How to Measure Fulfilment Warehouse KPI’s to Improve Performance

To achieve a fast fulfilment process you first require proper fulfilment warehouse management. This determines how well you receive, track, and store customers inventory, ultimately send stock out the doors faster. But what do you measure to see if a warehouse is performing well? A warehouse needs to be carefully observed and monitored through the use of KPI's. KPI stands for key performance indicator and can be a measurement of anything, specifically warehouse functions in this case. Failing to measure KPI's can make warehouse optimisation that much harder and therefore improvements shall be neglected.  

What are fulfilment warehouse key performance indicators?

A KPI is a metric associated with warehouse performance and can be applied to anything from receiving processes to the fulfilment process. It is important to set warehouse KPI's as it will make monitoring OKR's simpler as it enables you to efficiently track the performance of an ecommerce warehouse, its operational strength and any potential problems. It aids in managing risks as well as locating ways to optimise workflows. Warehouse management is a long and laborious task therefore KPI's are commonly broken down into categories to better manage them.  

Why tracking fulfilment warehouse KPI's is important

Warehouse KPI's are a critical part of managing an efficient supply chain. It also sets a baseline for when conducting warehouse audits. Lets breakdown the importance of tracking warehouse KPI's.

Improve fulfilment warehouse efficiency

Tracking KPI's improves warehouse efficiency. When tracking somethings performance, it highlights what is going well and what could be improved. An efficient warehouse relies on many factors to be successful, so it is important to have total clarity when it comes to identifying strengths and weaknesses. Inefficiencies can be caused by several things. Obsolete technology may be causing your workforce to spend unnecessary labour time doing a task a piece of tech could do. The warehouse set up may be slowing down processes due to a lack of organised shelving. When tracking the right KPI's this could be avoided, helping you find improved technology or new ways to optimise the warehouse set up. Tracking KPI's gives you an insight into what is missing from your fulfilment warehouse, whether that be a lack of up-to-date technology or unorganised internal processes.  

Saves retailers money

Not only improving efficiency KPI tracking can also help optimise logistics costs. The ability to save money is always at the front of people's minds when conducting business and especially in the world of ecommerce. Throughout the pandemic warehousing prices saw a 10% rate hike due to a high demand for warehouse expansion and construction. Renting alone can still eat away at profit margins. By utilising KPI's, over time you will find ways of optimising efficiency and workflows to better understand how much warehouse space is really needed. This can bleed into optimising inventory levels to meet demand while cutting back on holding costs.  

Improves customer satisfaction

The way in which your ecommerce warehouse operates can impact customer satisfaction for both your own business and the business you are fulfilling. Poor fulfilment workflows and slow returns processes will leave the customers who purchased the items unsatisfied which creates a bad image for the business they purchased it from. This is why it is essential to track certain ecommerce KPI's that help identify the issues found in an ecommerce warehouse. Things like order accuracy and shipping times are two good KPI's to track.  

Ensure better workplace satisfaction

The more safe and engaged your team is, the more efficient your warehouse will run. Speed, accuracy, and efficiency will always be a top priority but a safe work environment is still essential to keep track of. Safety KPI's can determine the safety of your internal processes. Encouraging a safe environment for your employees can be directly linked to higher productivity. Try to promote a clean work environment and remove rubbish and equipment to reduce the risk of accidents. This will make moving around the warehouse, on foot and by forklift, that much quicker. One-way workflows have also proved to create a more efficient warehouse process. Set up workstations with individual roles for each to ensure safety and eliminate congestion.  

Fulfilment warehouse KPI's to track for measuring & improving performance

There are several effective ways to measure warehouse performance, from how well inventory is managed to how efficient your warehouse picking and packing process is. Here are some different ways to measure performance.

Inventory KPI's

Inventory is the centre of your logistics operations. Your warehouse will become inefficient if your inventory levels can't meet the demand. Too much inventory can also incur higher costs, too much capital tied up before you sell. Here are some essential metrics to track so you can measure the effectiveness of your warehouse inventory management.
  • Inventory-to-sales ratio: This KPI tracks inventory on hand at the end of the month versus the number of sales you made within the same month. This metric is handy at detecting when your sales are dropping as average inventory units increase or don't deplete like they normally do.
  • Inventory carrying cost: This is calculated by adding up all the expenses associated with holding and storing unsold finished goods. This helps keep track of inventory expenses.
  • Inventory accuracy: This monitors your physical counts of units within your warehouse and compares it with what has been recorded. Inventory accuracy rate can give you insight into how well you manage inventory coming in and out.
  • Inventory shrinkage: This detects when inventory levels fall below what is recorded on the balance sheet. This can occur for many reasons like theft or damage.
  • Inventory turnover rate: Tracking turnover rate shows how many times inventory is sold and then replaced in a time period. Having and understanding of the average inventory turnover rate is an important measure for business performance, cost management, and sales. It also reveals the best-selling and slow-moving stock. Fast turnover generates revenue the quickest.
Tracking these KPI's is one of the steps to optimising your warehouse processes but to do this properly it takes time and will require technology like an inventory management system. This is why many people turn to a 3PL like OnLogistics to help with inventory management. Our integrated system links directly into your ecommerce store and provides transparency related to the KPI's that have been mentioned.

Receiving KPI's

Receiving inventory is a crucial part part of managing a warehouse. It is important to ensure all inventory is accounted before it is stored. Managing these KPI's can avoid issues such as receiving the wrong order and still storing it, to later find out it is wrong causing extra work. Monitoring warehouse receiving performance ensures that your receiving process is accurate. It also highlights when a reorder is required. Here are some common receiving KPI's.
  • Receiving efficiency: Monitoring receiving efficiency tracks warehouse productivity when more stock is received. It also clarifies any inefficiency within the process enabling you to see which part needs to be optimised.
  • Receiving cycle time: This refers to how long it takes to process new stock entering the warehouse. It includes counting stock, to storing and sorting. A long cycle time means a need to improve.
  • Cost of receiving per line: This highlights the costs incurred during the receiving process.

Put-away KPI's

This KPI helps measure your put-away process, which refers to how efficiently your team puts away new inventory.
  • Put-away cycle time: This KPI refers to how long it takes to put new inventory away. When having an efficient put-away process it will show in the form of shorter put-away cycle times. Long cycle times indicates a review is in order.
  • Put-away accuracy: this refers to the percentage of inventory that is put-away correctly the first time. This KPI can influence the picking process and therefore is crucial to keep track of.
  • Put-away cost per line: This KPI determines how much is spent for each line during the put-away stage. Higher costs indicating inefficiency.

Picking KPI's

Warehouse picking requires efficient workflows enabling your picking teams to work quickly and accurately. Helping reduce mistakes like mis-picks. Here are some KPI's worth monitoring.
  • Picking efficiency: Tracking picking efficiency refers to the number of order lines that are picked every hour.
  • Picking accuracy: This can help identify how many orders are being picked and packed without errors.
  • Picking cycle time: Picking cycle time tells you the time frame of each pick. Longer cycle times suggest the implementation of warehouse technology and automation tools.
  • Picking and packing cost: This is an obvious one to track as it will give in-depth accounts of how much is spent each pick and pack, including labour costs.

Performance KPI's

Another important KPI involves warehouse operations specifically order management and shipping. Look at your whole operations supply chain and you will receive insight into how well your warehouse operations are performing. Here are some distribution and performance metrics to initially track.
  • Order lead time: This metric helps you understand the time it takes for the customer to physically receive their order once they've placed it.
  • Total order cycle time: This metric refers to how long it takes to get your order ready to be shipped. From the moment an order is placed including the entire process of picking, packing, and any other steps required.
  • Rate of returns: Another important metric to measure as the return process requires labour and costs to process each return. Tracking returns can also provide insight into product quality and overall customer satisfaction.

Safety KPI's

Accidents not only put staff at risk but can also have detrimental effects on the overall business. An unsafe workplace could make the business look unprofessional and staff may not feel comfortable working for you. Business can be halted altogether if a serious accident occurs, with the risk of legal action being present also.
  • Accidents per year: An important KPI to track to measure the efficiency of your safety procedure. Try keep this as low as possible.
  • Time since last accident: The goal is to have no accidents but that isn't realistic, sometimes accidents just happen. But try to keep the time between accidents high and infrequent.
  • Time lost due to injury: This KPI can shine a light on how much impact an accident has on workplace productivity, employee satisfaction, and overall costs.
  • Total recordable incident rate (TRIR): This is the total number of work-related injuries per 100 full-time workers during a one-year period.

Stop worrying about fulfilment warehouse performance — outsource to OnLogistics

Online retailers already have a lot on their plate from product development to reaching new customers. That is why ecommerce brands have outsourced to OnLogistics. By outsourcing fulfilment to OnLogistics you don't have to worry about operations. From Inventory management to receiving orders, OnLogistics will offer full transparency into your logistics operations.