Control these indicators and improve your warehouse logistics

Why do we need to measure management of our warehouse?

What is not measured or controlled cannot be improved.

The warehouse is one of the company’s main areas and its correct management is fundamental for ensuring company success. Measuring and controlling the main processes of the logistics activity that takes place in the warehouse will allow us to identify our strengths and weaknesses and to identify opportunities for improvement.

But measuring the processes that take place in the warehouse is of no value per se. These measurements need to be aligned with the company’s objectives. Also, unexpected circumstances, as in the case of Covid, force companies to constantly analyse data to obtain a global vision of the situation so that decisions can be made, reacting swiftly and appropriately. Now more than ever, quickly adapting to changes is proving to be one of the most valuable skills.

Therefore, irrespective of the size of the company or working with a specific warehouse software, it is necessary to control the actions that take place inside the warehouse. Otherwise, how can we anticipate a stockout? What is the warehouse capacity for managing and dispatching orders? Or, how will we know if there are bottlenecks in reception?

How can we measure to improve warehouse logistics management?

To measure and quantify our work we will use KPIs (Key Performance Indicators). These indicators are important reference points that will help us to measure whether or not we are fulfilling our targets. Indicators must be measurable over time, quantifiable, centre on a single aspect to be measured, and be relevant to our goals.

Every warehouse manager knows that warehouse management needs to be measured and controlled, but often these metrics are not correctly used because they do not align with the company’s objectives, or because the information obtained is not adequately interpreted. Therefore, to define the metrics, we will choose those that help us to measure the key processes and activities for achieving the goals of the organisation.

There are a series of processes that we ought to measure as a general rule, such as goods reception, dispatch, inventory, order management, warehouse occupancy, or transport. But, what are the main indicators every company ought to control to assess the different phases of a warehouse’s logistics activity?

 

INDICATORS FOR MANAGING INCOMING GOODS RECEPTION

• Time to inventory goods received

Time taken between receipt of incoming goods and placement of the stock in the warehouse. Reflects the warehouse’s operational capacity to inventory goods received.

• Number of orders received per hour

This KPI helps to detect order reception peaks, for the purposes of coordinating arrivals with suppliers.

• Number of orders registered per hour

Provides information regarding operator productivity and other factors intervening in goods reception.

• Number of complete orders registered per day and supplier

Provides information on the percentage of each supplier’s goods that arrive in perfect condition. This indicator provides information on supplier quality of service.

• On-time deliveries by suppliers per day

Percentage of suppliers who deliver the goods on time. Offers information regarding supplier efficiency.

 

INDICATORS FOR MANAGING DISPATCH OR OUTGOING GOODS

• Line fill rate

% of complete lines satisfied for all orders. Reveals the operational efficacy of the warehouse in dispatching orders and efficacy meeting customer demand.

• Order fill rate in time

Measures the number of orders we dispatch to clients within a period compared to the orders requested. It is important to know whether the warehouse adequately manages and dispatches orders.

• Lines dispatched per hour

Offers information regarding warehouse processes and operator performance.

• Orders dispatched per hour

Indicates the warehouse productivity level.

• Internal order cycle time

The time it takes between the order arriving in the warehouse and leaving for delivery. Provides information on the warehouse’s capacity to meet demand and detects delays in order preparation.

• Ratio of orders prepared on time for dispatch

Percentage of completed orders for dispatch on the planned dispatch date.

 

STOCK OR INVENTORY INDICATORS

• Merchandise stock levels by reference

Levels of stock available in the warehouse for each reference. Provides data for optimum planning of procurement to avoid stockouts.

• Backorders / outstanding orders

Number of orders unable to be prepared due to lack of stock for several reasons. Provides stockout data and helps to identify the causes of the stockout.

• Obsolete inventory / dead stock

Stored inventory with no market demand. Avoids stock surpluses and indicates whether a stock clearance is required.

• Stock shrinkage

Compares the theoretical stock with the real stock available to note whether there is any unknown impairment or deterioration of the stock. It lets us know whether there is a risk of being left without stock and whether there may be inventory shrinkage due to theft, damage, loss…

• Stockout

Number of orders not met due to insufficient stock. Knowing how many times there are stockouts will help us to find a balance between demand and the stock required. Having surplus stock can be just as counterproductive as not having safety stock.

• Stock rotation

Reflects the frequency with which the goods are replenished and offers information regarding which products sell and which do not.

 

ORDER MANAGEMENT INDICATORS

• % of incident-free completed orders

Helps to reduce errors in order preparation.

• Complete orders dispatched

Allows errors in order preparation to be identified and reduced.

• Level of fulfilment of deliveries to clients

Provides data of orders delivered on time out of the total orders delivered to improve the quality of service to the client.

• Average order management cost

Average cost of all phases that take place from the moment the order is received until it is delivered. Allows us to identify whether we can reduce costs in any of the phases

• Order cycle preparation time

Time that passes between receipt of an order and its delivery. This data helps us to assess whether order preparation times need to be shortened. It is the way to achieve punctual deliveries and guarantee customer satisfaction.

 

WAREHOUSE UTILISATION INDICATORS

• Warehouse occupancy volume per type of location

Helps us to know whether we are using the full capacity of the space available, whether we need to restructure the warehouse, whether an extension is required, etc.

• Warehouse occupancy volume per article reference

Allows us to identify the destination of locations according to articles and to optimise use of the warehouse.

• Days on hand of goods

Measurement of the time a reference remains in the warehouse.

 

DISTRIBUTION AND TRANSPORT INDICATORS

• Average transport cost

Calculates the average costs of fuel, driver sustenance, truck maintenance, etc., for all trips made. This indicator controls this cost to see if it requires adjustment.

• Load mix

Allows us to know whether the truck’s capacity versus the load volume transported by the vehicle is cost-effective or not. Provides data of the vehicle’s minimum load to be profitable.

• On-time deliveries

Percentage of deliveries made within the estimated timeframes.

 

At POLYPAL we configure your warehouse to be as dynamically adaptable as possible to improve your capacity to respond to situations that require quick adaptation due to unexpected changes in demand.