9 Ways to Measure Warehouse Efficiency

When it comes to measuring warehouse efficiency and productivity, the first step is deciding which metrics are the most important. Utilizing a warehouse management system that tracks major standards of performance will help identify weak points in your process and staffing so that you can make improvements and adjust expectations accordingly. Here are some of the most common efficiency measurements that warehouses use today:

Umbrella Metrics

Your customers don't know how your warehouse runs, how many steps are involved in the order fulfillment process, or whose fault it is when an order is wrong. All they know is that the order they received either is or is not what they wanted. Your warehouse management system should be tracking all orders as one huge umbrella that can then be broken down and tagged with further information about where the error was made. For instance, you should be able to see how many perfect orders were fulfilled as well as the number of bad orders that were caused by:

• Accuracy issues
• Out-of-stock products
• Late deliveries
• Damaged products

This one big statistic will help you see the customer experience from a customer relations perspective.

Productivity and Labor Metrics

This is usually the area where a warehouse management system makes the biggest difference. Your tracking system should allow you to measure:

• Fill rate: The number of items that are being picked as compared to the number of items that are being ordered.
  
  
• Order accuracy: The number of items that are being correctly scanned into and out of bin locations.
  
  
• Shipping timeliness: The number of orders that are being filled and shipped according to the promised delivery dates.
  
  
• Downtime: The amount of time between items being picked, usually due to distance between bin locations.

These metrics allow you to not only see how your team is doing under various work loads, but also how well organized your warehouse is. Accuracy errors are caused by mis-scanning products, shelf IDs, and purchase orders. Excessive downtime or time that orders are sitting on the dock waiting to be shipped out can be signs that improvements are needed in your warehouse's organizational structure.

Stock Metrics

There are some situations that are beyond the control of your warehouse floor staff. A solid warehouse management system will also take into account complications in the order fulfillment process caused by items that are either out of stock, in the wrong locations, or outdated.

• Out-of-stock items: Items that are on back order from the manufacturer, causing orders to get backed up.
  
  
• Turnover: If your warehouse is adhering to first-in, first-out policies, you need to know how long products are lingering in your warehouse, especially if they have expiration dates.
  
  
• Missing items: Items that are showing as available in the warehouse management system but are not in their correct locations. This is another form of accuracy measurement.
  
  
• Seasonal trends: As the seasons change, customer behaviors change to match. By tracking trends according to the seasons and holidays, your business can plan to have high demand items in stock when you need them most and adjust stock accordingly year-round.

Starting from the top down, these nine metrics can help you improve your warehouse efficiency. By first looking at how customers are experiencing your services, you can break down the common problems that are being reported. Further disassembling productivity and labor into accuracy and speed metrics helps identify problems during the fulfillment process. Lastly, staying mindful of actual stock errors, vendor issues, and upcoming events will help balance the struggles that pickers face when trying to fill orders.