Key Performance Indicators for Thin Margin Warehouses

How many of your orders are mis-packed, mis-shipped, or even unavailable to ship? This can cause a loss of revenue and vital data. Warehouse operations do not control sales, but they do control distribution, which is where maximum profit can be captured (or lost).

Warehouse businesses always operate on thin margins, so fine-tuning operational efficiency may well determine profitability or loss. This can only happen when measurement metrics are in place. This post describes some of the most critical key performance indicators (KPI’s) that should you should track.

Often, warehouse e-commerce companies assume that they are at maximum storing capacity and cannot expand. Your next move does not have to actually involve moving to a new building. Complete utilization of your warehouse space needs to be properly assessed to know if you are truly out of space. The right metrics will determine the amount of available space you can still use to optimize delivery and profitability.

KPI’s For Warehouses

Over 200 KPI’s monitor the overall performance of a supply chain to get a more granular picture of the warehousing business.

Note: Using a tablet-based fulfillment solution provides the real-time data in modern warehouses to ensure that the KPI’s are satisfied. The key areas for real-time data accuracy are receiving, put away, storage, pick and pack, and shipping.

And the Metrics Are…

Inventory Accuracy
In a 100% optimized warehouse model, nothing is as important as inventory accuracy. This has direct impact on working capital and order fulfilment capacity. Warehousing operations are increasingly looking at the KPI’s that have been used by the manufacturing sector for decades.

Cycle Time
Data regarding cycle time measures the total time taken since the material came in as inventory and was picked up by the shipper for delivery, as a part of the order. The shorter the cycle time, the more money available as working capital.

Productivity KPIs among e-commerce warehouses will measure the number of orders to be picked up by the shipper, per hour (or in real-time, using cloud based apps).

Overall Equipment Effectiveness (OEE)
OEE (overall equipment effectiveness) data shares whether equipment is being fully utilized. Underutilization of the equipment represents an opportunity for production capacity and profitability; overutilization may indicate higher maintenance and replacement costs. Least lean are idle equipment which depreciates without any return on investment.

Given the labor-intensive nature of warehouses, OEE is often recoded as Overall Employee Effectiveness. Ultimately the data collection allows warehouse operations to measure and understand the efficiency of warehouse operations. The finer the KPI, the deeper the control it can provide. While granular dissection of these data are terrific, ultimately the small e-commerce warehouse must pay closest attention to top line revenue, bottom line profits, and ROI (return on Investment).