Measuring Warehouse Performance
As 2022 quickly comes to a close, companies plan for next year. Third-party warehouses and their customers need a set of performance metrics (KPIs) to establish the performance of their warehouses.
Here's a list of the major categories to discuss with your provider:
- Fulfillment: One of the most important metrics to agree on are the fulfillment metrics. This process begins when an order is placed and culminates when the order is delivered. Key processes to be measured are:
- Order Fill Rate. Anything under 94% probably highlights some issues.
- Order Timeliness. The percentage of orders being fulfilled in the agreed-upon time.
- Picks per Hour. Measuring the warehouses' throughput.
- On-Time in Full. Percentage of orders received by the end user in an agreed-upon time frame.
- Inventory Accuracy: Comparing the physical counts to the inventory records.
- Overall Throughput. Tracking how much product is received and shipped through the warehouse.
- Order Accuracy. This critical KPI tracks order accuracy as reported by the customers. It will have a direct reflection on Inventory Accuracy and On Time in Full.
- Chargebacks. Tracking customer chargebacks and using this metric to improve the process to minimize or eliminate customer chargebacks.
- Inventory Turns. Most warehouses can track inventory turns, providing a metric to analyze the overall health of the product mix.
- Dead Stock. Third-party warehouse space is limited; too much dead stock can affect the other performance metrics being tracked.
- Supplier KPIs. Most B-to-B customers have their own vendor scorecards they evaluate. Managing these scorecards is critical to minimizing chargebacks.
This is the best time of year to meet with your providers and establish a KPI program to meet your specific business needs.