How to Evaluate Warehouse Efficiency

How to evaluate warehouse efficiency – 7 KPIs
Warehouse efficiency – it’s a measurable value tied to key business processes that’re important for determining long-term profit and production goals. Warehouse Key Indicators – KPIs the achievement of which’ll allow the company to gain competitive advantages.
 
📌1 – Effectiveness of taking goods to the warehouse (one of the most critical processes)
Main metrics:
✔The cost of unloading –  the cost of labor, handling and equipment
✔Efficiency of processing the received goods— calculated in terms of labor costs by measuring the amount of inventory per employee per hour
✔Acceptance accuracy – % of errors during receiving goods in terms of quantity and quality
✔Utilization of labor and equipment – % of labor and material handling equipment
✔Cycle time – total time spent from the moment of unloading to the placement of goods.

📌2. Accuracy of assembly and packaging
Main metrics:
✔ Cost — costs for each line of the order, including assembly, labeling and packaging.
✔ Productivity — number of rows processed in 1 hour.
✔ Duration — time required to complete one order.
✔ Accuracy — % of orders collected and packaged without errors.
 
📌3. Inventory maintenance costs
The longer the product is stored in the warehouse, the more it costs the business.
Total maintenance costs —the sum of all expenses of the company for storing inventory for a certain period of time (Cost of goods, Costs of storage, Equipment and IT, Consumables, Taxes)
 
📌4. Inventory turnover
Main metrics:
✔Cost of inventory — cost of storage over a period of time, cost of handling in storage, maintenance costs, damage, shelf life… The longer an item is kept in a warehouse, the higher the cost to the warehouse.
✔Ratio Stock/Sales — this measurement allows you to determine the monthly increase in inventory against the declining sales.
 
📌5. Number of returns
— An indicator that gives an understanding of customer satisfaction. The key to using this metric effectively is segmenting by return reason.
 
📌6. Lost sales
— a key indicator which allows making deep analysis of procurement forecasting.
A high rate of not confirmed orders means that there are many applications for goods that are not in stock. This may be the result of:
– Low-quality Procurement Forecasting and S&OP
– Ineffective inventory management
– Lack of warehouse turnover analysis
 
📌7. Order Lead time.
– the average time between a customer order and receiving the product. The less time you need to complete an order, the happier C