KPIs are measurements that can be quantified and agreed to beforehand. KPIs vary across different organizations and industries and stay for a long time without changing often. They reflect the organization’s goals and are critical to its success.
Importance of Key Performance Indicators (KPIs)
Once the organization’s goals are set, there should be some way to assess the organization’s performance so that its progress toward the defined goals can be measured. Performance cannot be improved unless it can be measured.
Benchmarking using KPIs helps identify your performance compared to your previous performance as well as against your peers.
Warehousing is a dynamic business that requires close monitoring. A warehouse generates a huge amount of data that can be productively utilized. In today’s world, warehousing is a highly competitive business with demanding customers. Most times, the customers define KPIs as part of a service agreement.
Choosing the criteria for defining the KPIs is an important process. Different industries/business models require different measurements. For example, KPIs for a 2PL warehouse will be different from that of a 3PL warehouse; Similarly, an FG warehouse’s KPIs will be quite different from that of an RM warehouse. Hence, before defining a KPI, relevant parameters need to be measured for a specific warehouse. It is good to identify the various key processes in a warehouse and attach a KPI to the specific process. KPIs must always align with business requirements.
The Supply Chain Operational Reference (SCOR) model, a product of the Supply Chain Council, provides a framework that links business processes, best practices, metrics, and technology features in a unified structure. SCOR identifies over 200 KPIs to monitor the overall performance of the supply chain. These form the top level or the Level 1 performance metrics. It also defines focused metrics to help specific processes improve. These form the level 2 and 3 metrics.
Following are some of the top-level performance attributes and the associated metrics. Most of these performance metrics can also be applied to measure the performance of a warehouse process.
|Attribute||Top Level Metric|
|Supply Chain Reliability||Delivery Performance|
|Perfect Order Fulfilment|
|Supply Chain Responsiveness||Order Fulfilment Lead Times|
|Supply Chain Flexibility||Supply Chain Response Time|
|Supply Chain Costs||Cost of Goods Sold|
|Total Supply Chain Management Costs|
|Warranty/Returns Processing Costs|
|Supply Chain Asset Management Efficiency||Cash-to-Cash Cycle Time|
|Inventory Days of Supply|
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Warehousing KPIs to Analyze Business Performance
The business performance of an organization is normally measured by the revenues and profits it makes and the various costs it has incurred. As such, some of the KPIs for business performance may be
- Gross Profit = (Revenue – Cost of Goods Sold)
- Net profit = (Gross Profit – Operating Expenses – Taxes and Interest)
- Costs (various costs such as inventory, labor, machinery, etc.)
Warehousing KPIs to Analyze Operational Efficiency
The efficiency with which a warehouse operates is decided by how well various factors such as people, machinery, inventory, skill sets, and processes are managed. Some of the KPIs for measuring warehouse operational efficiency may be
- Utilization (space, labor, equipment, etc.)
- Wastage (wastage of inventory due to expiry or other reasons, man hours, skills, etc.)
- Fulfilment (timely order fulfillment, percentage of order fulfillment, the accuracy of order fulfillment, etc.)
Warehousing KPIs to analyze Safety and Health-related Incidents
Health-related issues have taken as much priority as business performance in recent times. They are usually assessed in terms of safety measures taken to prevent theft, machinery-related accidents, human safety, accidental fire, etc. Some KPIs for measuring these issues can be
- Accidents related
- [Lost time (in hours) due to accidents (including fatalities)] / (no. of hours worked)
- (No. of fatalities)/(no. of hours worked)
- Health and safety prevention costs within the month
- Percentage of products/services assessed for health and safety impacts
Warehousing KPIs to measure Eco-friendliness
This is another area that has taken priority equal to that of business performance and operational efficiency. In most countries, organizations are bound legally and are held responsible for corporate social responsibility. Some KPIs in this area may be
- (CO2 tonnes/employee/month)
- Greenhouse Gas (GHG) emissions/employee/month
- Renewable energy usage
- Percentage of materials used that are recycled input materials
- Total on-site created energy
BI Dashboards to visually track KPIs in real time
PALMS™ Analytics is powered by QlikView, the fastest-growing Business Intelligence (BI) product in the world. Clear visibility of KPI through powerful, interactive Business Intelligence & Analytics dashboards is the significance of this version. PALMS™ Analytics phenomenally improves a warehouse’s analytical capability by offering a performance management platform that truly helps you control costs, maximize profitability and boost your business results.