Warehouse key performance indicators (KPIs) provide in-depth details about your inventory status and warehouse performance. Even so, it is impossible to keep track of all your warehouse operations. Warehouse management systems help identify warehouse KPIs that need proper monitoring to measure efficiency and productivity.

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Each warehouse operates differently. They have specific objectives to follow and targets to achieve. As a warehouse professional, you need to define the performance metrics your warehouse needs and how to track them.
What This Article Covers:

• What Are Warehouse KPIs?
• Benefits
• Top Warehousing KPIs and Tips To Improve
• Best Practices
• Final Thoughts

What Are Warehouse KPIs?

Warehouse KPIs evaluate and identify critical objectives for your warehouse. They allow you to set monthly benchmarks and identify processes that affect your business. You can use these metrics to compare warehouse performance against competitors, which involves monitoring how your warehouse receives, handles, and ships items.

The success of a warehouse depends on measuring the right key performance indicators, such as packing costs, receiving efficiency, customer cycle order time, inventory accuracy and more.

Tracking warehouse KPIs helps you analyze trends and patterns over time and implement strategies to stay competitive. Most warehouse management systems can measure inventory accuracy and optimize tracking. You can select KPIs based on your warehousing requirements.

Primary Benefits

Monitoring KPIs is invaluable. In warehouses, KPIs relate to evaluations of timely shipments, warehouse space, sale returns, order picking and packing, and receiving and putaway. Below is a breakdown of how tracking KPIs benefits your warehouse operations.

Optimize Costs

Picking and packing cost warehouses a significant amount of money. Hiring more staff to get orders out for more extensive operations can run costs up quickly.

With warehouse KPIs, you can find the exact cost of picking and packing based on hours of operation, total orders picked, cumulative picking time, cost of consumables and the order cycle time.

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Improve Customer Satisfaction

Whether it’s managing customer-facing operations or improving shipping orders, it is critical to track eCommerce KPIs. This strategy helps identify shipping timelines and order accuracy. Accurate shipping details help predict order timelines or upcoming delivery issues. This data lets you handle shipping-related problems before they arise.

Boost Workplace Safety

Transportation and storage were among the top industries contributing to workplace injury, accounting for 59 injuries in 2021. The safer your workers feel in the warehouse, the better they operate. Since warehouses are synonymous with speed, they tend to attract fatalities and injuries.

Safety KPIs determine the frequency of warehouse incidents like equipment breakdowns, time lost during an injury, injury incidence rate, etc. With safety KPIs, you can ensure your equipment is properly maintained, and internal processes are safe.

Strengthen Warehouse Efficiency

Tracking overall warehouse performance highlights areas that need improvement. For example, suppose your focus is on shipping and receiving. In that case, you can start tracking the number of shipped items against estimated items, rate of returns, on-time deliveries and item lead time.

You can follow the same process with other warehouse operations and start tracking warehouse productivity and efficiency.

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Top Warehousing KPIs To Track

There are several warehouse KPIs for you to start tracking. Selecting the right warehouse management software system offers you multiple options to begin. A robust WMS is ideal for measuring warehouse KPIs like inventory visibility, warehousing operations and customer satisfaction.

1. Order Picking

Order picking is one of the most complex and time-consuming warehouse operations that affects how fast a customer gets their product. Picking incorrect items can incur huge losses. You need efficient workflows to track picking performance and order accuracy.

How To Improve

Order picking accuracy gives you exact data on picked items and orders. If you start seeing a drop in accuracy, it’s a sign for you to begin training your workers.

Another KPI you can track is picking efficiency. It helps monitor the number of order lines picked every hour. Here are a few tips to improve picking accuracy:

• Organize your warehouse and use the most appropriate picking system.
• Use pick and pack systems with digital barcode scanners.
• Minimize labor turnover by investing in experienced workers.

2. Backorder Rate

You can obtain in-depth information about your purchase success with backorder rate data. It provides forecasts and analysis regarding backorder rates. For example, if you see a high backorder rate, you’re getting orders for out-of-stock items. Backorders are terrible for customer experiences. Start tracking this KPI.

How To Improve

A frequently high backorder rate indicates poor inventory tracking, planning and forecasting. Below are a few tips to improve your backorder rate:

• Adopt better inventory management and tracking practices to avoid overselling.
• Minimize labor turnover by investing in experienced workers.

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3. Rate of Return

The rate of return determines how often customers return items to the warehouse. Tracking this KPI gives you an overall idea about customer satisfaction. However, the best way to identify the cause of returns is by segmenting them by reason.

For example, if the customer returns a product stating that the item delivered is incorrect, you need to start looking at how to improve picking processes.

How To Improve

Here are a few tips you can follow to improve return rates:

• Ensure you have the correct product descriptions.
• Provide barcode scanners to packers for shipping accuracy.
• Ensure your workers are well trained.
• Identify and segment returned items by reason.

4. Order Lead Time

Warehouse KPIs like order lead time let you track how long it takes an order to reach the customer. The lower the order lead time is, the happier your customer will be.

How To Improve

You can follow the below tips to improve your order lead time:

• Choose the right order picking system.
• Systematically manage your orders.
• Ship bulk orders to get more items out of the warehouse daily.
• Adopt quick shipping services.

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5. Inventory Turnover

The inventory turnover KPI tells you how quickly you sell and ship stock once it arrives in storage. This KPI provides accurate details of the items moving out of storage. The inventory turnover rate is one warehousing KPI you don’t want to miss tracking. The quicker you move stock from your warehouse, the less it will cost to store.

Monitoring this performance metric allows you to improve your buying practices.

How To Improve

Some ideal ways to improve inventory turnover are:

• Identifying slow-moving stock and streamlining inventory management.
• Improving inventory forecasting skills.

6. Receiving

Receiving incoming stock is a vital warehousing operation. It’s the first step that every warehouse professional should track and handle. Though receiving may seem like a mundane task, the receiver needs accurate information about incoming stock, weekly stock deliveries, the number of returned items due to damage or inefficient picking and more.

Tracking this KPI is crucial to enhance shipping performance.

How To Improve

You can start by recording timestamps of all your delivered products and then make another recording when stock is ready for putaway. Below are a few tips you can follow to improve receiving:

• Create different SKUs for individual products and their variants.
• Assign each SKU to specific warehouse bin locations.
• Assign processes and tasks to experienced workers.

7. Carrying Costs

Holding inventory for too long can cost your business a pretty penny. Tracking capital, storage, equipment, software and material costs give you an idea of how much you spend on inventory. It makes it easier to track extra expenses and analyze profitable areas.

How To Improve

You can indicate how much profit the current stock brings in by tracking carrying cost KPIs. Below are a few tips you need to consider:

• Automate inventory management to prevent inventory shrinkage.
• Adopt warehouse automation to reduce labor costs.

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Best Practices

By now, you should have an idea about some warehouse KPIs you can track. These metrics will help identify warehousing issues and allow you to monitor risks before they happen. Let’s look at some of the best practices.

Define Warehouse Goals

You can only track warehousing KPIs by ensuring all operations are at peak efficiency. First of all, you need to set goals you want to achieve. Analyzing metrics gets easier once you know which types of KPIs you’re looking to track.

Make necessary adjustments within your warehouse and inventory management systems while ensuring all departments can view your supply chain and see changes in real time.

Choose the Right KPI

Start selecting KPIs relevant to your warehouse workers and make adjustments accordingly instead of focusing on overall warehouse operations.

For instance, you can choose specific warehouse KPIs for pickers, such as quality metrics, cost of picking and number of hourly orders picked. For packers, you can choose KPIs related to cycle time for each receipt, cost of receiving and volume received per hour, etc. For shippers, you can adjust KPIs like cycle time per order, shipping cost, orders processed per hour, etc.

Once you have all the data from these metrics, you can compile relevant updates and inform workers about them.

Analyze Your Fulfillment Performance

Now that you have warehouse KPIs set to track, you can chart the performance of your order fulfillment process. Analyze your supply chain and identify areas that slow down order fulfillment.

Once you identify these areas, send the reports to your workers and start charting performance metrics to improve productivity.

Conduct Regular Audits

You need to conduct regular in-house audits to ensure your business runs efficiently. Start by focusing on warehouse components that can directly affect your warehouse efficiency, such as storage systems, customer performance metrics, warehouse throughput, security systems, warehouse layout, etc.

Once you are through with the audits, you can compile differently or a single register for your warehouse managers to update changes (if any).

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Final Thoughts

You can measure warehouse KPIs using different methods or formulas, but adopting warehouse management systems and inventory management tools is a smart choice.

There are several warehouse KPIs for you to start tracking. Did we cover all important KPIs, or have we missed something? Tell us in the comment section below.