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The term “KPI” means a lot of things to a lot of people: a crucial way of tracking certain measurements across different warehouse operations, a way to prove to your bosses that your team is getting stuff done, or just a huge pile of forms and spreadsheets you need to fill out that takes up all your time.

Whatever role KPIs may fulfill in your life, the fact of the matter is that every warehouse has a series of KPIs they need to track that can make or break them as a business.

Every warehouse has different KPI needs and measurements, and the things you track can impact a lot of your operations, procedures, and even the way you approach problems. If you need to decide on what KPIs you can track to best accomplish your goals or if you’re looking for new ways to measure your current operations, here’s five of the most important (and commonly-used) warehouse inventory KPIs to inspire you:

1. Inventory turnover ratio:

One of the most commonly-tracked and easiest metrics in inventory measurement is inventory turnover ratio. This ratio tells you how well you’re doing at moving inventory as well as how much is left over and and what your fastest- and slowest-moving items are. Having a high ratio may mean you’re not ordering enough of your most popular items, while a low ratio means you might not have the right inventory on hand, or too much of it. To calculate this ratio, divide the annual cost of goods sold by the average annual cost of inventory on hand..

2. Efficiency of the receiving area.

It’s no overstatement to say that many warehouses live & die based upon how effective their receiving area handles inbound products. In too many cases, this area is ignored in favor of other, more glamorous areas of the warehouse, but the receiving area can dictate how fast your inventory turnover is, how accurately your inventory counts are performed, and more. A good receiving strategy also accounts for the amount of space your workers have on their warehouse storage to get their jobs done.

3. Put-away speed and accuracy.

This one can be a little tricky to measure, but the effect it can have on your warehouse operations (and the ability to get things done) that the speed and accuracy of your put-away process is hugely valuable. Consider tracking factors like accuracy rate, cost per put-away item, time it takes to get the items from the receiving area to your shelves, pallet racks, and the like, and even the man-hours put into putting items away.

4. Order picking & packing.

Of course, no matter how well-done your inventory control methods are, it’s not going to do a bit of good if you struggle in getting your orders out to the customers. Tracking the success of your order packing can require the involvement of a few different KPIs such as cost per item picked, orders picked per hour, cost of picking labor, and more, but these metrics can have a massive impact on how you handle orders – without a good order handling strategy, you’ll lose more customers than your business can sustain.

5. Inventory accuracy.

Even if your order handling methods are impeccable, keeping the right products on hand is going to be a huge part of fulfilling customer demand and staying profitable. Develop a strong inventory tracking practice by comparing your on-hand items to what you have listed in your database, and do this regularly enough to make sure the numbers never skew too far one way or another. Find a quick and simple software solution to help with the tracking (and to stop you from having to pay some poor intern to slowly fill out Excel workbooks) and keep on top of any errors or irregularities with your current inventory levels.

With these KPIs all working at optimum levels, your warehouse will be more productive than ever – and your customers will keep coming back.

One Response to “Five Inventory KPIs That Every Warehouse Needs To Know”

  1. Divyesh says:

    Nice information.

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