Inside Logistics

The Data Dilemma

How to track the right warehouse metrics


March 27, 2018
by

Warehousing is in the middle of a seismic shift, led by e-commerce giants such as Amazon. Consumers demand greater product selection and faster shipping, and companies with seemingly endless resources have transformed these expectations into realities.

For warehouses trying to keep up with fewer resources, efficiency is key. Gathering data on your processes is essential for unlocking efficiency gains; however, the sheer amount of data warehouse managers have access to can be overwhelming. To benefit from data collection, you’ll need to consider two factors, what metrics you need to measure and what technology you employ to track those metrics.

If you focus on the metrics that track your core pick, pack and ship processes, data collection doesn’t have to be intimidating. There are two “families” of metrics to monitor: productivity and quality.

Productivity metrics focus on process and resource efficiency: How well is your labour moving items through the warehouse? Quality metrics focus on adherence to correct processes to drive the desired results and outcomes. As you embark on a project to improve warehouse efficiency, you’ll need to set measurable objectives for your efforts. Consider these productivity and quality metrics as the foundation for goal and objective setting.

Productivity

Picked units per hour per picker: The highest level of measure for productivity in your fulfillment operations. Once understood, you’ll be able to parse your data further: are employees in specific areas of the warehouse picking faster than others? Is lower productivity in that area a daily occurrence? Is a group of workers moving slower, or are items stored inefficiently, resulting in more distance traveled?

Order cycle time: The amount of time from when an order is selected for fulfillment to when it is expended from inventory. Be careful you’re measuring your own cycle time and not your shipping services, however. Traditional cycle time measurement ends when the order is completely processed, rather than when the item is picked up by a carrier.

Orders shipped: This can be a little more involved, especially if a warehouse is servicing multiple channels. E-commerce, retail, less-than-truckload and full-truckload shipping all contribute to this total, and the number needs to be parsed so order measurement reflects the complexity of the order. For instance, a retail partner order for four pallets should not be weighed the same as a single SKU e-commerce order delivered through parcel post.

Quality

Inventory accuracy resulting from ad hoc, responsive, and scheduled cycle counts: How well your periodic inventory counts line up with recorded stock level is indicative of process adherence and attention to detail within your operations. It’s also a valuable measure used by finance and procurement/purchasing departments.

Returns because of mis-shipment: How many items return to your warehouse because of a wrong address, or the wrong item received? Reverse logistics is a costly, but necessary, component of your operation. Understanding error rates and their causes is very valuable in determining internal auditing and shadowing requirements to improve the customer experience.

Let technology lighten your load

Best of breed warehouse management systems (WMS) provide companies with rich data and the analytics and visualization tools they need to identify and address inefficiencies, set appropriate labour productivity standards and accurately forecast resource requirements to handle variances in demand.

If you’re ready to invest in better warehouse management software, start by identifying your inefficiencies at a high level. Mold your goals and objectives around these inefficiencies; for example, if you notice items from one section of the warehouse take longer to pick and pack, set a measurable objective for improvement, such as a 50 percent decrease in order cycle time for those items. When you begin contacting WMS providers, you’ll want to use these objectives as the basis for your questions. Don’t just settle for the cheapest or flashiest solution – choose a system that makes it easy to collect and analyze the data that’s most important to you.

Data-driven decision-making is no longer a pipe dream – it’s an expectation. Executives want to hear about the dollars and cents, so before you revamp their warehouse processes, you’ll need metrics to back up your rationale.Still, there’s no reason to fear data. With a little bit of planning and the right technology, you’ll have the resources you need to develop strategies informed by your numbers.