If you’ve heard about the opportunities and benefits that warehouse performance benchmarking can put within reach of your supply chain organisation, you might understandably be keen to get a benchmarking project under way.
Before embarking on such a project though, you’ll need to be very clear about exactly what you will measure.
Whether comparing performance across your own warehouses and DCs, or benchmarking your warehouse network against external organisations, there are a number of performance elements that should be taken into account.
Some Common-sense Warehouse Benchmarking Metrics
In this post, you can discover some common-sense warehouse metrics that should probably be included in your project, regardless of whether you are benchmarking internally or externally.
These KPIs will help you evaluate performance, choose an appropriate benchmarking comparison group, set targets, and stay on course to attain them.
We’ll begin with a few metrics relating to cross-functional/cross-enterprise order-fulfilment performance—typically known as “perfect order” measurement.
Perfect Order Warehouse Performance
Perfect order is an ideal warehouse performance benchmarking metric, because as a fulfilment measurement, it’s tracked by a great many companies. It’s also a performance elementin which warehouse operations play a central role.
Perfect order can be defined as the percentage of orders…
- Delivered to the right location at the right time
- Containing the right products, received in the right condition, by the right customer
- Correctly packaged in the right quantity
- Accompanied by the right documentationand last, but not least, correctly invoiced
If you know your warehouse processes, then you know that most of the conditions described above depend on their effectiveness, with picking and dispatch processes probably being the most critical.
With that in mind, the following three metrics should be seriously considered for inclusion in a warehouse performance benchmarking project:
Warehouse DIFOT: This is an overall measurement of order lines delivered in full and on time. Warehouse DIFOT will differ from the full supply chain DIFOT results, since a warehouse-specific measurement should only include processes controlled by the warehouse, such as picking and dispatch.
On-time Dispatch: By comparing dispatch-timeliness across your warehouse operations, or with those of peers and competitors, you’ll be able to evaluate your picking and loading processes to determine how well they support your dispatchers in getting outbound vehicles away on time.
Dispatch In-full: This metric complements “on-time dispatch” and tells you how effectively your teams are managing inventory, picking, and dispatch, and preventing errors from hurting perfect order performance.
Other Warehouse Performance Benchmarking Metrics
In addition to perfect order metrics, warehouse performance benchmarking should ideally include a comparison of warehouse running costs. The following metrics should help you with this and (like the perfect order KPIs already discussed)are in common use among supply chain organisations:
- Total labour costs as percentage of total facility costs
- Total property/occupancy costs as percentage of total facility costs
- Warehouse costs as percentage of gross sales
- Warehouse costs per sales order
- Cost per unit throughput (pallets, tonnes, cases or any other unit)
- Sales per cubic metre of warehouse space
You can also try to benchmark warehouse productivity, but this tends to require careful peer-group selection if you are conducting external benchmarking. Productivity benchmarking metrics could include “lines picked per hour per full-time employee” (FTE) and “number of orders processed per day per FTE”.
Warehouse Benchmarking Success is Just a Click Away
Of course, there’s a lot more to warehouse performance benchmarking than choosing the right metrics, and the same is true when benchmarking any part of your supply chain.
If you’d like some help getting your head around supply chain benchmarking and performance measurement, our consultants at Benchmarking Success (a specialised business division of Logistics Bureau) are ready and waiting to lend their expertise to your cause.
To find out more about Benchmarking Success and the services we provide, please stop by at our website. If you have any questions while visiting the site, just send them in to the team using the short form provided.