Key Warehouse Performance Metrics: How to Measure Success

The E-commerce boom experienced in recent years has made warehouses a vital component of modern supply chains. With many businesses now relying heavily on online sales, efficient warehousing is essential to keep operations running smoothly.

To ensure your warehouse meets your business's and customers' needs, it's important to measure its performance. To do that, you should track key performance metrics such as order accuracy, picking speed, cost per order, and many more, as you'll discover in this article.

But it doesn't stop there; after tracking these metrics, you want to compare them with industry standards and optimize them accordingly. This will allow you to identify areas for improvement and make the necessary adjustments to increase efficiency, lower costs, and, ultimately, boost profitability.

Here are the top six performance metrics you should track and how to optimize them for warehouse success.

1. Order Processing Time

How quickly do customer orders get processed and fulfilled from start to finish? Tracking order processing speed is a key metric to measure the efficiency of your warehouse operations. The faster orders are processed, the greater customer satisfaction and retention. You'll also be able to process more orders within a specified period, improving the bottom line.

So, how do you improve order processing time for warehouse success? Below are a few practical strategies you can employ today:

• Streamline the process. Automate manual tasks, configure your inventory management system to quickly track orders, and use barcode scanners to speed up order picking.
• Train staff on the proper procedures for processing orders efficiently.
• Schedule regular maintenance of warehouse equipment to ensure it's working properly and won't cause delays.
• Streamline communication between departments to reduce errors and speed up order fulfillment.
  
  

2. Inventory Accuracy

Nothing hurts warehouse operations and customer experience like order delays and stockouts due to inaccurate inventory counts. Inventory accuracy is a crucial metric, as it measures the accuracy of inventory counts, including the number of items in stock and their location. This helps ensure the right amount of stock is available, and orders are promptly fulfilled.

You can optimize inventory accuracy by:

• Utilizing an automated system to track stock levels in real time. This way, you'll always have an up-to-date picture of your inventory and be able to identify any discrepancies quickly.
• Maintaining a regular cycle count schedule to ensure inventory accuracy. This will help you identify errors and losses from theft, damage, and obsolescence early on.
• Utilizing barcode scanners to quickly scan each item as they come in or out of the warehouse. This allows for accurate tracking and reduces manual counting errors.
  
  

3. Capacity Utilization

Capacity utilization is a metric that measures the efficiency of warehouse operations in terms of space, labor, and equipment. It also helps identify areas for improvement to maximize your warehouse's capacity and boost efficiency. A higher utilization rate indicates that the warehouse uses its space more efficiently. But there's always room for improvement.

To optimize capacity utilization:

• Analyze data from your WMS (warehouse management system) to understand how to use existing resources better. For example, you can identify overstocking of certain items and take measures to reduce it.
• Utilize space-saving technologies such as automated storage and retrieval systems, which compactly store items. This can increase storage capacity by up to 300%.
• Improve the layout of your warehouse. Place frequently used items closer to shipping areas to reduce order picking time.
  
  

4. Turnaround Time

How long does it take to receive an item from when it's ordered to when it's delivered, including the processing time? You should keep the turnaround time as short as possible and optimize operations to improve speed. The reward? You'll enjoy increased customer satisfaction, improving retention and customer loyalty.

To reduce turnaround time:

• Train staff on the proper order fulfillment processes to speed up the process.
• Streamline communication between departments. Ensure all stakeholders are on board and can communicate effectively with each other.
• Invest in advanced shipping software to speed up order processing and fulfillment. This will help you identify the fastest and most cost-effective shipping routes.
• Implement an automated system to track orders in real-time so customers are informed of their order's progress.
  
  

5. Order Accuracy

Order accuracy is a key metric that measures how accurately an order has been fulfilled, including the right quantity and quality of items picked. A high order accuracy rate will reduce costs associated with address correction and returns due to incorrect orders. It also boosts customer satisfaction as they receive the right product on time. And if you supply to retail stores, it'll ensure that you don't lose out on potential sales due to incorrect orders.

To achieve order accuracy, you need to:

• Utilize barcode scanners or RFID tags to accurately track each item as it moves in and out of the warehouse. This eliminates manual counting errors.
• Implement automated systems to track orders in real-time, so you can quickly identify and rectify any errors.
• Train staff on order fulfillment processes to ensure accuracy and avoid delays. Set clear guidelines and provide regular refresher courses to keep their skills up-to-date.
  
  

6. Cost Per Order

Perhaps the most influential metric in measuring warehouse success is cost per order. This metric measures how much it costs to fulfill a single order, taking into account labor, materials, shipping, and overhead costs. As with any other cost, you should keep the CPO as low as possible.

To reduce the cost per order:

• Use the latest technology to streamline operations and reduce labor costs. Automated systems like warehouse robotics can handle complex tasks more quickly and accurately, with fewer errors.
• Utilize space-saving technologies such as automated storage and retrieval systems to save on warehouse space costs.
• Optimize your inventory levels to avoid stockouts or overstocking. This will help you control your inventory costs.
• Choose the most cost-efficient shipping options to save on delivery costs. Invest in software to compare different carriers and their rates to get the best deal.

Eclipse IA can Help with Measuring Success Through Our CPU Solution!

Key warehouse performance metrics are essential for measuring success and optimizing operations. The six main metrics are capacity utilization, turnaround time, order accuracy, cost per order, inventory turnover rate, and stock availability. You can use existing data from your WMS to understand these metrics better and track them over time. You can also use this data to set benchmarks, track progress over time, and make data-driven decisions to improve warehouse efficiency and productivity.

At Eclipse IA, we're at the forefront of transforming the modern supply chain workforce with our team-based cost-per-unit (CPU) pay model, which is designed to help you recruit and engage best-in-class warehouse workers who will beat established industry benchmarks. Contact us today to learn more about our unique CPU solution that differentiates us from traditional staffing models and how we can help you measure and maximize success!