At the warehouse, numerous operations are carried out daily — from receiving goods to their dispatch. The accuracy and timeliness of these processes not only determine the efficiency of the warehouse but also the overall success of the business. One of the key tools for controlling and improving this efficiency is tracking and analyzing Key Performance Indicators (KPIs). In the modern world, where every minute and every resource matter, this becomes a necessity.
However, many companies encounter the challenge of not understanding which warehouse KPI metrics are suitable and necessary during the implementation phase. In our article, we will provide KPI examples for key warehouse processes. These examples will assist you in optimizing your warehouse operations and achieving high performance.
- What Are Warehouse KPIs?
- Why Is It so Important to Track Warehouse KPIs?
- Warehouse Management KPIs
- Warehouse Receiving KPI and Placement of Goods
- Shipping KPIs
- KPI for Customer Service
- Cost Management KPI
- Warehouse Safety KPI
- Complete Control of Warehouse Operations with Ysell.pro
What Are Warehouse KPIs?
Key performance indicators (KPIs) are metrics used to measure the efficiency and effectiveness of warehouse operations. They act as a compass, guiding organizations toward operational excellence. KPIs provide valuable insights into the performance, productivity, and profitability of warehouse operations. This enables the identification of areas for improvement, efficient resource allocation, and the implementation of corrective measures when necessary.
The purpose of measuring key performance indicators (KPIs) is to provide a clear understanding of what needs to be achieved and to direct the efforts of all stakeholders towards achieving the common goal. For example, if the established shipping target is 500 units of goods per day, but the warehouse only ships 400 units, considering the cost of the goods and the potential profit from their sale, this 20% underperformance can significantly affect the company’s financial performance. By tracking KPIs, you can identify this shortfall, motivate employees, increase their productivity, and improve the company’s profitability.
Why Is It so Important to Track Warehouse KPIs?
Tracking KPIs is essential for the smooth and efficient operation of any warehouse. By monitoring key metrics, you can obtain valuable insights into various aspects of your operations, including:
✔ warehouse productivity;
✔ accuracy of operations;
✔ customer satisfaction;
✔ economic efficiency.
You’ll be able to understand if your efforts are paying off and to what extent. Regularly tracking your warehouse KPIs will provide you with a number of significant advantages:
Process optimization
By measuring and tracking KPIs, you can identify bottlenecks, inefficiencies, and irrational areas in warehouse operations. This will enable you to implement strategies for optimizing warehouse operations.
Goal setting assistance
Having a clear understanding of the current level of performance, you can set achievable goals for your team. This motivates employees and helps direct their efforts towards improving the overall efficiency of the warehouse.
Budgeting assistance
Analyzing warehouse KPIs allows for more accurate cost forecasting and budgeting. You’ll be able to manage the company’s financial resources more efficiently.
Informed decision making
With KPI data, you can analyze the current state of affairs and make informed decisions about the need to adjust workflow processes or redistribute resources.
Improving customer service
By regularly tracking and analyzing KPIs, you can continuously enhance the efficiency and effectiveness of your operations. This, in turn, will lead to increased customer satisfaction.
Cost reduction
KPI analysis will help identify measures to reduce costs, improve resource utilization efficiency, and optimize processes. Ultimately, you’ll eliminate all unnecessary expenses.
Warehouse Management KPIs
In inventory management, KPIs are indicators that track the availability of stocks, their receipt, and shipment. They help assess how successfully your company manages its inventory and achieves its goals in this area.
Here are the key KPIs that will help you control your inventory:
1. Inventory turnover
This metric measures the speed of inventory turnover over a specified period. This KPI is crucial for maintaining an optimal balance between stock levels and customer demands. The formula for its calculation is as follows:
IT = COGS / Inventory
Here:
COGS (Cost of Goods Sold) – the cost of goods that have been sold during a specific period of time.
Inventory – the average volume of stock held in inventory during this period of time.
High inventory turnover indicates that your warehouse efficiently utilizes its resources. You quickly refresh your product range and minimize the risks associated with obsolescence or excess inventory. Conversely, low turnover may indicate issues in inventory management. These could include inaccurate demand forecasts, ineffective management, or marketing and sales problems.
2. Inventory accuracy
The warehouse metric measures the alignment between the actual quantity of goods and the data in the warehouse management system or inventory database. The formula for its calculation is as follows:
IA = (Electronic Record / Actual Quantity) × 100%
Here:
Electronic Record – the quantity of goods listed in the company’s accounting system or any other electronic document that reflects the expected quantity of goods in the warehouse.
Actual quantity – the quantity of goods that was counted during the warehouse inventory through physical counting or inventory checking.
For companies that own inventory, it is extremely important to have accurate and up-to-date data to avoid stockouts or overstocking. Such situations can lead to loss of sales or increased warehouse maintenance costs.
3. Stock-out rate
The metric measures the percentage of cases where the item ordered by the customer is unavailable in the warehouse and cannot be delivered on time. It will help your company assess inventory management effectiveness and reduce losses associated with missed sales due to product unavailability. The formula for calculating the stockout rate is as follows:
SOR = (Number of Stockouts / Total Number of Orders) × 100%
Here:
Number of stockouts – the number of orders in which the item was unavailable in the warehouse at the time of attempted delivery.
Total number of orders – the total number of orders processed over a specific period of time.
The lower the stockout rate, the better it is for your company. A low percentage indicates more effective inventory management and greater availability of goods for customers.
4. Damage rate
The metric is used to assess the volume of damage or losses caused by damage or spoilage of goods during their storage, handling, or movement in the warehouse. It can be calculated using the formula:
DR = (Number of Damaged Goods / Total Quantity of Goods) × 100%
Here:
Number of damaged goods – the quantity of SKUs (Stock Keeping Units) that are unfit for sale or use.
Total quantity of goods – the total quantity of SKUs stored in the warehouse during a specific period of time.
For example, if out of 1000 units of goods stored in the warehouse, 50 units are in an unsalable condition, the damage rate would be 5%. A high percentage may indicate inadequate security measures, packaging mismatches, or insufficient staff training.
5. Warehouse capacity usage
This is one of the key warehouse KPIs that measures space utilization efficiency. It evaluates how effectively you use available warehouse space for storing inventory. The metric determines the percentage of occupied space in the warehouse to the total available space:
WCU = (Occupied Space / Total Available Space) × 100%
Here:
Occupied space – the area of the warehouse that is used for storing goods or materials.
Total available space – the total area of the warehouse available for storing goods or materials.
By monitoring warehouse utilization, you can identify unused or overloaded areas in the warehouse. This will allow you to optimize layout and storage methods for maximum space utilization.
Warehouse Receiving KPI and Placement of Goods
Correct and efficient receiving of goods is a necessary condition for the smooth operation of the entire supply chain. This stage defines the beginning of the product lifecycle in the warehouse and directly impacts all subsequent processes, including storage, accounting, shipping, and delivery.
To track and control the quality of goods receiving at your warehouse, apply the following KPIs:
1. Receiving efficiency
These warehouse metrics will help your company determine how efficiently you use resources to process incoming goods.
The formula for its calculation is as follows:
RE = Volume of Received Stock / Number of Man-Hours Worked
Here:
Volume of received stock – the quantity of goods that have been successfully received at the warehouse during a specific period of time.
Number of man-hours worked – the total number of hours spent on the goods receiving process, including time spent on unloading, inspection, placement, and inventorying of goods.
Insufficient receiving quality can lead to errors in inventory management, loss of goods, or even delivery delays. This can result in customer dissatisfaction, increased order processing time, excessive inventory management costs, and even customer loss.
2. Supplier return rate
The metric measures the percentage of goods that were returned to the supplier due to defects, incorrect delivery, or order mismatch. Its calculation involves the following formula:
SRR = (Number of Returned Goods / Total Quantity of Received Goods) × 100%
Here:
Number of returned goods – the quantity of SKUs that were returned to the supplier during a specific period of time.
Total quantity of received goods – the total quantity of SKUs received from the same supplier during the same period.
A high return rate may require a review of relationships with the supplier or changes in the procurement process.
3. Dock-to-stock cycle time
The metric allows for the assessment of the speed of processing incoming goods. It includes the time for receiving goods, checking their quantity and quality, and preparing goods for order fulfillment. A short cycle time indicates fast inventory processing and reduces customer waiting time.
To calculate the metric, you need to divide the total processing time of goods from arrival at the dock to readiness for placement in the warehouse by the number of shipments. This approach will allow you to assess the average processing time of each shipment of goods in the warehouse and take appropriate measures to speed up this process.
4. Putaway cycle time
This metric determines the average time spent on placing received goods from the moment they are received to the moment they are actually placed on the shelves. Its calculation involves the following formula:
PCT = Total Time from Receipt to Storage / Number of Positions
Here:
Total time from receipt to storage – the time spent on placing goods in the warehouse, from the moment they are received from the supplier until they are officially available for shipment or use.
Number of positions – the total quantity of goods received in the warehouse over a specific period of time.
Reducing the placement cycle time will improve overall warehouse operations efficiency, reduce the cost of storing goods, and increase customer satisfaction by enabling faster order processing.
5. Put away accuracy
The metric allows you to calculate the percentage of correctly placed inventory units in the warehouse relative to the total quantity of inventory. It looks like this:
PAA = (Number of Correctly Placed Inventory Units / Total Number of Inventory Units) × 100%
Here:
Number of correctly placed inventory units – the quantity of goods that have been placed in the warehouse in accordance with pre-established rules and instructions, as well as information in the warehouse management system.
Total number of inventory units – the quantity of goods present in the warehouse and subject to inventory.
A high percentage of accuracy indicates effective warehouse space management. Conversely, a low percentage may signal the need to optimize placement and labeling processes to prevent errors in the future.
Shipping KPIs
Every online company aims to meet customer needs on time and with minimal costs. One of the key aspects of this process is accurate and timely order shipping. To assess how successful your company is in handling this task, the following KPIs will help:
1. Order picking accuracy
This is one of the most important warehouse KPIs. It measures the percentage of orders that have been picked and shipped without errors.
The formula for its calculation is as follows:
OPA = (Number of accurately picked orders / Total number of picked orders) × 100%
Here:
Number of accurately picked orders – the quantity of orders that have been picked and shipped to customers without errors or discrepancies.
Total number of picked orders – the quantity of orders that have been picked and shipped to customers over a specific period of time.
A high percentage of accuracy is crucial for customer satisfaction. It ensures that your customers receive their orders promptly and accurately.
2. Order lead time
This metric is an important indicator for assessing the efficiency of the order processing and delivery process. It measures the average time taken to fulfill an order from the moment it is placed by the customer to the moment of delivery.
The formula for calculating this KPI is as follows:
OLT = Total time from order to delivery / Number of orders.
Here:
Total time from order to delivery – the time taken to fulfill an order, starting from the moment the order is placed by the customer and ending with its delivery.
Number of orders – the total quantity of orders fulfilled over a specific period of time.
Timely order fulfillment will make your company more appealing to customers and enhance their experience with your brand. This will contribute to profit growth through repeat orders and positive reviews.
3. Perfect order rate
This metric determines the percentage of orders that have been processed and delivered to customers without any defects or errors. It is calculated using the formula:
POR = (Number of perfect orders / Total number of orders) × 100%
Here:
Number of perfect orders – the quantity of orders that have been processed and delivered to customers without any defects or errors.
Total number of orders fulfilled – the quantity of orders processed over a specific period of time.
Improving these warehouse metrics can lead to increased customer loyalty, reduced costs associated with returns and complaints, and strengthened market positioning for the company.
KPI for Customer Service
Customer service is a crucial aspect of any business, reliant on the efficiency of order processing and delivery. To ensure alignment with customer expectations, track the following warehouse KPIs:
1. Order cycle time
This is the time required for processing, picking, packing, and shipping an order to the customer. This KPI is crucial as it directly impacts customer satisfaction. It’s calculated using the formula:
OCT = Total time of all orders / Number of orders
Here:
Total time of all orders – the time spent on completing all orders within a specific period of time.
Number of orders – the total quantity of orders completed during the same period.
A prolonged order fulfillment cycle can lead to delays in delivery and ultimately result in customer dissatisfaction. By monitoring this KPI, you can identify inefficient processes and take necessary measures to optimize them.
2. On-time shipment rate
Customers expect their orders to be delivered within the promised timeframe, and any delay leads to their dissatisfaction. This metric allows you to calculate the percentage of orders delivered to customers on time. By tracking it, you can identify any recurring reasons for delays and take corrective measures to ensure timely delivery.
The formula for calculating on-time delivery rate is as follows:
OTSR = (Number of orders delivered on time / Total number of orders delivered) × 100%
Here:
Number of orders delivered on time refers to the number of orders that were delivered to customers within the agreed-upon timeframe.
Total number of orders delivered refers to the total count of orders that were delivered to customers within a specific period of time.
3. Return rate
This is a Key Performance Indicator (KPI) that measures the percentage of orders returned by customers for various reasons. To calculate it, the following formula is applied:
RR = (Number of returned items / Total number of items sold) × 100%
Here:
Number of returned items refers to the quantity of goods that were returned by customers within a specific period of time.
Total number of items sold refers to the quantity of goods that were sold to customers during the same period of time.
A high return rate can indicate issues with product quality, packaging, or order accuracy. By tracking this KPI, you can identify trends or patterns in returns and take necessary actions to address root causes.
Cost Management KPI
For businesses, it’s important to have an understanding of where money is being invested and how quickly it returns as profit. The following warehouse KPIs will assist you in this:
1. Carrying cost of inventory
The metric represents the total costs associated with storing and holding inventory goods in the warehouse over a specific period of time. It includes various expenses incurred in the process of holding inventory. This may include rent, insurance, taxes, maintenance, and losses from obsolescence or spoilage of goods.
The formula for its calculation looks like this:
CCI = (Cost of Inventory Holding + Cost of Goods Sold) / Total Inventory Cost
Here:
Cost of inventory holding is the total amount spent on storing inventory, including warehouse rent, insurance, taxes, and other expenses.
Cost of goods sold (COGS) is the total cost of goods that have been sold during a specific period of time.
Total inventory cost is the value of all goods that are in stock at a specific point in time.
2. Picking and packing cost
This KPI reflects the expenses associated with the processes of assembling and packaging finished orders before they are shipped to customers. The metric includes various costs incurred during the execution of these processes. This may include labor costs, expenses for packaging materials, as well as costs for equipment and infrastructure required to complete the tasks.
3. Cost per order
This KPI measures the total expenses incurred per order processed in the warehouse. It includes all expenses related to the order fulfillment process, including processing, picking, packing, and delivery. The formula for its calculation is as follows:
CPO = Total Order Processing Cost / Number of Orders
Here:
Total order processing cost is the sum of all expenses associated with fulfilling orders by the company over a specific period of time.
Number of orders is the total count of orders that have been processed by the company during the same period of time.
By measuring the cost per order, you can assess the efficiency of your operations and identify opportunities to reduce costs and optimize processes.
4. Labor cost per order
This KPI measures the labor costs associated with fulfilling each order in the warehouse. It includes both direct labor costs, such as wages, and indirect costs, such as supervision and training. You can calculate it using the formula:
LCPO = Total Labor Costs / Number of Processed Orders
Here:
Total labor costs is the company’s expenditure on paying the wages of employees involved in order processing over a specific period of time.
Number of processed orders is the quantity of orders that have been handled by the company during the same period of time.
The higher the labor costs to fulfill an order, the less profit the company makes from each transaction. Optimizing workflows, increasing employee productivity, automating routine tasks, and providing staff training can help reduce these costs and increase profitability.
Warehouse Safety KPI
Safety in the warehouse is a crucial concern for any organization operating warehouse facilities. Key Performance Indicators (KPIs) related to workplace accidents in the warehouse can help ensure this safety.
1. Accidents per year
The metric represents the number of accidents that occurred in the warehouse during a specific period of time. It allows your company to assess the level of safety in the warehouse and the effectiveness of measures taken to prevent workplace accidents.
If the number of accidents increases over time, it may indicate the need for additional safety training or improvement of safety protocols. Decreasing this number is a sign of improving working conditions.
2. Time since last accident
This indicator allows you to assess the effectiveness of safety measures and protocols over a specific period. A longer time since the last accident indicates that the safety measures are successfully preventing potential hazards. Conversely, a shorter duration may indicate the need for improvement in training or equipment to ensure safety.
By regularly tracking this KPI, your company can continuously strive to create a safer working environment for its employees.
Complete Control of Warehouse Operations with Ysell.pro
The Ysell.pro warehouse management system provides an extensive set of built-in reports that will help you track warehouse KPIs in real-time. With an informative dashboard, you can promptly receive warehouse statistics, conduct analysis, and stay informed about its operational efficiency.
The capabilities of WMS Ysell.pro for tracking KPIs include:
✔ Monitoring the accuracy, speed, profitability, and safety of warehouse operations both overall and for each process individually.
✔ Control over the availability of each SKU and its movement history.
✔ Monitoring the efficiency of operations across multiple warehouses simultaneously.
WMS Ysell.pro is a convenient and powerful tool for controlling all warehouse processes. The system not only tracks but also helps optimize warehouse operations. By automating all processes from receiving to shipping, Ysell.pro enhances their accuracy and speed, contributing to the overall success of the business.
