‘You Can’t Manage What You Can’t Measure’ is an old management adage, but it still rings true today. It is almost standard practice for companies to measure sales, customer service and financials. What about a warehouse? A warehouse performs a critical function whether it is part of a company’s operation or a profit centre, and it should be subjected to scrutiny.
As Key Performance Indicators (KPIs) serve as a good measurement of productivity, quality, errors and costs, warehouse operators should seriously consider introducing them. But what KPIs should warehouse operators include?
A similar question was posted on the web by Rajen, a warehouse head of a vegetable specialty fat company. He asked, “I would like to set KPIs for my warehouse. Can anyone give suggestions other than ‘on time delivery’?”
The suggestions came thick and fast from seasoned practitioners. While I had no quarrels with the suggestions, which I believe were good, are they applicable, especially when many suggestions were made even before they found out what business his company was in.
Do all warehouses have the same KPIs? Surely not.
Let me share my thoughts with me. I believe that while there may be broad similarities, as most warehouses will want to measure receiving, putaway, storage, order picking and shipping, to name a few, they are not the same, as much depends on companies’ priorities and performance criteria.
As we can see from the input given to Rajen, even two companies in consumer goods manufacturing have opted for different measurements. Included in the KPI lists:
Putaway Errors (units not put in the bin where they are scanned)
Units Per Hour Loaded (Or Putaway)
Case Pick Per Hour
Damage Fixed Per Day
Shipments Delivery vs. schedule
On Time Delivery
On Time Pick Up
Cycle Time (Picking, Shipping and Receipt)
On Time Receipt
Safety (Accidents/Near Misses)
Vendors Quality and Delivery
Defining what’s good for your company
For those planning to introduce KPIs in your warehouse for the time where should you start? Trying to download a template from the Internet is probably not the best way to go about it. Put some thought into this. The KPIs should tell you what matters most in your business. The measures need to relate directly to your strategy and business goals. They need to tell you if things go off track. Just as important, they need to be measurable and achievable.
Developing the right KPIs will equip you with the necessary indicators to gauge your performance in meeting your goals. Having the wrong ones may even increase your risk of failure as you may be focusing on the wrong thing.
Once you have established your standards, you can track variances to your standard. Invariably you will ask why you have the variances and you begin to look deeper at what items are causing the inefficiencies.
Few things in life are cast in stone, certainly not KPIs. As business changes, some indicators will become more important, and some less. Some may even become unnecessary. Review your indicators periodically so they truly reflect your business.