15 Warehouse Management KPIs You Need to Track

Derrick Weiss

Managing a warehouse comes with many challenges and opportunities. The best warehouse managers will track key performance indicators relentlessly, and use them to iterate and improve their operations.

There’s a lot of overlap between KPIs used in a warehouse with inventory and fulfillment focused KPIs, so be sure to check out those articles in detail here:

Check out the full guide to order management - including how to efficiently manage your warehouse operations.

Inventory KPIs

Inventory KPIs are covered more thoroughly in our article about them, but we’ll cover a few of the inventory management metrics that overlap with warehouse metrics here. Pro tip: almost all of them do, so be sure to check out our article on inventory management KPIs.

Shrinkage

Definition: The percentage of inventory that is listed in records but is not physically in the actual inventory.    

Formula: (Cost of Recorded Inventory – Cost of Physical Inventory) ÷ Cost of Recorded Inventory

What it means: This KPI, when excessive, may mean that you have a problem with inventory damage, theft, miscounting, or supplier fraud (when a supplier bills for more products than it sends), and that a thorough investigation should be performed.

Inventory Accuracy

Definition: The percentage of inventory that is tracked and physically present.

Formula: (Database or Software Inventory / Physical Inventory) x 100

What it means: This is the accuracy of your tracked inventory (typically using an inventory management system) compared to physical inventory in the warehouse. This number is usually close to 100%, but can be off if inventory theft, damage, or fulfillment isn’t tracked properly.

Inventory Turnover Rate

Definition: A ratio that shows how many times inventory was sold and replaced during a specific time period.

Formula: There are two calculations that will show your Inventory Turnover Rate:

Sales ÷ Average Inventory or Cost of Goods Sold ÷ Average Inventory

What it means: This KPI tells you how fast you are selling your inventory. It’s often measured against the turnover rate of industry averages. When your turnover rate is low, it indicates you have weak sales and excess inventory. A higher ratio shows that you have either strong sales or it could indicate that you are giving customers large discounts.

Cost of Carrying Inventory

Definition: The percentage representing cents per dollar that is spent on inventory overhead each year.

Formula: Carrying Costs ÷ Overall Inventory Costs

What it means: This KPI tells you how much you will spend (as a percentage) to hold and store your inventory annually. When you need to reduce your cost of carrying inventory, it’s important to reduce your inventory by eliminating obsolete, slow-moving, or dead stock inventory.

Receiving KPIs

The biggest thing to realize about receiving is that if it is done poorly, slowly, or inaccurately, it will have a ripple effect and make every other part of inventory or warehouse operations more difficult.

Receiving is the first instance that new inventory enters a warehouse, so it’s important that it’s done quickly, efficiently, and error-free.

Use these KPIs to track that.

Cost Per Line

Definition: the cost to receive a line item on a purchase order.

Formula: Total Cost of Receiving / Total Line Items

What it means: The higher this number is, the less efficient your receiving process is.

Receiving Efficiency

Definition: volume of inventory received per hour worked

Formula: Volume / number of man hours

What it means: this metric determines how productive employees working in receiving area. A lower score means employees might be hampered, need additional help, or are being negatively affected by some other factor.

Receiving Cycle Time

Definition: the amount of time it takes to process a delivery.

Formula: Total Time for Delivery / Number of Deliveries

What it means: If deliveries are taking a long time to process, then it may be advantageous to reduce the number of deliveries, or reschedule them so that receiving has more time to process each delivery.

Put Away KPIs

After inventory is received, it needs to be put away. These KPIs measure the effectiveness of that process.

Accuracy Rate

Definition: the percentage of items put away accurately the first time.

Formula: Inventory Put Away Correctly / Total Inventory Put Away

What it means: A simple metric to calculate, this measures the knowledge and processes of employees putting away recently received inventory. This should be as close to 100% as possible, and if it’s not, you can diagnose where it’s going wrong and fix it to speed up the whole process.

Put Away Cost Per Line

Definition: the cost to put away a line of items.

Formula: Total Cost of Put Away / Total Line Items

What it means: Usually measured in man-hours or a dollar figure, this metric can help target areas for cost reduction in the put away process by highlighting inefficiencies. If this is too high, the put away process will need to be improved.

Put Away Cycle Time

Definition: the amount of time it takes to put away items on average.

Formula: Total Time for Put Away / Total Time

What it means: This metric measures the average time it takes to put away an individual item. It can be tweaked by rearranging the warehouse for faster put away, or training employees on the most efficient way to complete this task.

Fulfillment KPIs

For more detailed information, see our full article on Fulfillment KPIs here.

Picking Accuracy

Definition: the accuracy of picked orders

Formula: ((Total Number of Orders - Incorrect Item Returns)/total number of orders) x 100

What it means: Picking the right products is a hugely important part of warehouse operations. If this number is low, then chances are an employee isn’t doing their job properly, or there isn’t a set process in place.

Rate of Customer Returns

Definition: The percentage of items returned compared to total items sold.

Formula: Items Returned / Items Sold

What it means: Clearly, this number should be as low as possible, but that is almost never possible. The important thing is to dig into why items are being returned. Damaged or late deliveries are under your control, whereas product issues or fraud may not be, but are important to take into account.

Warehouse Safety KPIs

Safety first is a good methodology to follow. While safety won’t necessarily increase profits or efficiency, it can reduce costs, create happier employees, and foster a healthy work environment.

Many of these warehouse safety metrics are trailing indicators - they measure the outcome, not the input. They won’t measure the number of times trainings are had or the adherences to safety regulations - they will measure the negative effects had on warehouse safety after they’ve occurred.

Leading indicators measure the proactive activities that contribute to good safety practices. For instance, holding monthly trainings or requiring certifications.

Time Since the Last Accident

Definition: the number of days since the last accident occurred.

Formula: Number of days since the last accident

What it means: Get this number as high as you can and keep aiming to get it higher. Since this is the main trailing indicator of warehouse safety, it’s a good benchmark for how safety training and follow through is working.

Time Lost Due to Injury

Definition: the amount of time that would otherwise have been spent working.

Formula: Lost Time in Hours Due to Accidents / Total Number of Hours Worked

What it means: If an employee is injured on the job and unable to work, they are unable to contribute, and other resources need to be called in, overtime offered if necessary, and

Accidents per Year

This one is pretty self explanatory - it’s the number of accidents that occur in a year. You want 0, but nobody is perfect, and accidents are just that - accidents. They’re not intentional. A high accidents per year could signal larger issues in workplace safety.

You probably won’t measure every single key performance indicator in your warehouse. It’s a lot - and many warehouse managers will find the top ones that are important to their operations, and check on the others quarterly or annually.

If you’ve found that the metrics you’ve been tracking aren’t up to par (or don’t know where they went wrong) book a demo of the SkuNexus platform to help iron out your warehouse operations.

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