32 KPIs to Measure Warehouse Performance
There is no better way to know where your company stands than to use metrics. After all, Numbers do not lie.
Key Performance Indicators (or KPIs) are a crucial part of effective management. KPIs present data that you can compare and analyse to find problems in your strategy. They help you set the correct milestones or goals that you can achieve for optimal growth.
Not to forget how complex a supply chain process is – KPIs can break down each step and make it easier to assess the current situation. The chances are that you will not need to calculate each KPI manually. Modern-day computing offers many tools and services to measure them for you.
Regardless, leaders need to be aware of the metrics to measure. Knowing what each metric means helps put it to correct use. Here are 30 KPIs that warehouses must calculate to measure their performance regularly.
1. Inventory Shrinkage Rate
Many a time, the total stock in records is more than the actual stock. This gap can be a result of many things such as theft, damage, clerical error, or lost items.
Inventory Shrinkage Rate counts the reduced value of inventory due to the unrecorded loss of stock.
To measure Inventory Shrinkage, use:
Inventory Shrinkage Rate = (Recorded Inventory – Actual Inventory) / Recorded Inventory
To convert the value to a percentage, simply multiply the decimal value to 100.
The metric plays a key role in profits. Higher the value, lower the profits.
Ideal Rate: Below 1%
2. Carrying Cost of Inventory
The carrying cost of inventory refers to the sum of all expenses in the storage and care of unsold goods. It can include the cost of rent, salaries, losses, taxes, and much more.
To calculate the metric, use:
Carrying Cost (%) = (Total Holding Cost / Total Annual Inventory Value) X 100
The total holding cost is the sum of the prices of service, risk, capital, and storage.
The metric helps identify where your costs come from and the scope for profits. It allows you to cut down on expenses in all the right places.
Ideal Rate: 20-30%
3. Inventory Turnover Ratio
The Inventory Turnover Ratio shows the number of times a company sells and replaces stock in a period. The higher the value, the better.
To calculate, use the formula:
Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory
The metric shows how well the team manages the stock. Damage to goods and wrong picks can often result in lower sales and shows up in this KPI's value.
Ideal Value: 5-10
4. Inventory to Sales Ratio
Inventory to Sales Ratio is a metric used to compare the amount of stock to sales (or orders) in a given period.
To get the ratio, use:
Inventory to Sales = Average Inventory / Total Net Sales, for a defined time period.
The Inventory to Sales Ratio works the same way as the Turnover Ratio. While the numbers differ, the base idea is the same. This KPI also compares sales and defines how good the team is at managing stock.
Ideal Ratio: 1/6
5. Space Utilization
As per the name, the KPI gives the percentage of space used for storage in the facility. It shows how efficiently you make use of the given space.
The formula to get the metric is:
Space Utilization = (Total Inventory Space X Warehouse Space Clear Height) / (Total Volume of Inventory)
The metric can help know if there is a space wastage. It can often be harder to know the actual worth of your space without numbers. The metric adds clarity and aids in adding more goods and profits without the need to expand.
Ideal Value: 22-27%
6. Fill Rate
Fill rate is the percentage lines shipped on time versus lines ordered by customers. In short, fill rate is the chance that you will accurately serve your customers.
The formula to get the metric is:
Fill Rate = (Lines Shipped on time) / (Lines ordered by customer)
Inaccurate computation of reorder points or high lead times of certain vendors could bring down the fill rate.
Ideal Value: 100%
7. Picking Accuracy
Picking Accuracy shows the number of orders picked with no error. It directly the measures and controls that are put in place to ensure accurate picks. If the value is low, it is time to take major steps to improve the same.
To measure the metric, use:
Picking Accuracy = No. of Accurate Orders Picked / Total Orders Picked
Errors in picking can cause a domino of issues. It results in returned orders, more time taken to ship, and low customer satisfaction.
The use of scanners and labels can help cut down on errors at large.
The aim should be to reach as close as 100%. It may not be viable, but the closer your value, the better.
Ideal Rate: 98%
8. Units Per Transaction (UTP)
UTP refers to the number of units in each order or purchase made. The final value is an average of the total in a fixed time frame. The higher your value, the better.
The formula to calculate UTP is:
Units Per Transaction = No. of Purchased Items / Total No. of Items
This KPI is a vital part of studying trends. While the sales teams play the main role in UTP, it can also reflect how logistics handle products. On-time delivery, correct orders, and no damage lead to a better UTP value.
9. Receiving Efficiency
Receiving Efficiency measures how productive the receiving area of your facility is. It compares the amount of work done to the hours put in to find the true value.
To calculate the metric, use:
Receiving Efficiency = Volume of Inventory Received / No. of Work Hours put in
A lower value calls for focus on the receiving process. A major reason for this lies in bad employee health or work culture, which you must deal with instantly. These causes can seep into other sections and disrupt the entire supply chain process.
You can use the KPI to identify trends, find peak times and re-assess your strategy.
10. Cost of Receiving per Line
The metric tells you the money it takes to receive a single line of items. The total cost should consider each step of the process.
The formula to use is:
Cost of Receiving = Total Cost of Receiving / Total No. of Line Items
The value of cost per line should decline with time. As it drops, it signifies that the process gets more efficient. A low cost does not only mean more profits but also more work done to scale the process.
11. Receiving Cycle Time
RCT refers to the time it takes to process each delivery. This can include time taken in:
- Counting items,
- Booking items, and
- Preparing the storage.
The formula to get the value is:
Receiving Cycle Time = Total Time Taken / No. of Deliveries
A low value is desirable when it comes to this KPI. If you have a long RCT value, you may want to consider the number of deliveries and reschedule the stages. Making the process smooth and bringing new tech tools to the process can also make it faster and easier.
12. Dock Door Utilization
The KPI measures the percentage of dock doors in use. The data can help utilize your facility to its full capacity.
To measure the value, use:
Dock Door Utilization = No. of Doors Used / Total no. of Dock Doors
A low rate can increase carrying costs as you pay for larger spaces. Thus, the metric plays a key role in noting the ebb and flow of demand and the need for better fleet management.
13. Dock Door Utilization Rate
Dock door utilization rate has an aspect of time in its calculation.
To measure the value, use:
Dock Door Utilization Rate = Dock Time Used / Total Available Dock Time
Problems in dock scheduling can bring this value down.
Ideal Rate: 100%
14. Time to Receive
Time to Receive refers to the time taken to process a delivery. You can also use the name “Receiving Cycle Time” for the same KPI.
To calculate, use:
Time to Receive = Total Time Taken to Sort Received Stock / Total No. of Received Items
A small value shows that your process is smooth and efficient. A faster process will create a ripple effect and change other KPI values such as cost.
You should also note that faster is not always better. If less time clubs with more errors, you need to reconsider your strategy.
15. Put away Accuracy Rate
Put away Accuracy Rate is the number of items put away with no errors. It shows how efficient the put-away process is or if it has any room to improve.
To measure the rate, use:
Put Away Accuracy = Total Inventory Put-Away Correctly / Total Inventory Put-Away
A high level of accuracy leads to on-time orders and better customer service. Monitoring this KPI allows you to plan and execute the put-away process better. On the flip side, a poor value can result in a loss of time, money, and resources. Ideal Value: 98-99%
16. Put away Cost per Line
Put away Cost per Line tells you the money it takes to put away a single line of items.
The formula for the KPI is:
Put Away Cost per Line = Total Cost of Put-Away / Total no. of Line Items
The higher the cost, the less efficient your put away process is. In that case, you need to re-assess and find areas to optimize cost and speed.
17. Put away Cycle Time
The Put-away Cycle Time is the average time it takes to put away a unit from your stock.
To calculate the metric, use the formula:
Put Away Cycle Time = Total Time Taken to Put-Away / Total No. of Line Items
Training your workers is one of the best ways to cut down on cycle time. You can also look for areas to automate or manage the process better.
Time and money are linked resources. The put-away cycle time can aid in setting goals to fasten the process and track progress. The lower the value, the better. As you begin to save more time, you can see the impact on other cost metrics as well.
18. Perfect Order Rate
Perfect Order Rate gives you the amount of fulfilled orders with no errors. Incidents or errors can refer to,
1) Damaged Goods,
2) Late Shipment, or
3) Inaccurate Picks.
Note that the criteria for a perfect order can differ among industries. The formula to get the rate is:
Perfect Order Rate = No. of Orders without Error / Total No. of Orders
The Perfect Order Rate shows how efficient the supply chain process is. To obtain a higher rate, you need to look for the root cause behind it. Minor tweaks in how you manage stock can often result in a notable change of value.
19. Total Order Cycle Time
Total Order Cycle Time is the time frame from when you place an order to when you send it for shipping. Note that the metric does not include the time it takes to ship the item.
To measure the value, use:
Total Order Cycle Time = Time Taken to Ship / Total No. of orders,
where Time Taken = Time the order is ready to ship – Time the order was placed
The longer it takes to ship an item, the more inefficiencies in the process. You should aim for a lower value to the metric by noting which step takes the most time and why. Try to save time by automating or build strategies that speed up the process to get better results.
20. On-Time Delivery Rate (OTD)
OTD measures the rate of goods that reach their destination within the set time frame. It is a major indicator of supply chain efficiency and its success.
The industry has set a high standard that needs to be met at all times.
The formula to get the KPI is:
On-Time Delivery Rate = On-Time Units / Total Units
The key reason for a late delivery today is the lack or improper use of real-time data and insights. A low rate calls out to assess and build a strategy based on data to cut cords, save time, and optimize each step. Ideal Value: 95%
21. Cost per Order
Cost per Order shows the amount of money it takes to fulfil each order. It is a vital step to manage finances and profits for your facility.
To calculate, use the formula:
Cost per Order = Total Cost to Fulfil Orders / Total No. of Orders, in a set period.
Total Costs can include:
1) Labour Costs
2) Management & Supervisory Costs
3) Facility Costs
4) Packing & Shipping Costs
The metric can help identify areas to increase profit or get more work done at the same cost.
22. Rate of Return
The Rate of Returns is a measure of the amount of sold goods that return to the facility. A high rate of return can be the result of damage, wrong picks, or inefficiencies in general.
To find the rate, use:
Rate of Returns: No. of Items Returned / Total No. of Items
Fishing out the main cause of return can help you know where the key problem lies. You can then tackle the issue head-on.
23. Order Lead Time
The Actual Order Lead Time is the average time it takes to fulfil an order. A-OLT is only one type of OLTs. Others are:
Requested Order Lead Time, or R-OLT.
Quote Order Lead Time, or Q-OLT.
Confirmed Order Lead Time, or C-OLT.
Each order lead time refers to a specific time frame between two steps.
To calculate, use:
Actual Order Lead Time = Delivery Date – Order Entry Date
The KPI can help identify flaws at various steps of the process and study trends. A deviation in order lead time can imply errors in the process which you must rectify instantly.
The main aim to calculate order lead time is to fasten and smoothen the entire supply chain process.
24. Accidents per Year
This is one of the easiest to calculate. It is simply the total count of the number of accidents that happen in a year.
Accidents per year give direct insight into how safe working in a facility is. It is a metric that is easy for our brains to relate to and react to. A high value implies lost time and can cause anxiety or fear among workers.
While 0 may not be easy to attain, you should aim to keep the value as low as possible.
25. Time since Last Accident
It is the number of days that have gone by from an accident to the present day.
Time since Last Accident = Current date – Last Date of Accident
The gaps between each case can tell you how frequent these accidents are. Accidents per year and Time since the Last Accident also connect and impact each other. To keep the former low, you must aim for this metric to be high.
It can also show the cause of accidents. If there is a certain period where accidents happen often, you can draw out the cause based on the time of the year.
26. Time Lost due to Injury
Time Lost due to Injury counts the number of hours lost due to injuries that worker would have spent working. Too many minor accidents that do not pose much health risk can also add up to lead to a high loss of valuable time.
The formula to calculate this KPI is:
Time Lost Due to Injury = Lost Time Due to Accidents (Hrs) / Total No. of Working Hours
While the safety of a human is on the top, it is also essential to know how it affects work. The metric can help directly translate the losses and call for action. A high value calls for measures to prevent both - major and minor cases.
27. Total Recordable Incident Rate (TRIR)
TRIR is a measure of the overall work environment of a facility. The KPI is of great value when it comes to meeting legal standards on safety. High rates are a prime issue and result in inspections time and again.
To measure the metric, use:
Total Recordable Incident Rate = (No. of Recorded Injuries × 200,000) / (No. of Working Hours), each in one year.
The value “200,000” is the standard work hours for 100 workers in a year. It takes 40-hour work weeks into account, but the norm may differ among various nations.
Ideal Value: 2.9 cases
28. Employee Turnover Rate (ETR)
Employee Turnover Rate is the count of employees that leave their job in a fixed period. The ETS measures how stable and motivated your workforce is. A high rate implies one or more problems in the work culture of your facility.
Employee Turnover Rate = Employees Who Left / Total No. of Employees
You get a stable team of workers when you:
Focus more on better leadership.
Be inclusive of each person.
Provide a safe and healthy work environment.
If you have a high ETR, look for the above areas on where you can improve. You can also find the root issue by talking to workers and getting to know them.
Ideal Value: 10%
29. Employee Net Promoter Score (eNPS)
The eNPS rates how employees feel about the company. Their image of the workplace can be either good or bad. The metric can measure how engaged and loyal workers are.
The eNPS scale often has a range of 1-10. You can meter the value by an eNPS survey. Based on the scale, employees fall into three types:
Promoters (9 or above)
To get an overview of the team, use:
eNPS = % of Promoters - % of Detractors
eNPS is largely a relative figure. If you see a fall in eNPS over time or have lower levels compared to similar companies, you need to shift focus to your workers. Make sure that their needs are well met and build a healthy work culture to improve performance.
30. Employee Satisfaction Score
As the name suggests, this KPI is a measure of how happy employees are with their job. The metric also makes use of a scale to score the metric.
The Employee Satisfaction Score is similar to the eNPS. Happy workers are bound to be more productive. They work with better focus and seek to grow daily.
Putting safety first is one of the most important steps. It makes workers feel valued and have trust in the company. They seek to repay the value and share this faith.
Contrary to the scale, you can also measure “Manager Satisfaction Score.” Each reflects the relationship between the two. A team that gets along works faster and better. In case of a low score, the focus should shift to the team rather than the process.
31. Cultural Entropy Score
Cultural entropy score reflects the health of the work. The scale is a direct measure of unproductivity levels in workers. The higher the score, the lower the amount of value through work.
The root cause of cultural entropy is fear and limiting beliefs from leaders. Workers, after all, learn the most from their leaders and managers.
The optimal method to measure the score is to use a survey. You can find one by the name of “Cultural Values Assessment”, or CVA.
A high score (above 40%) is a critical issue. Such a case demands a change in work culture, the approach taken by leaders. Ideal Value: < 10%
32. Overtime Ratio
This KPI is a ratio of the total amount of overtime hours put to the total amount of hours. You can also calculate the same in the form of a rate or percent value.
To get the ratio or rate, use:
Overtime Ratio = Hours charged to Overtime / Total No. of Working Hours
The ratio can reflect upon the work culture in the facility. A high amount of overtime hours can often result in low employee productivity and health.
Ideal Value: < 2%
Most facilities typically have the value lie within 5 – 8%, while below 2% refers to the best in class.
The best way to keep track of all these metrics and compare them is to use a dashboard. The use of visual data will make it easier for you to monitor and analyse trends.
The pivotal part of using KPIs is to use them for "Benchmarking." Benchmarking allows you to set goals or milestones for the team to achieve that you can measure via numbers. It is a process of continuous improvement that promotes growth in the long term.
Most managers use supply chain metric values by similar top companies to note an ideal value or set their goal. Many times, these values can differ among industries as well the size of a facility. On top of that, metrics like time and cost are too relative to compare. Thus, with KPIs, it is also important to take into account the context and what applies to your specific system.