4 Warehouse KPIs You Should Be Thinking About (But Probably Aren’t)
As somebody who works in order fulfillment, there is a good chance that you spend a decent chunk of time each week thinking about your operation’s key performance indicators (KPIs). And there’s a good reason for that: KPIs act as a report card for your business, helping you understand where you are excelling and where you might want to consider doubling down on your efforts for improvement.
Unfortunately, when people think about order fulfillment KPIs, their minds tend to go to the same handful of metrics: Order accuracy, total order cycle time, etc. While these metrics are of course important, focusing your attention solely on them at the exclusion of everything else is a recipe for disaster.
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Simply put, there are many other warehouse KPIs that you should also be thinking about, monitoring, and improving, but which you likely don’t give the attention they deserve. Below, we explore these often overlooked KPIs and explain why they are so important for your business.
Pick density refers to how often pickers are stopping in order to actually make picks, compared to the amount of time that they spend traveling between picks. It is often measured as lines or items picked per person per hour.
Why is pick density such an important KPI to measure and understand? As many studies have shown (and as common sense would imply), operations with a high pick density enjoy less congestion and greater overall productivity compared to operations with low pick density. Understanding your operation’s pick density also allows you to tweak your processes and workflows in order to increase this efficiency, says Larry Jones, VP of Operations at Conveyco Technologies.
“When you understand your average pick density, you can make adjustments to your pick paths, etc., in order to get tighter pick densities,” he says.
2. Equipment Downtime
How often are you experiencing equipment downtime? Has this number been trending up in recent months or quarters? Has it been holding steady? Which areas, departments, systems, or pieces of equipment have experienced the highest levels of downtime? What impact has this downtime had on your business, in terms of late or missed orders and, ultimately, your revenue?
If you’re like many operations, you may have no idea.
“Downtime and uptime are the heartbeats of an order fulfillment operation,” says Ryan Chan, CEO and Founder of UpKeep of, a maintenance software provider . “When a facility has too much downtime, everything trends downwards and the health of the organization suffers. If heavy-duty equipment is constantly broken, it has a chain effect that impacts every step in the process.”
By tracking your equipment downtime, you will be better able to understand your facility’s overall health, plotting trends in order to identify areas for improvement. Whether this involves conducting more preventative maintenance, upgrading/retrofitting a system, or even replacing an entire piece of equipment will depend on the specifics of your operation.
“When we understand where downtime occurs and why it happens, we can fix issues and shift a facility’s maintenance percentage away from reactive and emergency maintenance,” says Chan.
3. Number of SKUs Per Cubic Foot
Most warehouses and order fulfillment facilities are incredibly inefficient when it comes to putting their space to good use. Whether it’s because they have poorly configured shelves which are not suited for the product being handled, they utilize poor a slotting strategy, or their inventory management practices are inefficient doesn’t matter, the result is the same: Empty space accounting for up to 80 percent of a shelf’s volume.
Measuring the number of SKUs per cubic foot of warehouse space can be a great way of quickly ballparking how efficient your inventory and storage practices are, and can also be an incredibly helpful mode of identifying areas of improvement. Unfortunately, this isn’t something that many operations consider until they find themselves pushing up against the limits of their space.
“When’s the last time you optimized the spacing on your shelves?” asks Ed Romaine, VP of Marketing and Business Development at Conveyco Technologies. “If your operation is like most, the last time you thought about your racking and shelves was the day you had them installed. You configured them once, put them in place, and they have sat in that same configuration ever since. And given the rapid changes the industry has seen in recent years, that’s probably a problem.”
4. Customer Returns and Rejections
Another key metric that doesn’t often get the attention that it deserves is customer returns and rejections, which effectively measures the rate at which customers are happy with their orders.
When your customer return/rejection rate is low, it’s a good sign that your processes are working the way that they were designed to work: More often than not, you’re shipping complete orders, on time, and without error. When your return/rejection rate is high, then it’s likely that customer expectations are not being met. In addition to being costly to handle and process, a high volume of returns can cause productivity to plummet and even potentially send your customers into the arms of a competitor.
“Just as it’s important to track products before and during their creation, it’s equally critical to understand how your products fare after the customer has them in their hands,” says Chan.
In addition to the KPIs and metrics listed above there are a number of other considerations that you should be sure to keep in mind and monitor. One of the most important of these is knowing as much information as possible about the various SKUs and product that you handle and store within your operation.
“Clients often don’t do a great job of obtaining and recording the measurements and weights of all of the items they process,” says Romaine. “But this information is critical to so many processes.”
He goes on to explain that without a firm understanding of the size, weight, and other characteristics of your SKUs, it becomes very difficult to:
- Select the proper packaging for shipping
- Identify the proper storage medium for each item
- Ensure dense cube and efficient storage
Not sure where to start on the journey of benchmarking (and improving) your operation’s KPIs? A trusted systems integrator can help you to identify the KPIs which matter most to your business and craft an actionable plan to get you where you want and need to be—whether that involves changes to your technologies, processes, people, or a combination of all three.
- Romaine has spent over 30 years involved with organizations looking to optimize their distribution, manufacturing, and warehousing operations. Focusing on the customer’s processes, automation and business model, Romaine has helped dozens of organizations improve profitability by reducing labor, floor space, errors and inventory while improving accuracy, inventory turns and cut-off times.
Within the industry trade association, MHI, Romaine has taken numerous leadership positions including: Chairman of the Automated Storage & Retrieval (AS/RS) Group, Chairman of the Order Fulfillment Council of America, Chairman of the Warehouse Execution Systems Group and was one of the originators of the Carousel and VLM Product Section Group. He has also spearheaded the efforts to create the first ANSI industry safety standards for horizontal carousels.
Romaine is a frequent editorial and information contributor to hundreds of publications, blogs and online publications and has been a speaker at dozens of Supply Chain, Logistics, Lean and Facility organizations and functions. Just a few include the Parcel Forum, Institute of Industrial Engineers (IIE), Promat, North American Material Handling, Modex, National Mfg Week, Southern California Plant Operations, NJ Material Handling Assoc., Applied Ergonomics, Warehousing Education & Research Council (WERC), Lean Manufacturing Conference, Council of Supply Chain Management Professionals (CSCMP), NeoCon, Health Information Distribution Association (HIDA), National Catalog & Operations (NCOF), CSCMP and more.