Minggu ke -14

Performance
measurement for
warehouse management
 Why do we need to measure?

1. ensure customer satisfaction;

2. ensure that there is a culture of continuous
improvement within the operation;
3. discover potential issues before they become
major problems;
4. train staff in the right areas; and
5. reward staff where appropriate.

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 What should we be measuring?

 According to Ackerman (2003), we should be measuring

four areas within the warehouse:
1. reliability; includes on-time delivery, fill rates and accuracy
2. flexibility; Order cycle time is probably the best measure of
flexibility as it covers all aspects of the customer order process: how
we handle the order initially, whether we have the stock available,
how quickly we can process the order through the warehouse and,
finally, how quickly we can deliver to the customer.

3. cost; include cost as a percentage of sales and productivity against

labour hours

4. asset utilization: include efficient use of warehouse space, MHE,

staff and storage equipment.
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 KPI di Retail dan 3PL (Steve whyman)

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 How to choose the right performance
measures
1. Understand your business and its strategy.
2. Decide on the objectives.
3. Understand which KPIs are likely to assist in meeting the
objectives.
4. Align the KPIs to others within the company.
5. Ensure that everyone works towards achieving the
targets – nominate KPI owners.
6. If targets aren’t achieved, analyse the reasons why and
introduce processes to enable achievement.
7. If the target isn’t realistic, replace it.
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 The measures you choose need to be SMART

 Specific. Objectives should specify what they want to

achieve. Are they clear and unambiguous?
 Measurable. Can we put a value on the kpi? Eg How much,
how long, how many?
 Achievable. Are the targets you set achievable and
attainable?
 Relevant. Are the measures relevant to the overall goal and
strategy of the company?
 Timely. Are the timescales realistic and how often do you
measure?

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 Department metrics (courtesy of Vitasek
2010)

Department Target
Receiving Reduce dock to stock time
Customer service Reduce order process time
Picking Improve pick accuracy
Increase pick productivity

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 Traditional productivity measures

The first of these group measures are based on

labour, space, and equipment utilization:
1. Labour hours utilization
- based on the total number of labour hours available to
work over a particular shift, day or even week. These hours
should not include breaks.
- (Labour hours used × 100) ÷ labour hours available

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 Traditional productivity measures (2)

2. Warehouse area utilization

- We can look at floor space utilization but more realistically
we should measure the cubic capacity of the warehouse.
- Alternatively we can measure the number of pallet
locations utilized against the total possible locations.
- (Space used × 100) ÷ space available

3. MHE utilization
- (MHE hours used × 100) ÷ MHE hours available

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 Traditional productivity measures (3)

4. Cost as a percentage of sales

- The calculation is:
- (Total warehousing cost × 100) ÷ total sales revenue

5. Cost per order despatched

- The calculation is:
- Total warehouse cost ÷ total number of orders shipped
- The above performance cost measures need to be handled with care.
Cheaper products despatched from the warehouse can result in a
higher cost per order, which is not a reflection of increased costs in the
warehouse but a strategic decision made by the company.

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 Traditional productivity measures (3)

The third group is based on productivity measures:

Units picked per hour
- The calculation is:
- Units picked ÷ total hours available
- The unit in this example can be an individual item, a carton
or a pallet.

Dock-to-stock time
- This is the time taken from arrival of vehicle on the
receiving bay to visibility of stock on the system

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 Traditional productivity measures (3)

The final group is based on customer service

measures:
Order accuracy
- The calculation is:
- (Orders picked and despatched accurately × 100) ÷ total
orders received

On-time shipments
- The calculation is:
- Orders delivered as per customers’ requests ÷ total orders
received
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 New performance metrics

OTIF (on time and in full).

- This metric has been joined by the perfect order metric as
the most popular customer service metric. This not only
requires on time in full delivery but also the item has to be
damage free, have the correct documentation and label
and finally an accurate invoice.
- On-time delivery = 97%
- In full delivery = 98.5%
- Damage free = 99.5%
- Accurate documentation, labelling and invoicing = 98%
- Therefore the perfect order metric is 97% × 98.5% × 99.5% × 98% = 93.2%.
- In terms of OTIF, we get a result of 95.5% (97% × 98.5%).

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 Integrated performance models

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 Benchmarking model

Why should we benchmark?

- understand our own performance;
- identify any shortcomings;
- discover what others are doing better;
- identify performance targets that can be demonstrated to
be achievable;
- accelerate and manage change;
- improve processes;
- understand what is best practice.

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 Benchmarking model - principles

The principles of benchmarking are as follows:

- collaboration;
- confidentiality;
- value;
- flexibility;
- honesty;
- openness; and
- reputation.

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 Benchmarking model

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 Balanced scorecard

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 Balanced scorecard

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 Thank you

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