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Warehouse KPI Metrics
Warehouse KPI Metrics
Warehouse KPI Metrics
No matter what kind of warehouse you run, there are key performance indicators (KPIs) that you should be
“Every successful warehouse operation is driven by three main KPI’s. Expert knowledge of the product size,
expert knowledge of the SKU’s and their velocities, and optimizing the facility layout.”
“Every successful warehouse operation is driven by three main KPI’s. Expert knowledge of the product size, expert
knowledge of the SKU’s and their velocities, and optimizing the facility layout.” – Michael Bertram
In this article, we’ll go over 30 different warehouse KPI metrics, grouped into the following eight categories:
Inventory
Receiving
Putaway
Picking
Distribution
Storage
Safety
Employees
The supply chain is a complex web of interconnected parts that work together to move goods from producers to
consumers. The warehouses that lie at the heart of this process are critical links, and it’s important to track their
performance with accurate key performance indicators (KPIs). By doing so, you can set benchmarks and identify
problems that need to be fixed in order to improve warehouse performance. This, in turn, can help you reduce
MHI’s WERC (Warehouse Education and Research Council) recent edition of DC Measures listed industry
leaders’ top metrics for distribution centers. Below are the top 6 metrics:
3. On-Time Shipments
that stock. By tracking inventory levels, you can make sure that you have enough stock on hand to meet customer
1. Inventory Turnover
What it is: Inventory turnover is a key warehouse management KPI that reflects how quickly stock can be sold
or shipped. A high inventory turnover means less money is invested in storage, leading to higher profits.
What it is: Inventory turnover rate is a way of measuring how often a company’s stock of a particular SKU is
replenished. For example, if you had 100 shoe boxes available during Q2 and sold 200 in a quarter, the turnover
rate would be two. This metric can be useful in estimating inventory velocity or selling prices.
How to Calculate it: (SKUs Sold) / (SKUs in Inventory)
3. Inventory shrinkage
What it is: Inventory shrinkage is a measure of lost or missing inventory and can be caused by theft, damage, or
simple mistakes. This can have a significant impact on a company’s profitability, so this KPI is essential for
finding the value of the inventory that is missing from your warehouse.
How to Calculate it: (Cost of Recorded Inventory – Cost of Physically Present Inventory) / Cost of Recorded
Inventory
4. Inventory-to-Sales Ratio
What it is: The inventory-to-sales ratio measures how much inventory a company has in comparison to how many
sales it has fulfilled. This can help a company avoid situations where inventory is accumulating on the shelves and
not selling. A high inventory-to-sales ratio may indicate that a company is having trouble moving its product and
This number is important for financial analysts and investors to understand how efficiently a business uses
inventory dollars. Inventory is typically a merchant’s biggest investment, so it’s important to know how long
capital is being tied up in inventory and what optimizations can be made to the procurement and sales process to
shorten that time. In a nutshell, the faster a business sells through its existing inventory, the sooner it will see a
How to Calculate it: (Average Inventory) / (Cost of Goods Sold) / (Days in the Accounting Period)
Only stock extra inventory when you are anticipating extra demand (holidays and peak seasons).
6. Inventory Accuracy
What it is: Inventory accuracy is a measure of how well the amount of inventory tracked matches the amount of
inventory present in the warehouse (typically tracked by a warehouse management system). This number can be
affected by factors such as theft, damage, miscalculations, and shortages on the supplier’s side. The inventory
accuracy KPI will show if there is a difference between the two values. This number is important because it can
help to improve the efficiency of the warehouse and avoid potential losses.
Benchmark your current inventory accuracy and select an inventory quality program (ISO, lean manufacturing,
What it is: Order lead time is a warehouse management KPI that measures how quickly consumers receive their
orders. The faster the order runs, the better the customer experience will be. Because of this, the best lead times are
determined by a total KPI such as order cycle time. Order lead time can have a direct impact on reducing the time
Use workflow technology to improve internal communication by routing order-related papers immediately to the
order. This includes all the buyer and seller processes, such as accepting orders, choosing products, packing, and
shipping. The shorter this time period is, the more likely customers are to remain loyal.
Review your picking, packing and shipping processes to uncover areas you can save time.
What it is: The fulfillment accuracy rate measures how many successful orders are completed based on the total
number of orders received. The order must contain the right product on time for it to count as a successful order. A
lower accuracy rate means that there are issues with the order processing process that need to be reviewed and
addressed.
How to Calculate it: (Orders completed with no issues) / (Total orders received)
Tips for Improving Fulfillment Accuracy Rate:
What it is: When products have been received from the warehouse and booked, the process begins. It is feasible to
keep track of time spent counting, booking, and preparing for the disposal of received stocks. You should note the
specific time for all delivered stock and record another timestamp once this stock is ready to be discarded. You can
How to Calculate it: (Volume of Inventory Received) / (Total Number of Hours Worked)
Focus on pre-receiving processes: label position, label information, items per carton, and the number of
Match and correctly schedule your labor hours with the incoming shipment workload.
What it is: The total time it takes for a given transaction, from start to finish, is called the receiving cycle time.
This includes the time it takes for the product to be shipped, received, and processed.
A solid measurement to start with is the units per hour (UPGH) processed as a collective team and by each
individual. These can be single items, totes, or pallets. The important part is that you are measuring these figures
and the impact that new systems or processes have towards increasing picking, shipping, and receiving speeds.
Place resources where they are most needed within the facility.
What it is: The average cost of receiving per line is based on how often the customer receives the product. It
includes the delivery process, handling, and accounting for each product. The cost would go down as time passed,
How to Calculate it: (Total Costs) / (Total Amount) / (Items for each Receipt Line)
What it is: The order fulfillment timeline is the time between when a customer orders and when they receive the
product. This can vary depending on inventory availability, shipping times, and how quickly orders are shipped.
Audit your internal order system and talk to stock room employees to find areas of improvement.
Simplify your system for stocking inventory to improve inventory management and theft prevention.
What it is: The percentage of dock doors that were utilized. This will help you figure out if your docking areas
How to Calculate it: (Dock Doors Used) / (Total Number of Dock Doors)
Tips for Improving Dock Utilization:
Invest in a yard and dock management system to identify issues and potential bottlenecks before they enter the
warehouse.
What it is: The dock-to-stock cycle time is the time it takes for inventory to be received and put into stock. It
begins when your warehouse receives delivery of goods from the supplier and ends when those goods are put away
How to Calculate it: (Time Received Inventory is Put Away) – (Time Incoming Inventory was Received)
Reduce movement required by warehouse employees by tracking movement and identifying areas where you
Eliminate paperwork by upgrading to RFID scanners and an automated inventory management system.
Put Away KPI Metrics
Put away is the technique of storing the delivered item in its designated area in the warehouse. The KPIs for put
away is critical to understanding how these procedures function and what they are best at.
What is it: A high accuracy rate is essential for a good warehouse management system, as it impacts the loading
rate and can cause traffic congestion. A good accuracy rate ensures that the correct inventory is removed and items
How to Calculate it: (Inventory Put Away Correctly) / (Total Inventory Put Away)
Maintain accurate inventory data with clear signage, rack labels, and product labels.
Utilize material handling systems, including, barcode scanners, conveyor belts to shuttle systems, and mobile
locations. Tracking the put away cost per line can help you identify areas of inefficiency. Improvements should be
How to Calculate it: (Total Cost of Put Away) / (Number of Line Items)
Introduce real-time reporting with a Warehouse Management System (WMS) to find the most optimal storage
Use direct put away to eliminate staging locations and speed up put away times.
Utilize material handling systems to reduce touchpoints in the put away process.
What is it: Put away cycle time is the amount of time it takes put away a single item of inventory. Shorter put
away intervals are a result storage efficiency. Optimizing your inventory locations will improve put away
shorter your lead times will be and, as a result of this, improved customer satisfaction.
What is it: The perfect order rate is the percentage of orders that are delivered to your warehouse without any
incidents? This is achieved by ensuring that the right items arrive promptly and are received in excellent condition
by customers who bought them. The Lean Sigma approach is to identify problems before items leave the
warehouse.
How to Calculate it: (Total Orders Shipped) – (Total Shipping Failures) / (Total Orders Shipped)
the costly returns process, warehouses need to track their picking accuracy.
How to Calculate it: (Number of Incorrect Order Picks) / (Total Number of Orders Placed)
Consider different order picking methods such as batch picking, picking routes, zone picking, or wave picking.
Product velocity
What it is: The average number of products that customers buy in a transaction is known as the “units per
transaction” metric. This can be used by retail sales teams to understand how many items customers are buying on
average when they visit. A higher UPT means that customers are buying more items on average.
What it is: The backorder rate is a key KPI for warehouse management, and it is used to predict and evaluate
purchasing performance. Demands can spike at unexpected times if your forecasting is off, leading to temporarily
high back order rates. A consistently high back-order rate can lead to poor experiences for customers and damage
your business.
How to Calculate it: (Unfulfilled Orders at the Time of Purchase) / (Total Orders Placed)
crucial to track since it reveals how a warehouse can cut costs by efficiently and properly fulfilling returns while
What is it: The return rate is a fundamental warehouse KPI that indicates how often items are returned. This
allows warehouse managers to understand customer satisfaction and insight resolve issues. The return rate also
gives businesses a snapshot into the revenue being lost to returned goods.
The average rate of return for retail goods is 10.6% and for ecommerce items is 18.6%. These percentages will
vary based on the product category with some products averaging greater than a 30% rate of return.
Simplify your paperwork with barcode scanners and automated conveyor routing for print and apply systems.
For high return items, set up an area dedicated to returns to reduce long walk times.
Determine the cause of returns and address the root cause. E.g. – Are customers not satisfied with the purchase
because of a poor description or imaging on the website? Are incorrect items being shipped? Are there quality
Have processes in place to get no fault found and refurbished items back into a sellable format quickly.
Utilize flexible material handling equipment designs that will allow return items to flow back into the main
distribution system.
Storage KPI Metrics
Across the several methods of storage (AS/RS, Conveyor, Vertical Lift Modules, Material Handling
Equipment, Autonomous Mobile Robots) it is important to measure your process’s accuracy and efficiency.
What it is: The cost of inventory includes the costs of storage, service costs, damage costs, and waste. For
example, if a company has to pay to store its inventory in a warehouse, it will have to pay more money as time
goes on. Additionally, if the inventory is damaged, the company will have to pay for repairs or replacements. If the
inventory becomes obsolete, the company may have to write it off as a loss. All of these factors contribute to the
“Calculating your inventory carrying cost allows you to pinpoint and optimize inventory outliers to become more
profitable”
Caleb Thompson, Director of Business Development – Southern Operations at Hy-Tek Material Handling, LLC.
Minimize your inventory on hand and align inventory with demand forecasts.
Increase your sell-through rate by reviewing performance by product line.
What it is: Space Utilization is the percentage of area that inventory takes up in relation to the total storage
capacity. It is important to consider because it can help you determine if you need to expand your storage space or
“Space Utilization is an important but challenging KPI to track and adjust with traditional storage mediums and
changing inventories. Constantly adjusting storage beam levels is cumbersome and inefficient. Emerging
technologies and software are making this process easier with dynamic storage and real-time slotting
information”
Caleb Thompson, Director of Business Development – Southern Operations at Hy-Tek Material Handling, LLC.
Upgrade from manual storage to a vertical lift module or AS/RS (Automated Storage and Retrieval System)
Safety KPI Metrics
Safety KPIs are performance indicators that help companies determine their safety standards. By tracking these
KPIs, companies can gain insights into where they need to allocate resources to improve safety standards within
the warehouse.
What it is: This KPI is pretty straightforward and is an important indicator of the overall training and wellness of a
warehouse team.
Review your warehouse training and onboarding procedures and ensure that safety is your number one priority
Keep your stations and aisles clean and clear of any obstacles by inspecting them regularly.
Inspect your equipment and stay on top of maintenance plans for all material handling equipment and systems.
employee is unable to work due to an accident, managers must call on additional resources and even pay overtime
for employees who are able to work. Above all else, the safety and well-being of our employees are critical.
However, accidents cause delays, and the time lost due to accidents is important to know.
How to Calculate it: (Lost Time in Hours Due to Accidents) / (Total Number of Hours Worked)
Please see the tips listed for KPI 26. Accidents Per Quarter.
What it is: This is another fairly self-evident statistic that indicates warehouse safety. You want your accident rate
per quarter to be low, but you also want the time between accidents to be as high as possible. This warehouse KPI
will give you a good idea of how often accidents are happening in your warehouse.
How to Calculate it: Count the number of days from the date of the most recent accident until today’s date
Please see the tips listed for KPI 26. Accidents Per Quarter.
Employee KPI Metrics
The words of Brian Kristofek ring very true in today’s market, “Being a great place to work is the difference
between being a good company and a great company.” A strong, positive culture is vital in a warehouse
environment. Companies continue to try and find creative ways to increase employee satisfaction and retention.
Despite these efforts the Bureau of Labor Statistics reports a turnover rate of 40% for Transportation Warehouse
& Utilities. Having employee related metrics is critical in today’s labor market as it enables data driven decision-
making that leads to behavioral changes that effect cultural in a positive way.
What it is: Employee turnover rate is the percentage of employees who leave, both voluntary and involuntary, a
company during a given period of time. It is important because it is one of the indications of the overall level of
employee satisfaction.. High employee turnover rates are costly for companies. One of the many factors that
contribute to this turnover cost is the time and resources spent recruiting and training new employees.
How to Calculate it: (Number of Employees Who Left During the Time Period) / (Total Number of Employees at
Solicit feedback through employee engagement surveys to capture ideas on how to improve company culture.
What it is: Employee net promoter score (eNPS) is a metric used to measure employee satisfaction and
engagement. It is calculated by surveying employees on how likely they are to recommend the company to a friend
eNPS Scores subtract the percentage of passives from the percentage of promoters. The total eNPS scores range
Listen and take action on reoccurring employee concerns. Employees who feel heard will be more likely to
communicate and provide actionable feedback to improve culture, engagement, and performance.
Provide opportunities for employees to provide input outside of the Net Promoter Survey. Frequent touch bases
with employees not only give them the opportunity to provide informal feedback, but it also creates open dialog
Regularly meet with employees and ensure they know what you expect from them, and what success looks like
for their role. Employees who are aligned with their leader’s expectations are more engaged.
FAQ
What are the recommended KPIs to monitor warehouse performance?
Order-Picking Accuracy
On-Time Shipments
Inventory Turnover