16 April 2023 How would you, as a logistics manager, define the results achieved in recent months in your supply chain? Excellent, good, average, bad? Is it possible today to monitor the entire operational flow from one end of your warehouse to the other? Are there evaluation criteria in search of optimizations and identification of strategic opportunities that can differentiate your company from the common market? The answers to these questions are essential to understand how your supply chain is preparing and responding to the ever-evolving new consumer market trends and, above all, to assess the level of awareness and understanding of your warehouse’s internal processes. Maintaining a competitive company in today’s market, offering excellent results and good performance, is a great challenge. For this reason, it is crucial to have a 360° view of the business and regularly develop strategies capable of monitoring the entire workflow within the warehouse. An efficiently functioning supply chain ensures product quality, proper storage, speed in order delivery, fast tracking, effective inventory control and, consequently, customer satisfaction and loyalty. But how do you make all these gears work simultaneously and with the quality that demand requires? The answer is simple: closely monitor performance. Regardless of your niche, the only way to ensure logistics efficiency is to monitor all processes. A warehouse requires constant attention, so it is important to keep an eye on its development, and all this must be done assertively with the help of logistics KPIs that assist in understanding, quality, and performance evaluation. In this article, we will share the importance of logistics KPIs in your warehouse and how they can help you optimize work, resources, and time, as well as offer new opportunities for your supply chain. What are KPIs and how important are they for your company’s logistics? KPI is an acronym in English for Key Performance Indicator. This tool is nothing more than an indicator capable of promoting analysis and information that helps managers measure the performance of a specific process or action of a company. In the logistics field, these indicators are essential for measuring the performance of the entire supply chain, from product receipt at the dock, through internal movements, to order dispatch. Using the right KPIs is the foundation for every operation to succeed. This is because you can only improve what is measured. Think about it: without a concrete idea of the processes in your warehouse, how could you make improvements? Where would you start? Which step will be prioritized? Difficult to answer without a clear vision, with percentage data and numbers that truly represent what is happening, isn’t it? In practice, KPIs facilitate the monitoring of everything happening in the operation, helping to identify possible problems, manage risks, and discover opportunities to improve the workflow, making it even more optimized. Types of KPIs to improve your logistics There are many criteria to evaluate when efficiently managing a warehouse, which is why logistics KPIs are divided into different categories, ranging from stock and storage, to order separation, packaging, and shipping. Some of them are: Inventory and Storage KPIs Stock to sales ratio: this metric allows you to identify the number of items available in the warehouse in relation to sales over a specific period. Generally, this monitoring is carried out at the end of each month to monitor the extent of sales, observe if demand has decreased or increased, understand if stock levels are compatible with the demand for certain products, make projections, and set goals for the following months. Inventory holding cost: this logistics KPI is calculated simply by summing all expenses allocated to maintaining stored and unsold products. Understanding how much your warehouse spends on inactive items helps control storage costs and facilitates the work of other sectors, such as accounting and finance. Additionally, this metric helps identify when there are many products requiring special attention and high costs, which means strategies are implemented for selling stagnant goods. Inventory accuracy: this metric indicates the inventory count in relation to what is recorded in entries and exits along the supply chain. Basically, it is an analysis of what is recorded and what appears physically, considering the degree of accuracy between the data. It is one of the most important rates for inventory management and the proper functioning of the supply chain. The stock accuracy rate provides information on how stocks are organized, managed, and monitored. If percentages are low, it indicates that one of these points is not going well. Therefore, ensuring satisfactory levels depends on rigorous work to keep stocks always organized, records updated, and traceability functioning, among other factors. Inventory turnover rate: this KPI allows you to identify how many times inventory is sold and how quickly it is replaced. Understanding the stock turnover rate helps business performance, as this metric provides information on the best-selling products and items that remain in the warehouse for a long time, so you can recognize how quickly your company is recovering the invested money. Storage cycle time: how long does it take you to organize all the items in the inventory? This metric corresponds to monitoring the receiving and organizing process in the warehouse, so it is possible to measure team performance, seeking short cycle times and greater employee efficiency. Storage accuracy: this metric is responsible for indicating how accurately items have been stored in the warehouse. Are they at their correct addresses? Were they organized according to the warehouse’s logistical standards? Ensuring everything is done accurately can avoid serious errors that occur mainly in the product separation and shipping process, compromising the entire workflow. Receiving KPIs Receiving efficiency: this metric is qualitative and evaluates the quality with which employees perform receiving activities at the dock. It is possible to monitor productivity and activity execution times, so any fluctuation and inefficiency in this area may indicate the need for optimization through training, simpler workflows, and even process automation with management systems or new equipment. Receiving cycle time: the receiving cycle time refers to the time needed to process a new shipment received in your warehouse. It includes everything from control to classification and storage. A long receiving cycle may indicate the need to improve processes to make them more efficient. Cost per receiving line: receiving in the warehouse involves time and labor. Therefore, the cost per receiving line indicator refers to how much money you spend receiving new products. Picking KPIs Picking efficiency: this metric evaluates the efficiency of order picking by counting the number of orders fulfilled every hour. Remembering that agility is essential to ensure good customer service, but accuracy cannot be forgotten either. This brings us to the next topic. Picking accuracy: this metric helps count how many orders are picked and prepared for shipping without errors. If, in the end, the rates for this KPI start to decrease, it is important to raise a warning signal, meaning perhaps your team needs more training or tools that help optimize the work. Picking cycle time: as the name suggests, this indicator tells you how much time is spent picking each order. Many companies have management systems capable of automatically calculating this time, even alerting when orders are delayed. Monitoring this metric helps identify improvement points that increase flow speed, as time is a decisive parameter when companies choose customers. Separation and packaging costs: monitoring separation, labor, and packaging material costs can offer opportunities for expense reduction and new investments. Performance KPIs Order lead time or order delivery time: this KPI measures how long it takes for the customer to receive their order, considering the moment the purchase was made. In practice, this indicator is directly related to customer satisfaction, after all, the speed with which demand is met is a factor of great relevance in the current consumer market. Therefore, measuring this data helps understand the shipping process and the quality with which the service is executed. Satisfied customers indicate a satisfactory delivery rate. On-time delivery rate: do you want to monitor the quality of your product delivery? The on-time delivery rate allows you to identify the number of errors, delays, delivery times of couriers and partners, helping you decide the best delivery method. Order cycle time: a metric used to calculate the time spent preparing the order, from the moment your company receives the demand, including the entire separation, packaging, and any other phase until its arrival at the courier. Some companies execute this cycle in record times of less than 24 hours. Monitoring this time allows managers to identify opportunities and improvements, whether investing in new technologies or suppliers and carriers that keep up with the fast pace and market trends. Return rate: this KPI is essential for monitoring returns, especially for e-commerce, where it is possible to measure labor and costs to process and return or discard items in specific areas. In cases where these rates are high, it is necessary to reconsider shipping methods, identify internal flow errors, and invest in management systems that allow real-time monitoring of the entire operation, from start to finish. Safety KPIs Finally, it is extremely important for good managers to closely monitor rates related to workplace safety, in order to provide their employees with a safe and reliable working environment, after all, accidents and other inconveniences can put your team at risk and directly damage your results. Incidents per year: this metric helps control the number of incidents that occur each year. It is essential that this metric is as low as possible, tending to zero. Time since last incident: the main goal of this safety metric is for no incidents to occur over the years, but if they do, it is important to monitor the distance between each one and seek alternatives that prevent future incidents. Logistics KPIs improve warehouse efficiency Monitoring the maximum number of KPIs in your warehouse provides a high level of performance and results, speeding up outcomes and increasing your company’s profitability. All this is possible by identifying opportunities and focusing investments that improve and optimize areas with the greatest potential for evolution. There are many factors that contribute to the efficiency of a supply chain, so it is important to pay attention to all measurable categories. This way, it is possible to reduce current logistics costs, keep customers satisfied and increasingly loyal through efficient services, as well as offer a safe working environment for employees, increasing productivity levels. How to track KPIs in your warehouse There are many KPIs to monitor in your warehouse, and it may seem challenging to manage them all manually. Therefore, warehouse automation is present in most companies seeking better results, performance, and market leadership. New technologies, such as WMS, OMS, and YMS management systems, allow logistics managers to track in real-time, end-to-end, everything happening in their supply chain, from the arrival of trucks at the dock, to order dispatch and receipt. This way, it is possible to reduce time, effort, and errors caused by manual activities and variables. The technology offered by inventory, yard, and product shipping management systems is also used to consolidate information in one place, facilitating performance analysis and allowing managers to make improvements based on the main needs of their business. Discover some of the companies that have implemented Deagor management systems in their supply chain and achieved great results by optimizing their workflow. Additionally, to learn more about the most important KPIs for your company, download our Guide to Logistics Indicators. KPI in Logistics: How to Use Indicators to Optimize Your Business Deagor WMS per ecommerce può aiutarti!