When it comes to warehouse management, data is especially crucial as the more data you can gather, the better the decisions you can make. For effective warehouse management, you must prioritise WMS KPIs as it will assist in gaining an understanding of your warehouse efficiency. We will look at some of the WMS KPIs that you should start tracking.
Warehouse management software (WMS) consists of processes that enable businesses to administer and control their warehouse operations from when goods enter their warehouse until they move out. Using WMS reduces the chances of errors occurring when products are shipped. It also assists businesses in fulfilling their orders more rapidly and can trace ordered products in the warehouse instantly.
If you are looking to enhance warehouse efficiency, you must think about key performance indicators (KPIs) for your warehouse. Keeping an eye on KPIs helps you understand your operations, improving your warehouse efficiency. We will explore the five most essential WMS KPIs that your business needs to start tracking.
- Receiving and Put-Away KPIs
The time it takes to load items off a truck and onto the shelves will affect everything in the supply chain. Therefore, understanding these KPIs will enable you to determine where your receiving and put-away processes are doing well and where improvements could occur. To calculate your receiving efficiency, you should divide the volume of received goods by the number of labour hours in the same timeframe. Your receiving efficiency will always increase as your warehouse workers become more experienced. If the numbers for your receiving efficiency indicate a downward trend, then it may be time to re-examine your receiving process.
The put-away KPI looks at the accuracy rate for items employees put on the shelf. If there is a 100% put-away rate, you need to examine where errors occur, as this is usually due to mixing up similar products or learned mistakes occurring. For the success of the put-away KPI, employees should be putting away inventory correctly the first time, every time.
- Shipping KPIs
The KPIs related to this category include the order cycle time or the time it takes a customer’s order to ship once they have placed an order. The less time spent during this process, the more efficient your business is in this category. However, if your order cycle times are high, then this is an indication that they may be issues in packing, picking or shipping workflows.
- Storage KPIs
The storage KPI relates to how much it costs to keep your products on the shelves, and it is crucial to keep an eye on these KPIs since inventory is capital. One of the essential KPIs in the storage category is inventory carrying costs, and the measurement of this KPI will inform you of how much you spend storing your inventory. Storing inventory is also linked to your capital, so this number must be as low as possible. Divide your carrying costs by the overall inventory costs to calculate carrying costs.
Another KPI that relates to storage is the backorder rate, which measures unfulfilled warehouse orders. This number should be at 0% in a perfect world, but it will significantly depend on how quickly you can restock your shelves. To calculate the backorder rate, divide the number of delayed customer orders by the number of total customer orders. Once you have this, multiply that number by 100 to get the percentage.
- Picking KPIs
When customers are shopping online, they will do so by searching for the product they have in mind, and it can be extremely frustrating for them if they receive the wrong item. This isn’t only an issue for customers, but it can cost you and your customers money. Therefore, you must improve order picking accuracy and productivity to lower costs and make your customers happy. Order picking accuracy is calculated by subtracting the number of incorrect item returns by the total number of orders. Divide the figure you got by the total number of orders, and then multiply it by 100, so you get a percentage.
- Returns Process KPIs
Product returns are inevitable regardless of what the reason for them is. Some of the reasons why returns occur are someone ordering the incorrect item, the business sending the wrong item, or the items being damaged when they arrive. The primary KPI you should measure in this category is the rate of order returns, and this is calculated by dividing the number of returned items by the total shipped items. You can take this step further by calculating the number of damaged items returned by the total number of shipped items. You should also determine how quickly you can put returned products back on the shelves or the speed at which you deliver the correct items to customers.
Since data is the first step in optimising your warehouse, you should understand how to use the WMS KPIs. Taking the time to assess your WMS KPIs routinely will enable you to understand the performance of your warehouse, which allows you to make well-informed executive decisions.