An efficient warehouse is the engine that drives the success of any business that depends on inventory management, whether it's a complex supply chain or a small local business, measuring and optimizing warehouse performance is crucial.
This is where Key Performance-Performance Indicators, or KPIs (for their acronym in English), come into play, which provide valuable information about warehouse operation and productivity. In this article, we'll explore the KPIs most relevant to your expert-approved warehousing operation.
1. Inventory Accuracy
Inventory accuracy is a fundamental KPI since it represents the Accuracy with which the inventory management system reflects the actual quantity of products in the warehouse and this way you will avoid losses, surpluses and delays in your orders. Inventory accuracy is key to avoiding losses and delays. A strategic ally such as a fulfillment in Querétaro can help you have full control of your inventory and improve the accuracy of your records.
The formula for calculating Inventory Accuracy is 👉 No. of items in inventory/Total number of items in stock, known as IRA for its acronym in English.
2. Inventory Rotation
Inventory rotation Measure how many times the inventory is renewed in a specific period, usually annually. It is calculated dividing the cost of goods sold by the average inventory over the same period.
⚡ #CubboHack If you have high turnover as a result, it means that you have effective inventory management and a quick response to market demand
3. Order Cycle Time
This KPI measures the time that elapses from when an order is placed until it is delivered to the customer. An efficient order cycle time is crucial to customer satisfaction and can make a difference in customer retention.
The formula for calculating cycle time is:
Percentage of orders served on time: No. of orders served on time/Total orders to be served
4. Use of Space
Evaluate how physically distribute the products in the warehouse and it is an important factor since it determines if space is being used to the maximum or if there are underused or congested areas.
💡 #CubboTip Optimizing warehouse layout can reduce costs and improve efficiency
The formula for calculating how much space you use is 👉 Percentage of occupancy: Real occupancy/Total occupancy
5. Picking and Packing Accuracy
This KPI focuses on the accuracy of the process of selecting and packaging products for orders, this formula measures the proportion of orders that are processed correctly in relation to the total number of orders.
⚡ #CubboHack High accuracy in this process is essential to avoid returns and maintain customer satisfaction
Percentage of successful orders: No. of orders with no issues/Total orders served
💡 We recommend this article from Picking and Packing to reduce errors during this process
6. Cost per Order Processed
This indicator evaluates How much does it cost to process each order and includes costs such as labor, packaging, shipping and general warehouse expenses.
⚡ #CubboHack If you reduce this cost without sacrificing the quality of the service you can significantly increase the profitability of your E-commerce
7. Return Rate
The return rate indicates the percentage of products that are returned in relation to the total number of products sold.
💡 #CubboTip A high rate can indicate problems with inventory accuracy, packaging quality, or the management of defective products.
To maximize the efficiency of your warehouse, it's essential to measure and optimize these KPIs on a regular basis. With this information, you can identify areas for improvement and make informed decisions. By doing so, not only will you improve the warehouse operation, but you will also increase customer satisfaction and the profitability of your business. Remember that KPIs are powerful tools, but their success lies in how they are applied and interpreted in the context of your operation.
In Cubbo we can support you in complying with your operational KPIs, visit our site so you can be more efficient throughout the Fulfillment process
