The Importance of Measuring and Utilizing KPIs in Warehousing
Part One of The Importance of Measuring and Utilizing KPIs in Warehousing
This article is part one of our six-part KIPs in Warehousing series.
Warehouse management involves its own ecosystem of complex tasks. The efficiency of these tasks ultimately determines the success or failure of a business, so companies are constantly looking for ways to improve and streamline operations. This is evidenced by the fact that today there are dozens of warehouse technologies designed specifically to make these tasks easier and more efficient.
The goal for these organizations is lean warehouse management – optimizing operations in such a way as to reduce consumption while maintaining, and even improving, productivity. However lean management cannot be achieved until existing processes are assessed in a significant way and problems are identified and addressed.
KPIs, or key performance indicators, are a measure of performance of the business that provide insights and opportunities to improve. They are essentially a “performance scorecard” of benchmarks that are unique to each business, gauging progress towards the company’s goals, identifying areas that need improvement, and comparing performance to competitors and industry standards.
Why exactly are KPIs so important?
KPIs provide a focus for strategic and operational improvement and create a basis for analytical decision making. They reflect business goals and mission, providing ways to measure your company’s performance over time.
KPIs are critical indicators of an organization’s progress towards this goal of efficiency. Accurately and strategically tracking performance allows organizations to not only monitor the efficiency of warehouse processes, but also take corrective measures to increase productivity and asset utilization. The result is continuous operational improvement and increased customer satisfaction.
KPIs help focus attention on what matters most.
Accuracy of Tracking Data and KPIs
Obviously, the key to measuring KPIs is accurate tracking and data. Without it, there is no way to ensure that outcomes and improvements are true. If you are still relying on Excel spreadsheets and manual processes, the accuracy of your data is compromised and any tracking over time for improvement will likely be compromised in turn.
Before you begin tracking KPIs, ensure your data is tracked automatically and accurately or your efforts will be wasted. One solution for inaccurate data is choosing a software system that uses barcodes to track inventory and other warehouse processes. A good system will integrate into your Enterprise Resource planning (EPR) system and improve data accuracy by providing a framework for managing inventory, supplies, tasks, and other warehouse functions while updating the data in real-time to the ERP.
Different warehouses have different KPIs, therefore it is important that warehouse managers and administrators work together to identify areas of importance. Each warehouse KPI analyses a specific process or operation and gives you a result that shows how well that process is doing by comparing it to past numbers and benchmarks.
While all warehouses are different, there are many commonly used KPIs that can be applied to most warehouses. However not all KPIs need to be used to reach your goals. Instead, you should choose the ones that are most relevant to your current goals.
Over the next five parts in this series we will highlight the top 25 KPIs in warehousing. Part two explores KPIs in Receiving.