Warehousing KPIs What to Measure and What to Improve

onpalms.com/blogs/warehousing-kpis-what-to-measure-and-what-to-improve/

By Yogesh Pathak
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 organizations 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 organizations 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 organizations goals are set, there should be some way to assess the organizations 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 todays 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 warehouses 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.

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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.

Attribute

Top Level Metric

Supply Chain Reliability

Delivery Performance
Fill Rates
Perfect Order Fulfilment

Supply Chain Responsiveness

Order Fulfilment Lead Times

Supply Chain Flexibility

Supply Chain Response Time

Production Flexibility

Supply Chain Costs

Cost of Goods Sold

Total Supply Chain Management Costs
Value-Added Productivity
Warranty/Returns Processing Costs

Supply Chain Asset Management Efficiency

Cash-to-Cash Cycle Time

Inventory Days of Supply
Asset Turn

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Following may be some key performance areas to consider for a warehouse and metrics to measure these
performance areas.

KPIs to analyse Business Performance

Business performance of an organization is normally measured by the revenues and profits it makes and the various
costs it has incurred. As such, some of the KPIs for business performance may be
Profits
Gross Profit = (Revenue Cost of Goods Sold)
Net profit = (Gross Profit Operating Expenses Taxes and Interest)

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Turnover/Revenue
Costs (various costs such as inventory, labour, machinery etc.)

KPIs to analyse Operational Efficiency

The efficiency with which a warehouse operates is decided by how well various factors such as people, machinery,
inventory, skill sets and processes are managed. Some of the KPIs for measuring warehouse operational efficiency
may be
Utilization (space, labour, equipment, etc.)
Wastage (wastage of inventory due to expiry or other reasons, man hours, skills etc.)
Fulfilment (timely order fulfilment, percentage of order fulfilment, accuracy of order fulfilment etc.)

KPIs to analyse Safety and Health-related Incidents

Health related issues have taken as much priority as business performance in recent times. They are usually
assessed in terms of safety measures taken to prevent theft, machinery related accidents, human safety, accidental
fire etc. Some KPIs for measuring these issues can be
Accidents related
[Lost time (in hours) due to accidents (including fatalities)] / (no. of hours worked)
(No. of fatalities)/(no. of hours worked)
Health related
Health and safety prevention costs within the month
Percentage of products/services assessed for health and safety impacts

KPIs to measure Eco-friendliness

This is another area that has taken a priority equal to that of business performance and operational efficiency. In
most countries, organizations are bound legally and are held responsible for corporate social responsibility. Some
KPIs in this area may be
Emissions
(CO2 tonnes/employee/month)
Greenhouse Gas (GHG) emissions/employee/month
Renewable energy usage
Percentage of materials used that are recycled input materials
Total on-site created energy

BI Dashboards to visually track KPIs in real time

PALMS Analytics is powered by QlikView, the fastest growing Business Intelligence (BI) product in the world.
Clear visibility of KPI through powerful, interactive Business Intelligence & Analytics dashboards is the significance
of this version. PALMS Analytics phenomenally improves a warehouses analytical capability by offering a

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performance management platform that truly helps you control costs, maximize profitability and boost your business
results.
Yogesh Pathak
Yogesh, a technology visionary with 12 plus years of experience, has tremendous exposure in
planning and executing enterprise level business solutions for varied industry verticals. Yogesh,
an engineering graduate started his career in mainframe & midrange systems and has delivered
& deployed various high end projects for global customers. He co-founded Technoforte software
in the year 2000 and since then is the architect of Technofortes technical team.
http://www.technoforte.co.in/

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