When establishing the perfect order fulfillment KPIs and benchmark metrics for your warehouse operation, make sure you stay in your neighborhood. Don’t compare yourself to the Amazon’s of the world. You want to compare your fulfillment KPIs to other operations in your “neighborhood”.
There are so many warehousing KPIs and metrics that choosing the most impactful can be challenging. You want to ensure your order fulfillment KPIs makes sense for your operation and provide actionable data. Collecting and analyzing data is a time consuming task. Don’t waste your time on fulfillment metrics that don’t matter to you just because some “guru” told you that was the thing to measure.
Inventory management and order fulfillment KPIs should be a basis for ongoing and productive conversation within your organization. If reports are stuck in a shared folder somewhere and no one ever looks at them stop wasting your time. They should be used as a tool for improvement.
Most order fulfillment KPIs fall into one of four categories – Space, Throughput, Accuracy and Labor. Let’s talk about each:
There are two basic parts to capacity management KPIs – footprint and capacity. The footprint of the warehouse is fairly easy to measure. The key is turning the footprint into a cost. If you’re not sure what your floor space is worth, use this as a starting point:
| Location | Manufacturing Rent | Distribution Rent |
| Northeast | $7.27 | $11.25 |
| Midwest | $5.83 | $5.40 |
| South | $5.77 | $6.21 |
| West | $13.87 | $11.10 |
| US Average | $7.70 | $7.47 |
Warehouse usage measures the current capacity (in cubic feet). Capacity can help you understand when it’s time to explore expansion options before the warehouse is out of space and product is spilling into the aisles.
The capacity management KPIs are important because space costs money and organizations are constantly in search to optimize operations to improve the bottom line. Facilities are always looking for ways to expand their operations internally - making room for revenue generating activities (more manufacturing, additional quality checks, etc.) by shrinking the warehouse.
The DC Dental Neighborhood:
Throughput measures how many (parts, lines, orders) are completed in a specific time frame (hour, day) or by number of people.
Throughput is becoming a more important measurement as customer demand from B2C is bleeding into B2B. Years ago manufacturers and distributors had fewer criteria to meet to satisfy a customer. Today, customers want it all and more – increasing the demand for faster order fulfillment.
| Before | Now |
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The Value Drug Mart Neighborhood:
Order accuracy consists of two measurements – inventory accuracy and pick accuracy. Inventory accuracy measures your physical inventory on hand against the inventory recorded in your inventory management system. Order picking accuracy measures how often you are able to pick the correct part from inventory.
In a manufacturing operation, order accuracy leads directly to productivity. Missing parts due to inventory discrepancies or incorrect parts arriving at manufacturing can shut down the manufacturing line leading to lost time and money.
In a distribution operation, inventory discrepancies cause short picks leading to added shipping costs in and order delays. Mispicks lead to customer returns, increased costs and unhappy customers.
The Flight Safety Neighborhood:
Labor is quite simply the cost of the people required to execute the tasks within the warehouse. Labor is generally the most expensive part of the order fulfillment operation and is therefore scrutinized closely by upper management.
Additionally, skilled and reliable labor is increasingly more difficult to find and retain. With the impact on COVID-19, a stable and reliable workforce is hard to find. Workers are having to stay home with children or care for infected family members resulting in a fluctuating labor pool that is difficult to manage.
The Hauni Neighborhood:
Once you establish some order fulfillment KPIs you can move towards improvement strategies and goals. Here are a few tips to start on your improvement journey - 55 Warehouse Best Practices