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Warehousing is a dynamic business which requires close monitoring. A warehouse generates huge amount of data that can be productively utilized. In today’s world, warehousing is a highly competitive business with demanding customers. Most times, the customers define KPIs as part of service agreement.
Warehousing KPIs – What to Measure and What to Improve
Key performance indicators, more commonly known as KPIs play a key role in helping an organization define and measure its progress towards the defined goals. Once the mission has been analysed and the goals have been defined, KPIs are put in place for measuring the organization’s progress.
KPIs are measurements that can be quantified and agreed to beforehand. KPIs vary across different organizations and industries, and stay for a long time without changing often. They reflect the goals of the organization and are critical to organization’s success.
Importance of KPIs
“Why do we need KPIs” is an important question that comes to mind when we talk about key performance indicators. Following are some reasons why KPIs are required.
Once the organization’s goals are set, there should be some way to assess the organization’s performance so that its progress towards the defined goals can be measured. This performance cannot be improved unless it can be measured.
Every business requires a score card to keep track of its performance
Benchmarking helps identify your performance compared to your previous performance as well as against your peers.
KPIs in a warehouse
Warehousing is a dynamic business which requires close monitoring. A warehouse generates huge amount of data that can be productively utilized. In today’s world, warehousing is a highly competitive business with demanding customers. Most times, the customers define KPIs as part of service agreement.
Choosing the criteria for defining the KPIs is an important process. Different industries/business models require different measurements. For example, KPIs for 2PL warehouse will be different from that of a 3PL warehouse; Similarly, a FG warehouse’s KPIs will be quite different from that of a RM warehouse. Hence, before defining a KPI, relevant parameters need to be measured for a specific warehouse. It is good to identify the various key processes in a warehouse and attach a KPI to the specific process. KPIs must always align with business requirements.
Top KPIs
The Supply Chain Operational Reference (SCOR) model, a product of the Supply Chain Council, provides a framework that links business processes, best practices, metrics and technology features in a unified structure. SCOR identifies over 200 KPIs for the purpose of monitoring the overall performance of the supply chain. These form the top level or the Level 1 performance metrics. It also defines focused metrics to help specific processes improve. These form the level 2 and 3 metrics.
Following are some of the top level performance attributes and the associated metrics. Most of these performance metrics can be applied to measure the performance of a warehouse processes as well.
Choosing the criteria for defining the KPIs is an important process. Different industries/business models require different measurements. For example, KPIs for 2PL warehouse will be different from that of a 3PL warehouse; Similarly, a FG warehouse’s KPIs will be quite different from that of a RM warehouse. Hence, before defining a KPI, relevant parameters need to be measured for a specific warehouse. It is good to identify the various key processes in a warehouse and attach a KPI to the specific process. KPIs must always align with business requirements.
The most important K Pi's for warehouse are,
1- Sales return in the warehouse.
2- Staff turnover.
3- Inventory turnover and accuracy in the warehouse.
4- Safety and security policy.
5- warehouse budget.
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