what will most likely happen, and how they can adapt to it. When needed, it builds on operations research and advanced techniques like AI and machine learning to improve or automate business processes and extend the life and value of assets in the supply chain. It’s no surprise that 91% of supply chain leaders are actively investing on these capabilities.

A more tangible example is a warehouse KPI dashboard. It pulls datasets from various sources and converts them into visuals that can be readily accessed and interpreted. Warehouse KPI dashboards can be built depending on business need: forecasting demand and generating predictions, tracking activities within the warehouse, defining critical success factors, or everything in between. However, there are technical requirements for creating an actionable dashboard — from the right data storage and management technologies to back-end architectures that process data. Even complementing it with advanced analytics has its own prerequisites.

Download our guide to get a closer look at these essential KPIs, their industry benchmarks, how to calculate them, and how analytics can help operationalize them.

Essential Metrics and KPIs for Warehouse Operations

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