Formula: Number of days since the last accident. It measures the amount of orders that are processed, shipped and delivered without any incidents on its way. Copyright © 2017 - 2020 SkuNexus LLC. Having the help of specialised warehouse management software… KPI is an acronym for key performance indicators … KPIs for Warehouse Fulfillment Operations The success of your warehouse strategy is entirely contingent on how proactively you and your third-party logistics (3PL) provider identify key performance indicators (KPI… What it means: If deliveries are taking a long time to process, then it may be advantageous to reduce the number of deliveries, or reschedule them so that receiving has more time to process each delivery. Indeed, having a certain record of all your goods in your database that doesn’t match the actual physical inventory can harm your business considerably. The Most Important Logistics KPIs In the logistics area, KPIs are very important for measuring production, costs, and quality rates. Damaged or late deliveries are under your control, whereas product issues or fraud may not be, but are important to take into account. There is not one general rate to achieve, as it depends on the industry your company is evolving: a car dealership will have a lower turnover than a common groceries store. This logistics metric is good at evaluating the overstock. Definition: the amount of time it takes to process a delivery. Definition: the amount of time that would otherwise have been spent working. To effectively and efficiently manage a warehouse, you need to use warehousing KPIs. Warehouse KPIs can be broken down into different categories, such as receiving, put-away, storage, fulfilment and warehouse … Leading indicators measure the proactive activities that contribute to good safety practices. Saying that an order will arrive in 4-5 business days is better than saying it will arrive in 1-to-5 business days. A logistics KPI or metric is a performance measurement that is used by logistics managers to track, visualise and optimise all relevant logistic processes in an efficient way. Since this is the main trailing indicator of warehouse safety, it’s a good benchmark for how safety training and follow through is working. Receiving is the first instance that new inventory enters a warehouse, so it’s important that it’s done quickly, efficiently, and error-free. Inventory KPIs are covered more thoroughly in our article about them, but we’ll cover a few of the inventory management metrics that overlap with warehouse metrics here. The idea would be to benchmark your industry average rate and try to reach and exceed that target. It is therefore essential for logistics professionals to rely on the performance data collected by the tools at the warehouse… Formula: Inventory Put Away Correctly / Total Inventory Put Away. Definition: the percentage of items put away accurately the first time. That will let you know about the financial stability of your business, but also the direction you want to take - selling your inventory as quickly as possible or not. Managing a warehouse comes with many challenges and opportunities. hbspt.cta._relativeUrls=true;hbspt.cta.load(4223538, '20581e62-fb0f-4316-9f1f-1c57bc1bbb1e', {}); Get instant access to the Ultimate Guide to Order Management when you subscribe to the SkuNexus blog. Formula: Total Cost of Receiving / Total Line Items. Formula: There are two calculations that will show your Inventory Turnover Rate: Sales ÷ Average Inventory or Cost of Goods Sold ÷ Average Inventory. That way, your customer knows when he should be home to pick the package up, increasing your order picking accuracy rate and avoiding returns. On a more realistic level, it is also normal to have some disparities between the record and the warehouse, but the idea is to maintain that ratio over 92% as much as possible. Below is a listing of commonly used warehousing KPIs. A first step is to identify the right key performance indicators (KPIs) that will provide actionable information on your logistics processes. The On-Time Shipping performance refers to the ratio of orders that have been shipped on or before the requested ship date divided by the total number of orders. Many of these warehouse safety metrics are trailing indicators - they measure the outcome, not the input. This ratio will also help you spot issues related to receiving, shipping, or accounting. Breaking down this figure into several categories (countries, regions, types of products) will provide you greater information that you can use to optimize other logistics metrics, like the ones related to delivery. In “Key Performance Indicators for Distribution,” you’ll learn: What historical and predictive KPIs can tell you about your business. It is an even greater indicator if you measure and use it with other KPIs such as Inventory turnover, or the Carrying cost of inventory. The inventory turnover KPI quantifies how many times per year your distribution … Success with supply chain KPIs: a brief case study In the early years of this century, a British division of a global brewing company decided to diversify into contract distribution to increase utilization and reduce costs across its national warehousing and logistics … What it means: Usually measured in man-hours or a dollar figure, this metric can help target areas for cost reduction in the put away process by highlighting inefficiencies. May 21, 2014 ... Jump on here: Logistics Bureau Events. The higher is this rate, the better it is for your business. Which ones to use?… How many to use?Sadly, it’s not such an easy question to answer.Of course, they need to be SMART—Specific, Measurable, Achievable, Relevant, and Time-phased—but this may too rudimentary a set of rules to ensure KPIs are useful. Measuring them is not an easy task, but once it is done it will facilitate your overall management and add a lot of value, something that senior management or investors will appreciate. Usually you try to keep it not too high to avoid low inventory turnover rates. Warehousing KPIs. There’s a lot of overlap between KPIs used in a warehouse with inventory and fulfillment focused KPIs, so be sure to check out those articles in detail here: Check out the full guide to order management - including how to efficiently manage your warehouse operations. The Warehousing Costs refer to the money allocated to the goods moved into or outside the warehouse. Inventory Accuracy is one of those logistics metrics that can make or break your warehouse. Definition: The percentage of items returned compared to total items sold. Shipping is not only a matter of dispatching goods and packages in trucks or boats. It can be tweaked by rearranging the warehouse for faster put away, or training employees on the most efficient way to complete this task. Additionally, if you can precise the delivery hours (between 13h and 15h rather than between 8h and 18h), it is even better. Read on to know more about the key supply chain KPIs used by e-commerce logistics and courier companies in India. Definition: the cost to receive a line item on a purchase order. Among others, these measurements refer to transportation, warehouse and supply chain … The Average Transportation Costs calculates an overall of the expenses involved in processing an order from the beginning to the end. What it means: this metric determines how productive employees working in receiving area. The best warehouse managers will track key performance indicators relentlessly, and use them to iterate and improve their operations. When eCommerce companies scale beyond … Process KPIs for the logistics department are focused on ensuring that deliveries are handled on time and in full, without increasing the cost of delivery. It is important as it shows the efficiency of your supply chain and delivery services, and that leads of course to more satisfied clients that are willing to come back or recommend your services. What it means: A simple metric to calculate, this measures the knowledge and processes of employees putting away recently received inventory. Inventory management key performance indicators, Social Distancing Rules = Skeleton Crew / Use an OMS to Maintain Productivity. Definition: volume of inventory received per hour worked. A regular inventory checking the existing discrepancies with your electronic inventory record ensures that bookkeeping practices are in order and that your business is reliable, avoiding phantom inventory nightmares. As a result, proper KPIs are also necessary to measure the efficiency and effectiveness of this process. For more detailed information, see our full article on Fulfillment KPIs here. When your turnover rate is low, it indicates you have weak sales and excess inventory. Home Key Performance Indicators (KPIs) for the Logistics Sector Key performance indicators (KPIs) are frequently used in general business to evaluate the success of everything from a … The Logistics of Logistics. It will break down all the costs related to this logistics KPI according to distinct categories: the order processing, the administrative, the inventory carrying, the warehousing and finally the actual transportation costs. Later in this article, I will suggest some rather more comprehensive guidelines, … After calculating all these, you can evaluate the percentage each stage of the process represents and see if that is excessive or in the norms. Here is the complete list of the most important logistics KPIs … - … The use of our Supply Chain and Logistics KPI Dashboard programme will help you maintain an overall measure and give you a view of which activities need your attention. A KPI for picking speed can therefore vary a lot. A … It’s a lot - and many warehouse managers will find the top ones that are important to their operations, and check on the others quarterly or annually. After inventory is received, it needs to be put away. How to systematize your KPI process. It is a great indicator of efficient production planning, process, as well as marketing and sales management. Formula: Lost Time in Hours Due to Accidents / Total Number of Hours Worked, What it means: If an employee is injured on the job and unable to work, they are unable to contribute, and other resources need to be called in, overtime offered if necessary, and. Essential Supply Chain metrics & KPIs … This is a first logistics KPI to help you measure your supply chain performance. What it means: This KPI, when excessive, may mean that you have a problem with inventory damage, theft, miscounting, or supplier fraud (when a supplier bills for more products than it sends), and that a thorough investigation should be performed. Warehouse KPIs (key performance indicators) are the answer. Why out-of-the-box KPIs aren’t enough to improve performance. Among others, these measurements refer to transportation, warehouse and supply chain aspects. This logistics KPI measures the number of times your inventory entirely has been sold over a certain period of time. Assessing your warehouse KPIs routinely will help you better understand your warehouse performance and make well-informed executive decisions. You need to monitor inventory turnover, the carrying cost of inventory and the average inventory value, explains Paul Trujillo of Business 2 Community. These KPIs measure the effectiveness of that process. The more clearly you can articulate your desired performance levels up … A logistics KPI or metric is a performance measurement that is used by logistics managers to track, visualize and optimize all relevant logistic processes in an efficient way. You will lose less money with returns of inaccurate or damaged goods, and increase the level of satisfaction of your customer base. What it means: The higher this number is, the less efficient your receiving process is. Your warehouse management system (WMS) is designed to provide visibility and enable forecasting to keep goods moving. A high accidents per year could signal larger issues in workplace safety. Karl Friesenbichler Business Advice, Data, Key Performance Indicators, Logistics, Warehouse; Share … Measuring the KPIs of a warehouse determines whether the proposed targets are being met so that, with these data, action plans can be devised and logistics processes optimised. KPI is an acronym for key performance … They’re not intentional. Inventory tracking and inventory management of returned items affects the cost of inventory and carrying costs, plus labor costs. This number is usually close to 100%, but can be off if inventory theft, damage, or fulfillment isn’t tracked properly. All Rights Reserved. Below is a listing of commonly used warehousing KPIs. What it means: Picking the right products is a hugely important part of warehouse operations. Formula: Total Cost of Put Away / Total Line Items. No credit card required! This is a great performance indicator that will also tell you if your company is able to face unexpected situations. They won’t measure the number of times trainings are had or the adherences to safety regulations - they will measure the negative effects had on warehouse safety after they’ve occurred. Warehouse Statistics and KPIs Every Logistics & Warehouse Manager Should Know. According to Armstrong and Associates, the following metrics are most commonly used as 3PL … A logistics KPI or metric is a performance measurement that is used by logistics managers to track, visualize and optimize all relevant logistic processes in an efficient way. Definition: The percentage of inventory that is listed in records but is not physically in the actual inventory. Formula: Carrying Costs ÷ Overall Inventory Costs. Which three distribution KPIs to track most closely. While safety won’t necessarily increase profits or efficiency, it can reduce costs, create happier employees, and foster a healthy work environment. In general, the higher your turnover rate, the better. For instance, holding monthly trainings or requiring certifications. Formula: Total Time for Delivery / Number of Deliveries. If this is too high, the put away process will need to be improved. There’s a lot of overlap between KPIs used in a warehouse with inventory and fulfillment focused KPIs, so be sure to check out those articles in detail here: Inventory management key performance indicators This one is pretty self explanatory - it’s the number of accidents that occur in a year. A concrete example of a KPI for a warehouse with 250,000 different small items may be picking 30-60 order lines per man per hour. Definition: the cost to put away a line of items. Formula: Total Time for Put Away / Total Time. If you’ve found that the metrics you’ve been tracking aren’t up to par (or don’t know where they went wrong) book a demo of the SkuNexus platform to help iron out your warehouse operations. A KPI for picking speed can therefore vary a lot. What it means: This KPI tells you how fast you are selling your inventory. Shipments are the showcase of your warehouse; their quality and the accuracy to primary order will demonstrate the quality of your service as well. The best warehouse managers will track key performance indicators relentlessly, and use them to iterate and improve their operations. An well-integrated WMS will be able to provide KPIs … KPIs for reverse logistics includes customer returns. When outsourcing fulfillment services to a third-party logistics provider (3PL), it’s best to include KPIs in your Request For Proposal. The goal is to decrease the transportation costs while maintaining a high quality of delivery. Analyzing the trends over time will provide great insights on rush hours or rush seasons (such as Christmas time), and enable you to anticipate and allocate more resources accordingly. KPIs are the metrics that help you to understand just how well your 3PL is performing. Understanding KPIs to increase warehouse productivity. – Transport Director, Fredrik Kryasn, Aditro Logistics. What it means: Clearly, this number should be as low as possible, but that is almost never possible. Definition: the number of days since the last accident occurred. The same way you measure the number of orders placed ready on time to be shipped (On-Time Shipping KPI), you can measure the number of orders shipped out of your warehouse. A higher ratio shows that you have either strong sales or it could indicate that you are giving customers large discounts. With these KPIs, a complex system of a supply chain can be ran smoothly with minimal glitches and disruptions. And help identify areas that (when combined with a solid procedure and warehouse management … You want 0, but nobody is perfect, and accidents are just that - accidents. Whether it is outdated planning processes or disconnected execution systems too slow to face an increasing demand, the issues need to be addressed to quickly answer unexpected events. Like described above it really depends on your business what your target ratio should be. Safety first is a good methodology to follow. And based on the enthusiasm of our guests for this topic and the desire to improve warehouse performance, Mal Walker and I have put together a really simple and quick warehouse … Setup only takes a few minutes. The ideal number of KPIs … Warehousing is the management of space and time. Become a data wizard in less than 1 hour! These expenses cover equipment and energy costs like ordering, storing and loading the goods, as well as more human costs like labor, shipment, or delivery. Definition: the amount of time it takes to put away items on average. Formula: (Database or Software Inventory / Physical Inventory) x 100. After benchmarking and having an idea of the average delivery time from your warehouse to anywhere, the goal would be to decrease it when possible - offering special delivery services for instance - but more importantly, to precise it. Here are the, THE RIGHT KPI EXAMPLES FOR EVERY USE CASE, : Spot potential issues in your order fulfilment process, : Track your average delivery time in detail, : Analyze all costs from the order placement to delivery, : Optimize the expenses of your warehouse, : Avoid problems because of inaccurate inventory, : Track how many times your entire inventory is sold, see rich examples of interactive real-time kpis in datapine, instructions how to enable JavaScript in your web browser. The productivity of a warehouse is central to a company’s growth strategy. The Perfect Order Rate is another highly important logistics metric when it comes to your supply chain efficiency. The biggest thing to realize about receiving is that if it is done poorly, slowly, or inaccurately, it will have a ripple effect and make every other part of inventory or warehouse operations more difficult. The simplest warehouse management KPIs are based on storage. A concrete example of a KPI for a warehouse with 250,000 different small items may be picking 30-60 order lines per man per hour. The warehousing costs are a component of another logistics KPI, the total transportation costs. You probably won’t measure every single key performance indicator in your warehouse. Definition: A ratio that shows how many times inventory was sold and replaced during a specific time period. Formula: (Cost of Recorded Inventory – Cost of Physical Inventory) ÷ Cost of Recorded Inventory. The shipping time as well as the delivery time are both respected, the order is not a wrong one and the goods are not damaged. This primed and ready for use … It’s often measured against the turnover rate of industry averages. After calculating yours, compare it to the average rate of your industry and surpass it. Warehouse being the main area of your business, it is important to measure and review the costs on a regular basis, so as to improve your operations and evaluate such improvement. Warehousing KPIs To effectively and efficiently manage a warehouse, you need to use warehousing KPIs. The information on this page WILL help you get it right.Many people get confused about KPIs or Key Performance Indicators in Logistics and Supply Chain operations. These key performance indicators must also ensure … Definition: The percentage of inventory that is tracked and physically present. When you need to reduce your cost of carrying inventory, it’s important to reduce your inventory by eliminating obsolete, slow-moving, or dead stock inventory. KPI’S in logistics In the logistics area, KPIs are very important for measuring production, costs, and quality rates. Definition: the accuracy of picked orders, Formula: ((Total Number of Orders - Incorrect Item Returns)/total number of orders) x 100. Pro tip: almost all of them do, so be sure to check out our article on inventory management KPIs. If this number is low, then chances are an employee isn’t doing their job properly, or there isn’t a set process in place. Among others, these measurements refer to transportation, warehouse and supply chain aspects. JULY 14, 2013. If your inventory is inaccurate, that can lead to unexpected backorders but also unsatisfied customers and more generally, higher overall costs. What it means: This KPI tells you how much you will spend (as a percentage) to hold and store your inventory annually. Definition: The percentage representing cents per dollar that is spent on inventory overhead each year. This is a typical logistics KPI example to narrow down and precise as much as possible for a better service. They allow you to set a benchmark for month-on-month improvements. What it means: This metric measures the average time it takes to put away an individual item. Here is the complete list of the most important logistics KPIs and metrics, that we will discuss in this article in every detail: Shipping Time: Spot potential issues in your order fulfilment process, Order Accuracy: Monitor the degree of incidents, Delivery Time: Track your average delivery time in detail, Transportation Costs: Analyze all costs from the order placement to delivery, Warehousing Costs: Optimize the expenses of your warehouse, Number of Shipments: Understand how many orders are shipped, Inventory Accuracy: Avoid problems because of inaccurate inventory, Inventory Turnover: Track how many times your entire inventory is sold, Inventory to Sales Ratio: Identify a potential overstock. What it means: Get this number as high as you can and keep aiming to get it higher. Indeed, if the amount of time between the moment the customer placed his order and the moment that order is prepared to be shipped is too long, that can show some trouble in the process that need to be fixed. 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